Double Insurance

Will two insurance clauses cancel each other out?

In a couple of recent Australian examples, parties have been found to have been insurance for the same thing on two or more policies. These examples are complex, but can you have dual insurance? Or do they cancel each other out? Here are two examples to better explain:

Lambert Leasing Inc. v QBE Insurance (Australia) Ltd [2016]

In this example, Lambert and Saab sold an aircraft to Mackellar Mining Equipment Pty Ltd and Dramatic Investments Pty Ltd. The purchase agreement required them to indemnify Lambert and Saab and maintain an insurance policy which covered such an indemnity. They took out a policy with QBE, which named the lessee of the aircraft as the “insured”, and Lambert and Saab as “additional insureds”.

The aircraft later crashed and all on board died. When the families of the deceased applied for compensation, the double insurance was uncovered.

The legal proceedings began against QBE where Lambert and Saab claimed they were entitled to indemnity under the Policy. The trial was dismissed as the judge found that it did not render the “other insurance” clause in the QBE Policy void; and Global had already indemnified any loss incurred by Lambert and Saab. This was later appealed by Lambert and Saab who argued that the trial judge erred in finding that they were required them to have “entered into” both Policies and that they did not satisfy such a requirement.

Ultimately, the High Court found that “other insurance” clauses will only be void in circumstances where both contracts have been “entered into” by the relevant “insured” and the “relevant insured” is the named insured party, not a non-party insured. The Court also found that, where “other insurance” clauses were not void, the two “other insurance” clauses cancel each other out.

In this case, both Global and QBE were liable and Lambert and Saab were entitled to elect which insurer indemnified their claim.

Zurich Australia Insurance Ltd v Metals & Minerals Insurance Pty Ltd & Ors [2009] 

Speno was contracted by Hamersley to provide rail grinding services. Speno was insured by Zurich and was required to indemnify Hamersley against liability in the event of injury to its employees as a result of negligence. Hamersley had also obtained its own insurance with MMI which included an “other insurance” clause in its policy, insuring against the same risk.

When two Speno’s employees were later injured, Zurich indemnified Hamersley. Zurich sought a contribution from MMI, arguing that the “other insurance” clause was void.

The High Court then universally agreed that section 45 does not render an “other insurance” clause void where a person benefiting from the contract of insurance is not a party to that contract. As a result, the “other insurance” clause in the MMI policy had the effect of limiting MMI’s liability to excess insurance.

More information

These examples are complex and require advanced legal advice for each of the circumstances. If you would like any further information or assistance regarding double insurance and what it means in other situations, please speak with you experienced team of legal professionals.