It is a fundamental element in a successful claim for double
insurance contribution that there is a common liability to
indemnify the same insured in respect of the relevant loss. In this
case, the New South Wales Court of Appeal upheld the decision of
the New South Wales Supreme Court at first instance, where the
Court had found the common liability was lacking in this case, with
the result that a double insurance claim failed.
Moray & Agnew's Sydney office acted for the unsuccessful
The tenant leased premises from the landlord from which the
tenant conducted a restaurant business.
Pursuant to the lease, the tenant was required to maintain an
insurance policy noting the landlord's interest and covering
damage or destruction to improvements erected on the property. In
discharge of those obligations under the lease, the tenant secured
a contract of ISR insurance with Lloyds covering, amongst other
things property damage to the leased premises. The ISR Policy noted
the interests of the landlord.
Another provision of the lease required the tenant to repair any
damage to the property upon request by the landlord.
On 9 January 2001 the business premises were destroyed by fire.
Following the fire:
The tenant claimed on the ISR policy
Lloyd's reserved indemnity under the policy, but made a
'without prejudice' advance payment to the tenant
The landlord wrote to Lloyd's to register the
landlord's interest in the premises (but did not seek to claim
on the policy)
The tenant arranged for the reinstatement of the premises
involving payment of $2.3 million to contractors
The tenant commenced proceedings against Lloyd's seeking
indemnity under the policy in respect of the monies paid to
Lloyd's agreed to indemnify the tenant under the policy and
paid the claim, thus resolving the tenant's proceedings against
The landlord was insured under a separate ISR policy issued by
CGU. The CGU policy, which covered the landlord against damage to
the premises, did not note the tenant's interest.
In the claim the subject of these proceedings, Lloyd's
claimed contribution from CGU towards the amount paid by
Lloyd's, on the basis of the principles of contribution,
referred to generally as double insurance.
At first instance, the claim for double insurance was
unsuccessful on the basis that because the premises had been
reinstated at the tenant's cost, the landlord at no time had a
right to indemnity under the CGU policy. The landlord had no loss
Court of Appeal Decision
The primary judge's decision was unanimously upheld.
On appeal, Lloyd's sought to draw analogies with the
decision of AMP Workers Compensation Services (NSW) Limited v
QBE Insurance Limited  NSWCA 267 where a CTP insurer was
held to be entitled to contribution from a workers compensation
In that case the CTP insurer covered the owner and driver, but
the workers compensation insurer covered the owner only.
Notwithstanding that the CTP insurer made payments solely on behalf
of the driver (who had been sued by an injured passenger), it was
held to be entitled to contribution.
On appeal, Hodgson JA acknowledged the leading authority on dual
insurance, namely the High Court's decision in Albion
Insurance Company Limited v Government Insurance Office of New
South Wales where the Court said that double insurance existed
where an insured was insured against the same risk with two
In this case, Hodgson JA concluded that:
although each policy did cover the same risk to the
[Landlord], the Lloyds policy in addition covered a different risk
to [the tenant], namely the risk that [the tenant] would be
required to reinstate the premises ..., and the payment actually
made by Lloyds was in respect of that different risk. [A]lthough
both policies did cover identical losses of identical insureds
([the landlord]), the [landlord] did not receive any indemnity
against that loss from the insurer.
Handley AJA reached the same conclusion, stating:
Although both policies insured the landlord against the loss
it initially sustained, in the end it sustained none, and the CGU
policy did not insure the tenant against the loss it sustained and
the liability it incurred. In my judgment there was no relevant
double insurance, the tenant made no election, and Lloyds are not
entitled to contribution from CGU.
Neither Hodgson JA nor Handley AJA considered the AMP v
QBE decision involving the CTP insurer was analogous to the
present case as in that case the indemnity operated equally for the
owner and driver, whereas in this case the indemnities were
separate and distinct.
The decision reinforces the importance of commonality of
identity of insured and risk in a successful double insurance
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.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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