Professional Liability Guide

CHAPTER 13 – DUAL INSURANCE

CHAPTER 13 – DUAL INSURANCE

What is dual insurance? Dual or double insurance occurs when two (or more) insurance policies cover the same interest, subject matter, risk and loss, often discussed in terms of ‘ co-ordinate liabilities ’ between insurers with a shared obligation to make good the one loss. 583 Co-ordinate liabilities place the parties on an equal footing such that they should bear the burden of the risk pro-rata. 584 It, therefore, arises from principles of equity (and common law), which prevent one party from being enriched unjustly at the expense of another who is also liable for the same loss. So, dual insurance arises where payment by one insurer discharges the obligation of another such that the second insurer is no longer required to meet its promise to the insured. The leading Australian authority on double insurance is Albion Insurance . 585 In that case, an employee was injured in a car accident while at work. The accident was a result of the negligent driving of another employee. The employer had a workers’ compensation policy with Albion, which had a common law damages extension. The employer also had a CTP policy for the vehicle with GIO.

The employee sued the employer. Albion paid the claim (following judgment) under the common law extension and sought contribution from GIO based on dual insurance.

GIO accepted that if the employee had claimed against the CTP policy, GIO would have been liable to meet the claim. However, it resisted the claim for contribution on the basis that the subject matter of the policies was so fundamentally different that dual insurance could not arise. Essentially, the Albion policy covered the employer against the risk of injury to the employee in the course of employment, irrespective of negligence, whereas the GIO policy covered anyone becoming entitled to damages arising from the negligent use of the motor vehicle.

In finding that dual insurance existed, the majority held:

‘There is double insurance when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has evolved … The doctrine however only applies when each insurer insures against the same risk, although it is not necessary that the insurances should be identical. Thus one insurer may only insure properties A and B against fire and the other insurer may only insure property A against fire … The element essential for contribution is that, whatever else may be covered by either of the policies, each must cover the risk which has given rise to the claim. There is no double insurance unless each insurer is liable under his policy to indemnify the insured in whole or in part against the happening which has given rise to the insured’s loss or liability.’ 586

[our emphasis]

583 Burke v LFOT Pty Ltd (2002) 209 CLR 282. 584 Albion Insurance Co Ltd v GIO (NSW) (1969) 121 CLR 342. 585 (1969) 121 CLR 342. 586 Ibid 345.

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