Australia: One Insured, Two (Different) Risks, No Contribution

Last Updated: 8 October 2008
Article by Anthony Scott

Collyear v CGU Insurance Limited [2008] NSWCA 92

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 appellant, Lloyd's.


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 contractors
  • Lloyd's agreed to indemnify the tenant under the policy and paid the claim, thus resolving the tenant's proceedings against Lloyd's.

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.

First Instance

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 to claim.

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 [2001] NSWCA 267 where a CTP insurer was held to be entitled to contribution from a workers compensation insurer.

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 independent insurers.

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 contribution claim.

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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