Australasian Correctional Services Pty Limited v AIG Australia Limited [2018] FCA 2043

Australasian Correctional Services Pty Limited v AIG Australia Limited [2018] FCA 2043

On the wording and structure of the policy, the Supplementary Payments clauses imposed on the respondent a duty to defend the suit, not merely to reimburse allocated defence costs. Because the cross-claim contained claims capable of falling within the cover, the duty extended to the whole suit and to all expenses incurred by the respondent in defending it, subject to the policy's express limits. The insurer's own defence expenses were not 'costs' within Exclusion (s) or the $200,000 deductible; they were expenses of the respondent, distinct from liability and third-party costs.

Jurisdiction
Australia
Judgment Date
21 December 2018
Procedural Posture
Insurance Coverage Dispute Concerning Defence Costs Under a General and Products Liability Policy / Separate Questions Heard Under R 30.01 of the Federal Court Rules 2011 (cth)
Outcome
Separate questions answered in favour of the applicants; respondent ordered to pay the applicants' costs to date.
Legal Topics
['duty to Defend' 'defence Costs' 'allocation or Apportionment of Defence Costs' 'deductible' 'policy Exclusions' 'supplementary Payments']
['insurance' 'civil Procedure' 'commercial Contracts'] ['duty to Defend' 'defence Costs' 'allocation or Apportionment of Defence Costs' 'deductible' 'policy Exclusions' 'supplementary Payments']

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Procedural Posture

Insurance Coverage Dispute Concerning Defence Costs Under a General and Products Liability Policy / Separate Questions Heard Under R 30.01 of the Federal Court Rules 2011 (cth)

Legal Issues

  1. 1 ['Where the respondent is obliged by the policy to defend the cross-claim in the name of and on behalf of the applicants, whether the respondent is liable under the policy to pay or bear the whole cost of that defence or only the proportion not properly allocated to allegations which could not result in indemnified liability.' 'Whether the respondent is liable under the policy to bear any of the first $200,000 of legal costs of or incurred in defending the cross-claim, having regard to paragraph 12 of the Schedule to the Policy and Exclusion (s).']

Ratio Decidendi

On the wording and structure of the policy, the Supplementary Payments clauses imposed on the respondent a duty to defend the suit, not merely to reimburse allocated defence costs. Because the cross-claim contained claims capable of falling within the cover, the duty extended to the whole suit and to all expenses incurred by the respondent in defending it, subject to the policy's express limits. The insurer's own defence expenses were not 'costs' within Exclusion (s) or the $200,000 deductible; they were expenses of the respondent, distinct from liability and third-party costs.

Court Disposition

Separate questions answered in favour of the applicants; respondent ordered to pay the applicants' costs to date.

Orders

  • ['Pursuant to r 30.01 of the Federal Court Rules 2011 (Cth), the two questions arising in the proceedings be heard separately from any other questions.' 'Question 1 answered: The whole of the costs of the defence, being all expenses incurred by the Respondent in defence of the suit.' 'Question 2 answered: Yes, such...