Australia: Duelling Indemnities: HIH continues to have impact: case law on equitable contribution

Insurance Update March 2012
Last Updated: 27 March 2012
Article by Nicole Wearne and Renee Gorenstein

HIH Insurance Ltd was notorious for its claims management approach to third party claims litigation with a fierce reputation for not being afraid to test the boundaries of legal principle. As a result the law reports are replete with significant superior court decisions in which HIH companies or their insureds feature in the development and understanding of Australian law and insurance law in particular. The group in liquidation has continued to add to the development of legal principle in the areas of insolvency law, reinsurance law, directors' duties, shareholders rights: the list goes on. Its most recent contribution arises out of the remnants of the Dragon Scaffolding case following the Federal Government's bailout of the HIH group. In the latest High Court case, HIH Claims Support Scheme (HCSL) has sought to extend the law in relation to equitable principles of dual insurance.

The decision of the High Court in HIH Claims Support Ltd v Insurance Australia Ltd [2011] HCA 31 (the HCSL case) provides a useful statement of the principles of equitable contribution and when the obligations of two or more parties may result in coordinate liabilities.

HCSL was created by the Commonwealth Government to assist insureds affected by the collapse of the HIH group of insurance companies, by providing a partial or complete indemnity for third party and first party losses, subject to specified criteria being satisfied.

In general terms, dual insurance exists where two insurance policies insure the same entity against the same risk. The insured entity is entitled to call upon either policy to the value of the agreed indemnity. Under the principles of dual insurance, the indemnifying insurer is entitled to claim an equitable contribution from the other insurer.

The HCSL case involved an appeal by HCSL against a unanimous decision of the Court of Appeal of the Supreme Court of Victoria (Warren CJ, Mandie JA and Beach AJA). The Court of Appeal held that, for the principles of dual insurance to apply, the liabilities of the relevant insurers must be 'coordinate' or 'of the same nature and to the same extent'. The Court found that the liabilities of HCSL and an insurer are not coordinate and therefore HCSL cannot rely on the principles of dual insurance to seek an equitable contribution from an insurer.

The High Court in the HCSL case unanimously dismissed the appeal.

Gummow ACJ, and Hayne, Crennan and Kiefel JJ found that the assignment of the insured's rights, which was central to the HCSL Scheme, did not place HCSL in the same position as HIH either 'effectively or "in substance"'. Under the Scheme, HSCL did not step into the shoes of HIH and become exposed to all claims under HIH policies or to contribution claims from co-insurers of HIH. Rather, HCSL stepped into the shoes of the insured, who assigns his/ her rights to HCSL thereby entitling HCSL as assignee creditor to lodge a proof of debt in HIH's liquidation. That aspect of the Scheme, which applied to all eligible insureds, was fundamental to maximising recovery of public funds utilised for the purposes of the Scheme.

Further, the High Court found that the obligations of HCSL to the insured under the Scheme 'were not "of the same nature and to the same extent" as the obligation of' the respondent insurer (IAL) in that:

  1. there is no common interest or common burden between HCSL and IAL because, if IAL had paid the insured under its insurance policy before HCSL formed the contract between it and the insured, the insured would not have satisfied the eligibility criteria for assistance under the Scheme. The insured and HCSL would never have entered into contractual obligations with each other and the possibility of double indemnification in respect of the insured's loss would not have arisen
  2. since HCSL undertook no enforceable obligations under the Scheme until a payment was made, IAL would never have had an opportunity to bring a claim for contribution against HCSL
  3. the offer of assistance under the Scheme was conditional upon the insured's assignment of rights under the HIH policy, covering events which had already occurred. This means that the risk undertaken by HCSL could not be described as the same risk undertaken by IAL. It could not be said that HCSL's contract to indemnify the insured, made after the HIH Group's insolvency and coming into existence upon payment, and IAL's contract of insurance covering the insured 'were the "one insurance"'.

The High Court held that IAL's ability to claim the benefit of satisfaction, because of HCSL's payments in respect of the insured, does not give rise to a common burden. The High Court found that 'a "community of interest" between obligors is not a sufficient condition for the operation of an equity to contribute in circumstances where the obligations in question are qualitatively different'.

On the basis of the above, the High Court concluded that the obligations of HCSL and IAL 'are not "of the same nature and to the same extent"' and are not co-ordinate liabilities.

In a separate written judgment, Heydon J was somewhat critical of the situation in which HCSL found itself, identifying what he calls a number of 'striking' features of the case. Namely, that:

  1. whereas HIH was unable to pay but willing to do so, IAL was able to meet its liability to indemnify but has been unwilling to do so
  2. normally, where a person is insured by two insurers, the liquidation of the first operates adversely to the interests of the second by rendering it liable to indemnify the insured completely, without contribution. IAL does not dispute that, if HIH had not gone into liquidation but had indemnified the insured, IAL would have been liable to make contribution to HIH
  3. IAL has, despite its 'stroke of good fortune in the Federal Government's intervention', resisted paying anything towards alleviation of HCSL's burden of indemnifying the insured, which, but for that intervention, it would have had to bear.

Notwithstanding the above, Heydon J concluded that the reasoning of the majority was correct and the appeal must be dismissed.

Heydon J confirmed that 'contribution is a remedy which rests on a type of mutuality' and found that mutuality did not exist. If the insured had proceeded against IAL, IAL would not have had contribution rights against HCSL because HCSL was not an insurer of the insured and IAL was not eligible to claim under the Scheme.

Heydon J noted HCSL's argument that, if it lost the appeal, this would result in a 'windfall' to IAL. However, Heydon J considered that HCSL had presented no reason for developing the doctrine of contribution to overcome this difficulty. He considered that to develop the law to benefit HCSL in these circumstances 'would not be to develop the law relating to contribution, but to revolutionise it' and 'it would be a revolution having the tendency to produce idiosyncratic and uncertain results'.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions