Professional Liability Guide

CHAPTER 13 – DUAL INSURANCE

While few cases deal with the question of which method to use, the generally accepted approach is the independent actual liability method, 604 although the courts have left open the use of the maximum potential liability method. In Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd Johnson J said: ‘It is apparent from the authorities that the apportionment of liability between insurers with co-ordinate liability is a matter of discretion. However, the discretion must be exercised reasonably and fairly so as to achieve a just and lawful accommodation of the competing interests of the two insurers. In achieving that aim the Court is entitled to take into account all matters which go towards ensuring that the result is equitable. Despite the fact that the authorities generally acknowledge two methods of determining contribution, the maximum potential liability method or the independent actual liability method, I accept that the Court is entitled to apply some variant of these two methods if there are particular circumstances which make it necessary to depart from the principal methods in order to achieve a just result.’ 605 However, in this case, the Court ultimately found the independent actual liability method the most suitable method of calculation. Application of the maximum potential liability method of apportionment in this case would have produced a gross distortion of reason, justice and fairness because Zurich would have borne so little of the total liability.

As a rule of thumb under the independent actual liability method: where all the payments made are less than the limits/sub-limits of both policies, equal contribution will apply.

604 Ibid. 605 (2007) 209 FLR 247, 322–323.

123

© Carter Newell 2023