Mere notice of a contractual dispute does not itself necessarily constitute a policy claim.
The insured contractor, which subsequently went into liquidation without achieving practical completion of the works, and whose employer sought to claim directly from its indemnity insurers, contracted to attend to alterations and additions to an existing building.
The contractor was insured under three design and construct professional indemnity insurance policies under three consecutive policy years on a claims made basis.
The employer’s claims against the contractor were for alleged breach of the building contract including claims for liquidated damages and defects in the design and construction of building elements.
The insurer, in resisting the employer’s claim to proceed directly against it under the relevant legislation, successfully argued that the employer had made no written demand for civil compensation, civil damages nor non-monetary civil relief against the contractor during the policy period. Nor were those contractual demands notified to the insurer during any policy year.
So, the insurer argued, there was no valid insured claim made during the policy period for the loss. The court said that the claim under policy could be express or implied, but the evidence presented in respect of all the building claims did not sufficiently amount to a “claim for civil liability in respect of the conduct of professional services” as required by the policy. The correspondence between the employer and the contractor, and evidence of the relevant project manager, demonstrated the employer’s dissatisfaction and contractual entitlement to liquidated damages but did not constitute written demand for civil compensation nor civil damages as required by the policy.
A reservation of a contractual right, a claim for liquidated damages, or the exercising of a right of set-off under the building contract by the employer did not constitute a claim under the policies.
With respect to the employer’s defects claims, the court found that the correspondence only alleged contractual non-compliance and not an actual claim for compensation.
In any event, the court was not satisfied that the building claims arose out of the Professional Services as defined in the policies.
The claim failed.
Regard must always be had to the policy terms and definitions and whether a clear written demand for compensation is required to satisfy what constitutes a “Claim” under the policy.
The assertion of rights under a building contract between the employer and contractor are not necessarily identical to the assertion of a right of a claim to be made under a professional liability policy. A dispute over a problematic building project and rights under the relevant building contract may be insufficient to trigger a policy response.
374, 376 New South Head Road Pty Ltd v SMLXL Projects (NSW) Pty Ltd