Professional Liability Guide

PROFESSIONAL LIABILITY GUIDE

The fundamental points that emerge from this passage are that:

ƒ the insured cannot recover more than its loss – this enshrines the fact that the indemnity principle is a fundamental tenet of dual insurance; ƒ the insured may claim from either insurer – the insurer cannot control which policy is claimed against (enshrined in section 76 of the ICA, discussed below); ƒ the insurances must insure the same risk, but they do not need to be identical; and ƒ each insurer must be liable, although they do not need to be liable for the whole of the loss.

Justice Kitto summarised the position as follows:

‘What attracts the right of contribution between insurers, then, is not any similarity between the relevant insurance contracts as regards their general nature or purpose or the extent of the rights and obligations they create; but is simply the fact that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained …’ 587

In QBE Insurance (Australia) Ltd v Lumley General Insurance Ltd, 588 the Victorian Court of Appeal summarised the general principles applicable to dual insurance as follows:

ƒ both insurers must insure a common insured (it does not matter that the policies may also insure others and that not all the insureds are covered by both policies); ƒ both policies must cover the same risk or same liability (it does not matter that one or both policies may also cover other risks that are not the subject of the claim); ƒ the common insured suffers a loss or incurs a liability that is covered by both policies (either in whole or in part); ƒ the first insurer has indemnified the insured for its loss or liability under the terms of its policy; ƒ the second insurer has not indemnified the insured for its loss or liability under the terms of its policy; ƒ whether the loss is covered by both policies is to be determined at the time of the insuring clause event, so events after the insuring clause event (e.g. failure to claim under the second policy; cancellation of the second policy) will not affect the first insurer’s right to contribution; and ƒ where the loss falls within an exclusion clause of the second policy, there is no entitlement to contribution. 589 Dual insurance continues to provide complexities for the courts, particularly in relation to ‘other insurance’ clauses. In Allianz Australia Insurance Ltd v Certain Underwriters at Lloyd’s of London, 590 the New South Wales Court of Appeal was required to consider the interplay between an ‘excess clause’ in one policy and the ‘escape clause’ in another. In that case, section 45(1) of the ICA did not void either of the ‘other insurance’ clauses because the insured was not the contracting party to either policy. At first instance, the Supreme Court of New South Wales held that Lloyd’s policy was ‘underlying insurance’ within the meaning of the Allianz policy and, because the ‘escape clause’ meant that Lloyd’s policy did not respond, Allianz was unable to seek contribution from Lloyd’s. The Court of Appeal overturned this conclusion, determining that Lloyd’s policy did not constitute ‘underlying insurance’. The Court found that

587 Ibid 352. 588 (2009) 24 VR 326. 589 Ibid 341. 590 [2019] NSWCA 271.

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