Background
Built Tech Hoardings Pty Ltd was a subcontractor on a Brighton construction project. In July 2022, a traffic controller was seriously injured when a gate that Built Tech had modified fell on her. She sued Built Tech, and the Victorian WorkCover Authority brought a separate recovery claim.
Allianz insured Built Tech under a public and products liability policy and indemnified it for settlements of $1 million and $650,000, together with defence costs. Allianz then sought equitable contribution from AIG, relying on AIG’s annual public liability policy for the Icon group, under which Built Tech was insured in connection with the project.
AIG relied on condition 17, a “Difference in Conditions” or other-insurance clause. It contended that its cover was excess to the Allianz policy, meaning there was no double insurance and therefore no right of contribution.
The Court’s Holding
Derrington J dismissed Allianz’s application. Condition 17 applied so that AIG was not obliged to indemnify Built Tech for the claims already covered by Allianz, and no double insurance existed on which Allianz could found an equitable contribution claim.
The Court held that Built Tech was, on the ordinary construction of the schedule, a “Named Insured”: it was a subcontractor of Icon SI, and Icon SI was contractually required to obtain insurance for relevant subcontractors as named insureds. Independently, the Court held that “Named Insured” in condition 17 should be read as “Insured.” Limiting the clause to named insureds would produce an absurd and commercially unsound result, while other parts of the clause showed the intended operation was broader.
As AIG’s policy operated only as excess cover in these circumstances, AIG was not a co-ordinate insurer of the same liability. The Court did not need to determine quantum, the appropriate contribution, or interest. Allianz was ordered to pay AIG’s costs.
Key Takeaways
- An equitable contribution claim requires double insurance: insurers must have co-ordinate liability for the same insured liability.
- An other-insurance clause can prevent double insurance by making one policy excess to separate available cover.
- The Court may correct an evident drafting error by construction where the literal wording produces an absurd or commercially senseless result.
Why It Matters
The decision illustrates the close attention Australian courts will give to the commercial operation of construction-project liability policies, particularly policies extending cover to contractors and subcontractors. Poor drafting did not prevent AIG from relying on condition 17 where the policy, read as a whole, clearly showed that the clause was intended to apply to all insureds.
For insurers seeking contribution, the case confirms that the threshold question is whether both policies provide primary, co-ordinate indemnity. If an effective other-insurance clause makes one policy excess, contribution is unavailable.