Australia: The High Court To Have The Final Say In Relation To ‘Other Insurance’ Provisions

Last Updated: 24 August 2009

Section 45 of the Insurance Contracts Act 1984 (Cth) regulates the enforceability of what are known as 'other insurance' provisions. An 'other insurance' provision is a provision in a contract of insurance that excludes cover to an insured for a liability in respect of which the insured is covered under some other contract of insurance.

Section 45 of the Insurance Contracts Act

Section 45(1) is expressed in the following terms.

Where a provision included in a contract of general insurance has the effect of limiting or excluding the liability of an insurer under the contract by reason that the insured has entered into some other contract of insurance... the provision is void.

The reach of the section has been examined by State courts in recent times. The issue has been whether the section should be given a strict interpretation or liberal interpretation.

Strict interpretation

The strict interpretation is that the section only renders void an 'other insurance' provision to the extent that it applies to some other contract of insurance the insured has actually entered into.

It follows that the section only renders void an 'other insurance' provision to the extent that it excludes cover for a liability covered under some other contract of insurance to which the insured is a contracting party.

The practical result of this interpretation is that the insurer can decline cover where the insured is entitled to cover under some other contract of insurance, only if the insured was a contracting party (as opposed to a third party beneficiary or even 'additional insured'). In this instance, the insurer can force the insured to seek cover under the other contract of insurance.

In Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd [2009] WSCA 31, the Full Court of the Supreme Court of Western Australia adopted the strict interpretation.

Liberal interpretation

The liberal interpretation is that the section renders void an 'other insurance' provision to the extent that it applies to some other contract of insurance under which the insured is entitled to cover.

It follows that it is immaterial how the insured came to be entitled to cover under the other insurance. It is enough that a third party entered into the other contract of insurance on behalf of itself and the insured or that the insured is covered under the contract by operation of an extension (e.g. a principal's extension).

This encompasses almost every 'other insurance' provision.

The practical result of this interpretation is that the insured is free to choose which contract of insurance it seeks cover under. The insurer must pay and seek contribution from the other insurer.

In HIH Casualty & General Insurance Ltd v Pluim (2000) 11 ANZ Ins Cas 61-477, the NSW Court of Appeal's decision was consistent with a liberal interpretation although the Court did not expressly consider this issue.

Although the liberal interpretation does not conform strictly to the words of the section, it is arguably more consistent with the intent of the section.

The section was seemingly meant to be remedial, given the Australian Law Reform Commission report from which it stems. It was meant to render void any 'other insurance' provision to the extent that it applied to some other contract of insurance under which the insured was entitled to cover. The circumstances in which the insured came to have the benefit of cover were seemingly not meant to be material.

However, as is often the case, the drafting of the section did not achieve this purported intention.

High Court to decide

On 31 July 2009, the High Court granted leave to appeal from the decision in Speno so far as it concerns the interpretation of the section.

This means the High Court will have the final say as to whether the strict interpretation or liberal interpretation should be followed throughout Australia.

The High Court may also comment on a range of other issues traversed in Sepno including the time when the effect of an 'other insurance' clause is to be determined, the severance of the void part, specification of underlying insurance, utmost good faith where contribution is claimed in the face of a waiver of subrogation, and the right of subrogation where contribution has been paid.

The High Court is to hear the appeal in the October sittings of the High Court at Perth and so a decision should be handed down early next year.

For more information, please contact:



Ray Giblett

t (02) 9931 4833


Rory O'Connor

t (02) 9931 4933




David Slatyer

t (07) 3231 1532


Simon Carter

t (07) 3114 0129




Paul Sheiner

t (08) 9323 0955


Andrew Mason

t (08) 9323 0911


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