Allianz Australia Insurance Limited v AIG Australia Limited

The Federal Court has dismissed a claim by Allianz Australia Insurance Limited for equitable contribution from AIG Australia Limited, holding that no double insurance existed between the two policies. The dispute arose from a Brighton, Victoria construction project, where a gate modified by subcontractor Built Tech Hoardings Pty Ltd fell and seriously injured a traffic controller. Allianz, which insured Built Tech directly, paid settlements of 1 million dollars and 650,000 dollars plus defence costs, then sought contribution from AIG, which insured the broader Icon construction group under an annual public liability policy.

Justice Derrington held that condition 17 of AIG's policy, a difference in conditions or other insurance clause, made AIG's cover excess only where another policy already responded. The Court found Built Tech fell within the AIG policy's scope as an insured party, and construed the clause as applying to insureds generally rather than only to those expressly named in the schedule, even though the clause as drafted referred to named insureds. On that construction, AIG owed no indemnity for losses already covered by Allianz, so there was no concurrent primary cover and no basis for equitable contribution.

The decision turns on policy wording rather than any change to the law of double insurance, and it illustrates a court's willingness to read down an other insurance clause where a literal reading would produce a commercially irrational result. It is directly relevant to insurers and brokers involved in layered liability and construction insurance programmes, particularly where a head contractor arranges project-wide cover for subcontractors who also hold their own liability policies.