Australia: Double insurance and common liability

HIH Claims Support Limited v Insurance Australia Limited [2009] VSC 344
Last Updated: 16 December 2009
Article by Ritsa Balfoort

The Victorian Supreme Court has recently revisited the complexities of double insurance, deciding that the time at which the existence of double insurance is to be considered is whether or not a common liability existed at the time of the relevant occurrence.


The part of the proceeding which was subject of the appeal was a contribution claim, based on double insurance, brought by Zurich against MMI. MMI defended the claim on the basis that there was no double insurance because it could rely upon an 'other insurance' clause which entitled it to deny policy cover. Zurich argued that the 'other insurance' clause was rendered void by section 45 of the Insurance Contracts Act (ICA) which provides, relevantly, that where a provision included in a contract of general insurance has the effect of limiting or excluding the liability of the insurer by reason that the insured has 'entered into' some other contract of insurance, the provision is void.

The 'other insurance' clause in the MMI policy had the effect of converting the policy into an excess of loss policy where the insured was either a party to another contract of insurance covering the same loss or where, although not a party to the other contract of insurance, it was entitled to the benefit of that insurance.

In this case, MMI's insured was not a party to the other contract of insurance (the Zurich policy), but was named in it as a party entitled to benefit.

The Judgment at first instance

The judge at first instance found that section 45 only applied in circumstances where the insured was a contracting party to the other insurance, but that because the 'other insurance' clause in the MMI policy had both a prohibited effect (where the insured was a party to the other insurance contract) and a permitted effect (where the insured was merely a beneficiary under the other policy), the entire clause was rendered void. Zurich's contribution claim therefore succeeded.

The decision of the Court Of Appeal

The trial judge's finding that section 45 of the ICA only applied where the insured was party to the other contract of insurance was not challenged before the Court of Appeal. The Court of Appeal found, however, that the permitted part of the 'other insurance' clause could be severed from the prohibited part with the result that the clause was effective to exclude cover (save for excess of loss) in respect of MMI's insured because it was a beneficiary (but not a contracting party) under the Zurich policy. This defeated Zurich's contribution claim.


The Court's decision in this case is relatively straightforward. However, it is important to have an understanding of the complex factual matrix with events leading to this case to appreciate what issues were before the Court.

The catalyst of the series of proceedings which preceded this case was the resulting damage caused to a large screen at the 1998 Grand Prix when the structure supporting it collapsed. Screenco had been retained to provide the screen. Screenco sub-contracted the scaffolding to a company, Dew, and Dew in turn subcontracted the works to Steele. The scaffolding failed and Screenco sued Steele and Dew in the NSW Supreme Court.

Steele held a liability insurance policy with a company in the HIH group (HIH). HIH accepted Steele's claim for indemnity. HIH paid a certain amount of Steele's defence costs prior to its liquidation ('the HIH defence costs'). Steele then assigned his rights under the HIH policy and his rights against any third party to HIH Claims Support Limited (HCSL), the Scheme established by the Commonwealth government to assist HIH insureds. In return, HCSL agreed to pay 90% of any award against Steele and 90% of his own defence costs, with Steele responsible for paying the balance.

Steele was found liable to both Screenco and Dew in the NSW proceeding. HCSL paid Screenco and Dew 90% of the sums awarded against Steele.

HCSL then commenced subrogated proceedings in the Victorian Supreme Court in Steele's name against Insurance Australia Limited (IAL) who, by that time, had been vested with SGIC's rights. At first instance it was held that the HCSL was not an insurer, that the agreement between HCSL and Steele was not an insurance contract, and the payments made on behalf of Steele were characterised as welfare payments. It was further held that the SGIC policy responded to Steele's claim, and that IAL was also liable to contribute to one half of the HIH defence costs.

The decision in relation to the payment of the HIH defence costs was upheld on appeal, but the decision in favour of Steele was overturned. It was found that the contract between HCSL and Steele was not a contract of insurance, but that the payments made by HCSL were made under a contract between HCSL and Steele by which there was a contractual obligation to indemnify, and they were not voluntary payments. As Steele had already been indemnified by HCSL pursuant to that contract, he could not be indemnified again under the SGIC policy. The Court concluded that it may have been open for HCSL to seek contribution from IAL if their liabilities were co-extensive or coordinate, but that the question had not arisen in the proceeding save in respect of the HIH defence costs.

In this proceeding, HSCL sought contribution from IAL.

HCSL argued that the court was required to consider whether a situation of double insurance would have arisen as between HIH and AIL as liability insurers of Steele, in which case HCSL argued it would have such rights as the successor of HIH.

IAL argued that HSCL had a primary contractual obligation to indemnify Steele, and that IAL had a secondary obligation as insurer to indemnify him.

In the alternative, IAL argued that the relevant date for considering whether or not HSCL and IAL had a common liability to indemnify Steele was as at the date of the incident. HCSL was created after the incident and accordingly it could not have shared a common liability with IAL.


Hollingworth J considered herself bound to apply the recent Victorian Court of Appeal decision in QBE Insurance (Aust) v Lumley General insurance Limited [2009] VSCA 124, (see the August 2009 edition of Legal Directions for a case summary), in determining that double insurance arises if there is a common liability as at the insuring clause event. Her Honour considered HIH and HCSL as two separate entities. HCSL did not exist at the date of the relevant occurrence and there was obviously no contract for indemnity between HCSL and Steele at that time. Her Honour also found that HSCL's obligation to indemnify Steele was primary in nature, and that IAL's obligation to indemnify Steele as insurer was secondary, in which case HCSL and IAL's rights were not co-ordinate in which case there was also no right of contribution on that basis. HCSL's claim for contribution against IAL was dismissed.


This decision follows a line of recent Australian decisions that insurers must have a common liability as at the time of the insuring clause event for double insurance to arise. We understand that HCSL has appealed.

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.

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”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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