Authored by Patrick Bracher.
In a September 2026 judgment of the Federal Court of Australia, the court grappled with ‘infelicitous wording’ of an annual public liability insurance policy to decide whether a sub-contractor under a building contract was a “named insured”. The court found that it was, which then did away with the equitable contribution claim by one insurer against the other.
Under the heading “Named Insured”, 15 contracting parties were named followed by “The Owner and Principal and all contractors and sub-contractors and other parties as required by the contract or agreement”. The Design and Construct Contract required the principal to obtain insurance covering its subcontractors. It was therefore held that the sub-contractor, which was responsible for damages for personal injury to a third party, was a Named Insured within the meaning of the policy even though it was not identified by name. The court came to this conclusion under the policy despite the fact that the ordinary meaning of the phrase ‘named insured’ means that the insured would be named specifically by name. On the wording of the policy it was held that this would lead to absurd results and could not have been what the parties intended.
The judgment is interesting because it discusses the principles of double insurance, which does not often appear in the law reports. The right of contribution arises when two or more insurers each insure against the same risk, creating a co-ordinate liability to the insured. It is not necessary that the terms of the respective insurances be the same, or even of the same kind, provided they cover the same risk. Where double insurance exists, an insurer who has paid more than its rateable proportion is entitle in equity to a contribution from all co-ordinate insurers of the same liability. This right reflects the fundamental principle that the burden of satisfying the insured’s liability is to be borne equally between those who have assumed an obligation to indemnify in respect of it. That includes any costs reasonably incurred in defending the underlying claim. Where one insurer is involved in settling a claim against the insured, the other insurer may not seek to reopen the liability of the insured, provided the settlement represents a reasonable compromise of the proceedings.
The judgment is not much of a precedent for the ‘named insured’ finding except to show that where wording is ambiguous, the courts will not get stuck on the ordinary meaning of the words if they lead to absurd results or indicate a different intention of the contracting parties.
The principles of double insurance are more or less the same as in South Africa, based on the principle of indemnity.
[Allianz Australia Insurance Limited v AIG Australia Limited [2026] FCA 1357]