Professional Liability Guide

CHAPTER 14 – OTHER INSURANCE

Therefore, since Hamersley had not entered into the Zurich policy but was instead a non-party insured, section 45 did not operate to render the other insurance clause in the MMI policy void. MMI was, therefore, able to defeat the Zurich double-insurance claim. A good way to understand the Zurich decision is to look at what would have occurred if Hamersley had elected to claim under its own MMI policy to begin with instead of claiming under the Zurich policy. Had that occurred, MMI would have paid the claim and then sought contribution from Zurich based on dual insurance. Zurich would, in turn, have raised its other insurance clause to establish that the Zurich policy was excess to the MMI policy. Zurich’s other insurance clause would have been subject to the operation of section 45(1) of the ICA. The net result would, therefore, have been different. Hamersley had clearly entered into the MMI policy in the relevant sense, and Zurich’s other insurance clause would have been void. Therefore, dual insurance would have applied. Following the limitation placed on the application of section 45 by the High Court, in Nicholas v Wesfarmers Curragh Pty Ltd, 607 the Queensland Supreme Court has, however, distinguished the case from circumstances in which a policy is effected by a parent company covering the interests of a subsidiary. Wesfarmers Curragh was a named insured and a party to the policy, which had been obtained by its parent company (Wesfarmers). The Court held that entry into the policy by Wesfarmers on behalf of its subsidiary should be viewed as an entry into that contract by the subsidiary itself for the purposes of section 45, for two reasons. First, the relationship between Wesfarmers and its subsidiary was properly characterised as that of agent and principal, and no legal distinction is made between a transaction effected through an agent as opposed to one effected directly by the principal. If the application of section 45 was confined to policies entered into directly by an insured party and not through an agent, its operation would become contingent on a matter irrelevant to the statutory intention. The Court referred to the ALRC Report on Insurance Contracts (No 20, 1982), which identified that the mischief section 45(1) was meant to avoid was the prospect of an ‘ other insurance’ clause rendering a primary-layer policy an excess-layer policy without an appropriate reduction to the premium. The Court stated in this regard, ‘ Parliament can hardly have intended to ignore entirely “commercial convenience and practice ”’, recognising that it is commonplace for insurance to be effected through brokers or other agents. 608 Second, the High Court majority in Zurich indicated a willingness to extend the meaning of the words ‘ entered into ’ in appropriate circumstances, notwithstanding they found in that case that the phrase could not extend to include beneficial third parties. The Court, therefore, found that entering into a contract of insurance by a parent company on behalf of itself and subsidiaries was an ‘ entering into ’ the contract of insurance by the subsidiary for the purposes of section 45(1).

607 [2010] QSC 447. 608 Ibid [32].

125

© Carter Newell 2023