Where is the boundary between marine insurance and general insurance? Gibbs v MMI reaches the High Court

The boundary between general insurance and marine insurance has been a matter of some conjecture over the years,1 not the least because of the ‘elliptical and circular’2 definitions of the elements of marine insurance contained in the Marine Insurance Act 1906 (UK) (the UK Act). Australia adopted those definitions when it transposed the UK Act, virtually unchanged, into its own legislative landscape in 1909. In the United Kingdom, and in Australia until 1986, the boundary between the two types of insurance was not of critical importance. The two legal regimes did not differ substantially:3 general insurance was governed by principles of common law, and the Marine Insurance Act 1909 (Cth) (MIA) was said to restate the common law existing at the time of its enactment.4 In 1986, the Insurance Contracts Act 1984 (ICA) came into effect. The ICA applies to insurance that is not covered by the MIA.5 The ICA seeks to protect the rights of insureds and diminish the rights of insurers as they existed at common law.6 The differences between the two Acts mean that applying one Act to a given set of facts may well give the opposite result to the other.7 With the introduction of the ICA, the definitions determining when the MIA applies have become particularly important. The Australian Law Reform Commission (ALRC), in its recent review of the MIA8 described the definitions contained in ss 7 and 9 as ‘cascading’.9 Little case-law has emerged on the boundaries between the two regimes,10 particularly in relation to hull insurance.11 Issues such as the type of adventure, the risks to which the policy responds, the place of operation and the nature of the vessel are all factors relevant to the question posed by ss 7 and 9 of the MIA — namely, has the insured suffered losses incident to marine adventure by reason of the vessel being exposed to maritime perils? The recent Australian High Court case Gibbs v Mercantile Mutual Insurance (Australia) Ltd12 raised almost every one of those issues on its facts. It involved a small runabout vessel operating only on the Swan River, used for a business offering parasailing, insured only for P&I (or third party) risks and with the policy written in the form of a marine policy.13 The nub of the Gibbs case was stated by the joint judgment of Hayne and Callinan JJ: The Insurance Contracts Act assumes, therefore, that a distinct boundary can be identified between contracts to which the Marine Insurance Act applies and other forms of contracts of insurance. This appeal requires the location of that boundary.1