Collyear -v- CGU Insurance  NSWCA 92
Supreme Court of New South Wales Court of Appeal
Giles JA; Hodgson JA; Handley AJA
- This was a claim for contribution by Lloyds against CGU Insurance relying on the principles of double insurance that failed because Lloyds did not establish that CGU had a common or co-ordinate liability in respect of the indemnity paid by Lloyds to its insured.
- The indemnity paid by Lloyds was to one of the entities insured under its policy (the tenant) to comply with its contractual obligations under a lease to reinstate damaged premises at the request of the landlord.
- The landlord was covered under the Lloyds' policy (and under the CGU policy) however the indemnity was paid by Lloyds to the tenant (not to the landlord)
- Furthermore, as the landlord had been indemnified by the reinstatement of the premises by the tenant (for which it received payment under the Lloyds' policy), the landlord had suffered no loss in respect of which it could be indemnified under the CGU policy.
- On 9 January 2001 the "Lagoon Restaurant" at North Wollongong was destroyed by fire.
- The premises were owned by the Stuart Park Reserve Trust (the Trustee) which was managed by the Wollongong City Council.
- The restaurant was operated by Emibarb Pty Ltd under a lease from the Trustee that contained a term that if the property was damaged the landlord could notify the tenant that it required the damage to be repaired.
- Following the fire, the Council, on behalf of the Trustee, gave such requirement notice to Emibarb to repair the damage by reinstating the restaurant premises.
- Emibarb had a policy of insurance with certain underwriters at Lloyds. This policy identified the property insured as extending to "property belonging to the Insured or for Damage to which property the Insured is legally responsible or for which the Insured has assumed responsibility to insure..."
- The Council had a policy with CGU Insurance that covered its interest in the premises. The terms of the CGU policy did not cover the interests of Emibarb in the premises. The policy also had a term covering the interests of other parties which included the insurable interests of the Trustee.
- Emibarb lodged a claim under the Lloyds' policy for the reinstatement costs of the restaurant premises and received $3,750,000 in full settlement of that claim.
- Lloyds then claimed contribution from CGU on the basis of the double insurance principle.
- The primary Judge at first instance rejected the claim by Lloyds for contribution finding that there was no dual insurance by the operation of the two policies and consequently no claim for contribution. The Lloyds underwriters appealed.
- The appeal was dismissed.
- The Court confirmed the long established principles of double insurance to the effect that each insurer must be liable under its policy to indemnify the Insured against the happening which had given rise to the Insured's loss or liability. An insurer seeking contribution from a co-insurer must establish that:
(a) It is liable to indemnify the Insured under its own policy;
(b) It has paid out sums in respect of that liability;
(c) The co-insurer is also liable under its policy to indemnify the Insured; and
(d) The co-insurer has not paid out any moneys to meet its liability to the Insured.
- The Lloyds' policy covered Emibarb's interest as lessee, and extended to Emibarb's liability under the clause of the lease requiring reinstatement of the premises at the request of the landlord. This followed from the wording of the policy stating that the property insured included property "for Damage to which property the Insured is legally responsible."
- The Lloyds' policy also covered the interests of the Trustee as lessor and owner and required Lloyds to indemnify the Trustee in the event of damage. However, since the obligation was no more than to "indemnify" the Trustee, this obligation would not result in any liability to pay money under the policy unless the Trustee suffered loss against which it was to be indemnified.
- As the Trustee had required Emibarb to reinstate the premises pursuant to the lease and as that had been done by Emibarb, the Trustee's loss had been eliminated, not by any payment under the Lloyds' policy but by Emibarb's compliance with its contractual obligations under the lease. The Trustee, having been indemnified by the tenant (Emibarb) in respect of the damage to the premises (i.e., by reinstating them) the Trustee had suffered no loss which could be the subject of a claim under the CGU policy or the Lloyds' policy.
- Although each policy did cover the same risk for the Trustee, the Lloyds' policy in addition covered a different risk to Emibarb, namely the risk that Emibarb would be required to reinstate the premises under the lease; the payment actually made by Lloyds was in respect of that different risk. Although both policies did cover identical losses of identical insureds (the Trustee), the Trustee did not receive any indemnity against that loss from Lloyds.
- Although both policies insured the landlord (the Trustee) against the loss it initially sustained, ultimately it sustained no loss. The CGU policy did not insure the tenant against the loss it sustained being the liability it incurred to reinstate the premises at the request of the landlord in accordance with the terms of the lease.
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