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36 AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #115 JULY/AUGUST 2007

CONTRACTS

INSURANCE ISSUES IN CONTRACTINGSt John Frawley, Partner

Holding Redlich, Melbourne

INTRODUCTION This paper will consider briefly:

(a) standard (and non–standard) types of cover;

(b) some important concepts and principles of insurance; and

(c) related issues including contractual indemnities and limitations of liability, and the effect of the national proportionate liability reforms.

All too often, the question of appropriate and adequate risk coverage is paid insufficient attention in commercial and contractual arrangements in the construction and engineering industry. The aim of this paper is to identify, and provide some answers to, important questions that arise in respect of the management of project risks.

The paper concludes by proposing a ‘checklist’ of issues to consider for those who are involved in the management or supervision of construction and engineering projects (Schedule 1). The checklist is not exhaustive, but provides a framework for early identification of important issues concerning the covering and management of risk.

‘CONTRACTS OF INSURANCE’In Australia at present, the coverage of project risks remains predominantly within the province of the traditional insurance and re–insurance markets.

For this reason familiarity with the provisions of the Insurance Contracts Act 1984 (Cth) (the Act) is necessary.

The Act is of particular importance as it applies to ‘contracts of insurance’.1 The term ‘contracts of insurance’ has a very wide meaning. Only a small class of insurance contracts are excluded from the operation of the Act (including, for example, workers compensation

insurance—which is compulsory and regulated by a separate legislative regime).2 Therefore, the standard types of insurance contract used in the construction and engineering industry will almost invariably be ‘contracts of insurance’ and attract the operation of the Act.

What are the defining characteristics of an insurance contract? They may usefully be summarised as follows:

(a) An insurance contract is a contract (the policy) by which one party (the insured) agrees to pay consideration (the premium) in return for which the other party (the insurer) promises to pay an amount or provide a benefit (indemnity) upon the realization of a specified risk (the occurrence of which is uncertain).

(b) The relationship between the parties to an insurance contract is unlike that found in most other ordinary commercial transactions insofar as the parties are obliged to act towards each other with the utmost good faith. This obligation has been enshrined in s13 of the Act, and extended so that the duty is implied in every contract of insurance.

As a general proposition, insurance contracts may be categorised as either:

(a) ‘direct loss’ policies; or

(b) ‘liability based’ policies.

A direct loss policy provides indemnity (or cover) for the occurrence of a specific event causing loss to an insured. This is often referred to as ‘first party cover’ as the policy responds to cover the loss suffered by the insured. An example of first party (direct loss) cover is works insurance which we discuss below.

A liability based policy provides cover to the insured for its liability to a third party for the loss suffered by that third party as a

AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #115 JULY/AUGUST 2007 37

result of the, usually negligent, conduct of the insured. This is often referred to as ‘third party cover.’ An example of third party (liability) cover is professional indemnity insurance which we discuss below.

STANDARD TYPES OF INSURANCE COVER USED IN THE CONSTRUCTION INDUSTRY

Introduction For convenience, this paper will consider the typical requirements under a design & construct project delivery method. Clause 5 of PC–1 is extracted [Attachment 1]. Different project delivery methods, such as ‘build only’ or ‘BOOT’ (build own operate transfer) may require different (lesser or additional types of cover). A ‘BOOT’ project may require business interruption cover for example. The insurance clauses for the standard AS2124–1992 have also been extracted for comparison (note: no requirement for professional indemnity cover) [Attachment 2]

It is critical to understand thoroughly the nature of the project risks so that a proper analysis can be made and a specifically tailored risk coverage program implemented from the outset.

The standard types of insurance required include:

(a) works insurance;

(b) professional indemnity insurance;

(c) public liability insurance; and

(d) workers compensation insurance.

Workers compensation insurance is compulsory and regulated by its own legislative regime. Workers compensation insurance covers the statutory responsibility of an employer to compensate for injury to, or death of, persons arising out of or in the course of

the employment. It is sometimes known as ‘employee cover’.

Public liability insurance provides cover for the insured’s liability for injury to, or death of, persons (not being employees) and damage to property (not being the property covered by works insurance). Public liability insurance therefore supplements workers compensation insurance and works insurance.

Works insuranceWorks insurance provides cover against loss or damage suffered by an insured as a result of any loss or damage caused to the works during the period of the relevant project. For example, the primary insuring clause and exclusions for one of the standard’ works insurance policies is provided at Attachment 3. Works insurance is also often known as ‘construction risk’, ‘construction material damage ‘or ‘property damage’ insurance. Works insurance typically names all contracting parties as ‘joint’ or ‘named’ insureds.

Historically, the typical project delivery method was ‘build only’. AS 2124–1992 (and AS4000–1997) reflects that history insofar as there is no requirement for professional indemnity (PI) cover. Works insurance is typically ‘first party cover’. Therefore, it does not cover the liability of an insured to third parties. It also limits the cover provided to that which compensates the insured for the loss or damage to the works or insured property (however defined), but not for defective workmanship, faulty design or consequential loss.

For example, consider clause 18(a) to (f ) inclusive of AS2124–1992 [Attachment 2] and the form of exclusions for the example works insurance policy [Attachment 3]. The effect of this is that an insured under a ‘build only’ contract obtains cover for

All too often, the question of appropriate and adequate risk coverage is paid insufficient attention in commercial and contractual arrangements in the construction and engineering industry.


on the part of an insured. It is often the case that the PI risk will be covered by policies more accurately called ‘civil liability’ or ‘liability’ policies.

This type of cover has traditionally been available to parties who provide professional services (i.e. lawyers, doctors, architects, engineers) to cover a negligent failure to meet the standard of performance of a reasonably competent practitioner within the particular field of endeavour. Of course, that failure may (almost certainly will) involve a breach of contract as there has traditionally been implied in all contracts for the provision of professional services a term requiring the provider to exercise ‘reasonable care and skill’ in the performance of the duties and provision of the services.

Now it is not uncommon to see liability policies offer indemnity in respect of breaches which go beyond the traditional ‘negligent’ breach to include indemnity for conduct which would breach, for example, provisions of the Trade Practices Act 1974 (Cth) (TPA). It is also not uncommon to encounter liability policies which express the ambit of the cover provided as being in respect of ‘any civil liability whatsoever’.

For example, refer to the extract professional indemnity insurance policy which is Attachment 4, and in particular, clauses 1.1, 1.5 and 1.6. Note the terms of clause 1.1 and 1.5: clause 1.1 refers to the ‘professional business practice’ (for a contractor, this may be very broad: the relevant policy includes in its definition, ‘. . . general builders and contractors...’); clause 1.5 provides coverage ‘in respect of any claim made against the insured for breach or alleged breach of a contract for the provision of professional services’ (undefined). Underwriters’ intention is to restrict their

liability to indemnify the insured for its liability to third parties for breaches of contract which would otherwise be tortious (negligent) acts. The policy, at clause 1.5 would appear to go beyond providing cover for a liability, but rather is triggered by a claim (as defined).

Consider also the liability policy wording extracted at Attachment 5. The cover offered is generally expressed in terms of claims made against the insured: i.e. third party cover. However, the clause extracted is susceptible to a different interpretation. The cover is expressed as being for ‘loss...sustained by (the insured)’: i.e. first–party cover. This discussion emphasizes the importance of contracting parties being able to satisfy themselves that the terms of policies effected are satisfactory, and to achieve the intended objective.6

One should also note that it is a feature of liability policies (such as PI policies) that the insured’s entitlement to indemnity does not arise until the liability of the insured to the third party claimant is determined.7 Usually, this will not affect the insured’s entitlement to reimbursement of ‘defence costs’ (see discussion below).

In summary, professional indemnity insurance is:

(a) cover for the insured’s liability to third parties in respect of the loss suffered as a result of specified conduct on the part of the insured (by contra–distinction with works insurance);

(b) usually taken out for a specified amount, which ideally (but rarely) exceeds the contract sum (the losses suffered by a third party will almost certainly include amounts other than simply the loss incurred to parts of the works);

loss and damage to the works but not for the negligent conduct or defective workmanship of the builder (contractor). Consider also exclusion 3 in the example works insurance policy. Assume that:

(a) a structure collapses; and

(b) the cause of collapse is the negligent design of a part of the structure (say, in the in–ground civil design).

The effect of that exclusion might be that:

(a) an insured (i.e. owner, contractor subcontractors, subconsultants) will not be entitled to recover the cost of remedying the defective design or remediating the in–ground civil part of the structure; but

(b) will be entitled to indemnity in respect of the balance of the structure destroyed in the collapse, and for any other loss or damage suffered to the works (or the insured’s property).

Of course, for an occurrence such as this you would notify both the works insurer and the professional indemnity insurer.

In summary, works insurance:

(a) covers an insured’s loss in respect of an event causing loss or damage to the works;

(b) names each project participant as in insured;3

(c) is usually for an amount equal to or greater than the contract sum;4

(d) is maintained for the period of the contract (including defects liability).5

Professional indemnity insurance Professional indemnity insurance provides liability (or third party) cover to an insured for its liability to a third party in respect of that third party’s loss arising as a result of specified conduct


(c) covers a period beyond the period of the relevant contract, to match either the general law or legislative period of liability; 8 and

(d) an area of law and commerce fraught with uncertainty and opportunity.

Conclusion The scope for argument as to the ambit of cover under any policy can readily be seen. It highlights another feature of the insurance industry: the poor drafting of policy wordings generally. It also serves to illustrate the rationale underpinning a useful ‘rule of thumb’ for managing ones affairs: don’t make assumptions about the ambit of cover provided by your insurance policies—rather, seek all possible avenues of recovery and notify the insurers accordingly (including having your broker and lawyers review policies).

NON–STANDARD RISK COVERAGE In addition to considering (and ensuring) the adequacy of any traditional risk coverage (insurance) program, parties to a construction and engineering project should consider whether the project may require or benefit some form of:

(a) non–standard insurance cover such as for liquidated damages or force majeure; or

(b) alternative risk transfer (ART) mechanisms.

ART mechanisms are a form of financial instrument which offer the possibility of:

(a) providing protection for previously ‘uninsurable’ risks (e.g. revenue loss; debt securitisation catastrophe risk); and/or

(b) transferring risk from insurers to capital markets and investors.

Surety (or performance) bonds are an example of an ART mechanism. Performance bonds

provide a guaranteed pay out of a stipulated maximum amount (or ascertainable amount) upon the occurrence of any risk event which prevents completion of, or even performance of, a project including:

(a) insolvency of a contractor; or

(b) failure to complete due to poor performance.

Performance bonds can provide very effective risk coverage because they are event, rather than liability, based. However, they are very expensive and have yet to penetrate the Australian market to any significant degree.

While the flexibility and potential financial security offered by non–traditional risk coverage options may be attractive (and a major boost to project feasibility), there are issues to be considered in deciding whether or not to pursue alternative risk coverage options such as:

(a) will the governing law be Australian law—‘new’ or non–traditional insurance products are largely offered out of the London market (and are therefore not subject to the Insurance Contracts Act); and

(b) is the particular ART mechanism an ‘insurance contract’ and subject to the Insurance Contracts Act (which provides substantial legislative protection for insureds) or even, maybe, a ‘futures contract’ subject to the Corporations Act 2001 (requiring potentially onerous regulatory compliance).

Conclusion A careful analysis of the project risks profile and the implementation of a customised risk coverage strategy is therefore critical to ensure that the financial interests of participants are adequately protected. It may even be the difference between ‘getting the project up’ in the first place.

This paper focuses upon the usual position: projects in which traditional insurance regimes are in place (and which, therefore, invariably attract the operation of the Insurance Contracts Act). Nevertheless, similar types of issues arise and should be addressed no matter the nature of the risk coverage program.

MANAGING ‘RISK EVENTS’—THE IMPORTANCE OF NOTIFICATION

Claims Made ... Made and Notified ... Circumstances Professional indemnity and other liability policies have traditionally been characterised as either:

(a) ‘claims made; or

(b) ‘claims made and notified’,

policies.

A ‘claims made’ policy provides cover in respect of the liability arising in respect of a claim made against the insured during the policy period (usually one year).

A ‘claims made and notified’ policy refers to claims made on the insured and notified to the insurer during the policy period.

The distinction and its effect upon insured’s and insurer’s relative rights has been the source of substantial judicial debate. Currently (and helpfully) it seems that in two critical respects the debate has been rendered all but one of form.

Section 54 of the Act provides in effect that the insurer may not refuse to grant indemnity because of the act or omission (not being one which contributes to or causes a loss) of the insured, but may only reduce the quantum of the indemnity to be paid by the extent of the prejudice suffered as a result of the act or omission.

For a ‘claims made’ policy, the ‘indemnity trigger’ is the making of a claim, while the ‘claims made


to an insured it should proceed carefully and expeditiously to determine whether or not, and if so, when to notify the insurer.

There is an added aspect to this issue. Section 40(3) of the Act provides that where ‘circumstances’ are notified within a policy period (whether a ‘circumstance notified’ clause exists or not) the insurer cannot refuse indemnity simply because a claim is made after the expiry of the policy period.

There was judicial debate, having regard to the terms of s40(1) as to whether s40(3) applied to ‘claims made’ as well as ‘claims made and notified’ policies. However, since the High Court’s decision in Newcastle City Council v GIO11 it appears settled that the extension of cover afforded by s40(3) applies to both types of policy wording.

Conclusion The above discussion only briefly touches upon this complex area of the law, but heightens the level of awareness one needs to have in respect of the management of ‘risk events’ and notification generally. For those responsible for the management or supervision of a project, that responsibility demands early attention, including the early advice of brokers and lawyers as the commercial ramifications may be significant.

IMPORTANT CONCEPTS OF INSURANCEIn this section, the paper identifies a number of important concepts in the insurance industry. It is not exhaustive—whole texts have been written about individual concepts to which this author will make only passing comment.

Insurer and insured obligations—misrepresentation/non–disclosure Both the insured and the insurer (also often known as

and notified’ policy requires two acts to trigger indemnity, the latter being an obligation of the insured to act (i.e. to notify the insurer). It is now relatively settled law that s54 provides relief in respect of either form of policy. The issue to be determined is the extent of the prejudice suffered.

However, there remains controversy in cases concerned, not with whether a claim has been notified within time but with terms of the policies that either provide an election to extend cover, or an obligation to notify in respect of ‘facts, matters or circumstances that may give rise to a claim’, and in particular whether a failure to notify will attract s54 of the Act.

The courts appear to have settled the debate which has endured in one form or another since the early 1990’s.9

The High Court in the FAl General Insurance v Australian Hospital Case,10 appears to have overcome most hurdles, to provide for a more stable approach and one which substantially expands insurers’ potential liability. It now seems that if circumstances exist which should have been notified, then failure to notify will be an ‘omission’ and will attract s54 (in the same way that failure to notify of a claim made by a third party against the insured will attract s54).

Accordingly, it would seem that a failure to either:

(a) elect to give notification where there is a choice; or

(b) to give notification where there is an obligation;

will not entitle the insurer to refuse indemnity, and that the relief s54 of the Act offers to insured’s will be attracted.

Therefore, where ‘facts, matters or circumstances’ which may give rise to a claim, are known

For those responsible for the management or supervision of a project, that responsibility demands early attention, including the early advice of brokers and lawyers as the commercial ramifications may be significant.


‘underwriters’) have very clear obligations to ensure the accuracy of statements made to each other, as well as obligations to make disclosure. For the insured, this is primarily in respect of matters material to the risk which the insurer will cover (e.g. novelty of design; relevant physical conditions). For underwriters, this is primarily concerning ambit of cover and exclusions.

These obligations arise both at general law, and in respect of ‘contracts of insurance’ (such as works insurance and professional indemnity insurance) under the Act.12

Possibly, the most important of these is the duty of ‘utmost good faith’ imposed upon both parties by s13 of the Act. Many of the other obligations given expression in the Act merely supplement, or give greater definition, to this fundamental and distinguishing feature.

For the insured, the fundamental duties may be summarised as:

(a) a duty not to misrepresent facts—this is not unusual; and

(b) a positive duty to disclose material facts affecting the risk which the insurer proposes to undertake, and which are known to the insured [s21].

For the insurer, those same fundamental obligations may be stated in reverse.

The doctrine of utmost good faith, enshrined and elevated to a contractual duty in the Act, also means, for example, neither party can rely upon a term of the contract of insurance where such would be a breach of utmost good faith [s14]. Thus, both the insurer and he insured must have regard to the interests, not only of itself, but of the other party to the contract of insurance.

The role of the broker13

The broker is an essential participant in almost every contract of insurance. The broker facilitates the process, acting as an intermediary, by which a contract is formed—particularly, often, the completion by the insured of the proposal form (by which the insured’s disclosure obligations prior to contract are undertaken).

But whose ‘side’ is the broker on? The prima facie position is that the broker acts as the insured’s agent. This is subject to a number of exceptions—for example, where the broker acts under a ‘binder’ for the insurer (in which case, such binder must be disclosed to the insured).

The implications are numerous depending upon whether or not the broker is agent for the insured or the insurer. This is particularly so in respect of notification and disclosure.

For example, assume the broker is the insured’s agent and the insured notifies the broker by letter of ‘circumstances’. The broker fails to notify the insurer. What is the insured’s position vis–a–vis the insurer? Insured’s would do well to seek written confirmation that the broker has notified the insurer immediately any notification is given. If not obtained, and the broker has failed to notify the insurer, the insurer may well not be liable to indemnify or, at least, may be able to substantially reduce the quantum of indemnity (and the insured faces the prospect of suing both!).

Multiple ‘insureds’ Most construction contracts will require that the insurances to be taken out by a party. Usually this obligation falls upon the contractor, but the principal may reserve the right to take out insurance covering certain risks or part

thereof.14 Where appropriate, the contract will stipulate the other party, subcontractors and subconsultants as named insureds under the relevant policy. These parties are sometimes referred to as ‘joint insured’, ‘co–insured’, ‘named beneficiaries’ or ‘named insured’.15

This is important as s48 of the Act provides in effect that:

(a) a party specified (not being a party to the insurance contract) as ‘a person to whom the insurance cover provided by the contract extends’ has the same rights and obligations ‘as if he were the insured’; and

(b) the insurer has the same defences ‘as he would have in an action by the insured’.

Therefore, for example, if the insured is guilty of fraudulent non–disclosure (which is a complete defence to any claim for indemnity), the innocent ‘named insured’ may not be entitled to the benefit of the policy. However, in the case of post–contractual fraud by the insured, such as arson of the insured’s property, the third party’s rights under the contract may remain intact.

Subrogation Subrogation is the principle by which one party (the insurer) becomes entitled to exercise the rights of another. A party which subrogates to another’s rights does so in the name of that other party.

Most construction contracts will require a waiver of all rights to subrogation by the insurer against all other insureds (this emphasises the prudence of adopting the terminology of ‘named insured’ or equivalent in construction contracts). This would seem fundamental if the risk allocation agreed to for a project is to have any meaning.

The Full Court decision of the Supreme Court of WA


proper professional advice having regard to the particular project requirements and risk profile is necessary and prudent.

Indemnities—generallyAn indemnity is a contractual promise (obligation) given by one party in favour of another (the indemnified party) to hold the indemnified party harmless against specified losses or damages which the indemnified party may suffer.

As reference to clauses 5.1 and 5.2 of PC–1, 1997 (Attachment 1) demonstrate an indemnity will often provide financial protection against:

(a) the indemnified party’s own loss; and

(b) the indemnified party’s liability in respect of a third party’s loss,

which arises as a result of the conduct of the party obliged to provide the indemnity.

Often contractual indemnities will be ‘mirrored’ in the insurances required to be effected for a project. However, this does not mean that a party’s obligation to indemnify is thereby reduced—an indemnity is an express contractual obligation capable of enforcement in accordance with its terms.

For this reason, any suggestion that an indemnity is not required because insurance covering the relevant risk is to be effected should be dismissed: they are two entirely separate risk coverage mechanisms.

Of course, from a practical perspective it may often be the case that the real hope of recovery lies with underwriters, depending upon the financial capacity of the party which is asked to provide the indemnity. And these are equally important considerations as it will invariably be counterproductive (and futile) to insist upon an indemnity where

in the Woodside Petroleum Development case16 is a case in point. It emphasised the basic principle that there can be no subrogation against the insured (i.e. a co–insured under a relevant policy).

Being an ‘insured’ (and therefore, likely, a party given current case law) under a relevant policy is therefore critical. Care should be taken to ensure that the stipulation of ‘insureds’ in the project documentation is appropriate.

For example, the owner (or principal) should not be a ‘named insured’ under a professional indemnity insurance policy as it is the owner/principal which will invariably be the ‘third party’ claimant. By contrast, the principal and all other project participants should always be ‘named’ on the works insurance policy and public liability insurance policy.

Insured’s entitlement to recover costs from insurer Usually, a policy will entitle the insured to recover ‘cost and expenses’, or ‘defence costs’ either:

(a) up to the limit of the indemnity (a ‘reducible’); or

(b in addition to the limit of indemnity (more usual),

incurred either in defence or settlement of a claim against the insured, or for specified costs such as architects fees necessary for reinstatement.

However, this does not extend to recovery of costs in pursuit of an insured’s claim for indemnity against an insurer.17

Reinstatement and aggregation of claims Most policies will provide for reinstatement of the limit of indemnity in respect of each separate claim. However, the

policy may also provide that in any one policy period the indemnity will reinstate fully but the aggregate of all claims in respect of the policy will not exceed a specified amount ( i.e. cover may exhaust).

This is important whether the insured has either:

(a) project specific cover; or

(b) an ‘annual floater policy’,

but more so in respect of the latter. An ‘annual floater policy’ is one that covers all projects over a given policy period. If an insured (as most major contractors do) holds an annual floater policy it will be relevant, as either a contractor or a principal, to ensure that the limit of indemnity is adequate, and that aggregation of claims will not pose a problem, having regard to the risks profile for the project.

CONTRACTUAL INDEMNITIES, LIMITATIONS OF LIABILITY & PROPORTIONATE LIABILITY

IntroductionIn this section of the paper we will very briefly touch upon the related issues of:

(a) contractual indemnities;

(b) contractual limitations (including exclusions) of liability; and

(c) the effect of the national (but anything but uniform or satisfactory) proportionate liability reforms.

Each of the above impact importantly upon considerations concerning the desired risk coverage and risk allocation regimes for construction and engineering projects. Our focus will be on the interaction between these related concepts and insurance. In each respect, careful attention to detail and


there is no practical hope of capacity to meet the obligation if called upon.

However, that aside, a properly drafted indemnity which reflects the mutual intent of the parties provides an important risk coverage function.

Careful drafting to effect those intentions is essential. For example, an indemnity expressed in respect of ‘any act, neglect or default’ may at first blush seem co–extensive with one expressed in respect of ‘any act or omission’. But it’s not.

In F&D Normoyle,18 the NSW Court of Appeal (by majority) held that the general word ‘act’ must be read down having regard to the other words, ‘neglect or default’, so that only an ‘act’ which itself was somehow ‘wrongful’ would enliven the indemnity.

Similarly, in Heinrich’s case19 a subcontractor was required to indemnify the contractor against:

… all loss, damage, injury or liability whatsoever that may occur in respect of the works or through the execution of the works …

This broad indemnity was expressed within a single sentence that commenced by expressing a prohibition that the subcontractor (obliged to give the indemnity):

... shall not commit any act or trespass or commit any nuisance or be guilty of any negligence …

Within this context, the Queensland Court of Appeal held that the indemnity did not respond to indemnify the contractor for its loss suffered as a result of the contractor’s own negligent conduct. Rather, the indemnity was enlivened only in respect of losses suffered as a result of the subcontractor’s conduct.

The results in F&D Normoyle and Heinrich’s case are, moreover,

consistent with the High Court’s approach in Andar Transport20 which is to the effect that where an indemnity suffers some ambiguity in expression, the courts will give the benefit of the doubt to the party giving the indemnity.

The above recent cases and discussion emphasizes the critical importance of careful, precise and knowledgeable drafting of contractual indemnities.

Limitations and exclusions of liabilityLimitation of liability clauses (including exclusion clauses) seek to cap, limit, reduce or exclude a liability that a party would otherwise have in contract, under statute (where permissible) or otherwise at law (including in tort or at equity).

It’s quite a mouthful, but surprisingly often parties are disappointed when the contractual limitation of liability is found not to apply to particular conduct, or types of conduct, because the relevant clause has not been adequately expressed.

The courts are notoriously reluctant to give general expression broad application: the courts will read down the scope of limitation clauses against the beneficiary of the limitation.

Therefore, for example, clauses expressed to limit or exclude ‘all liability’ or liability for ‘any loss’ have frequently failed to exclude liability for negligence. The better course is to expressly stipulate that such liability is limited or excluded, or to focus upon the cause rather than the effect: clauses which limit liability for loss ‘howsoever arising or caused’ will be more effective.

Often parties will seek to limit (or cap) liability by reference to the insurance regime effected for the project. Here again, careful drafting is required to ensure that

the limitation does not operate based upon what an insured is able to recover, but rather is expressed by reference to the respective amount of the limit of the indemnity.

More generally, parties should consider the interface between proposed limitation of liability clauses and the proposed insurance regime.

The following further examples suffice to illustrate the point:

(1) Insurers often suggest that a party which agrees to limit liability (thus restricting the amount which it can recover against the other party when a specified risk event occurs or liability crystallises) in circumstances where that party itself has ‘first party’ or ‘direct loss’ insurance cover, may prejudice its own insurance cover. This, because the insurer will itself be constrained (upon subrogation) by the contractual limitation.

This is true. However, as the effect of s54 is to reduce the amount of indemnity to reflect the extent of the prejudice, as long as the party agreeing to the limitation of liability recognizes this risk and accepts it, then Underwriters (insurers) should have little or no objection.

(2) A party which enters into an alliance contracting form of project delivery will often contract on a strict ‘no blame’ or liability only for ‘wilful default’ basis.

If contracting on this basis, there is no standard third party liability policy in Australia that will respond. Accordingly, requiring the design & construct contractor to effect professional indemnity insurance would be an exercise in futility, as ‘wilful default’ is a typical exclusion from such cover. The solution is likely to be the principal effecting its own ‘direct loss’ insurance cover.


damages. As Schedule 2 demonstrates, very different results in the different State and Federal jurisdictions obtain.

In Victoria, the courts are prohibited from ordering apportionment of damages between any ‘wrongdoer’ which is not a party to the relevant proceeding. However, in Western Australia, South Australia and Tasmania, the court is compelled to apportion damages between the parties and absent wrongdoers (whether a party or not).

These failings alone are significant. This paper does not consider the further multifarious problems and complexities of the proportionate liability regimes. However, possible adverse consequences, such as forum shopping, are relatively easy to identify. Some, more troubling may be less so: for example, in Victoria, it may be attractive for principals which engage a design & construct contractor to insist upon arbitration as the preferred dispute resolution method, as apportionment can only be made amongst parties to a proceeding. The reverse applies to the principal which has separately engaged builder and designer.

However, assuming that one cannot contract out in Victoria, might an ‘arbitration agreement’ be struck down as an attempt to avoid the Wrongs Act 1958 (Vic). Certainly, given the express prohibition in Queensland,24 there are real questions to be answered concerning the validity of an ‘arbitration agreement’ clause in a contract and, by extension, the future of the uniform national Commercial Arbitration Acts regime.

Conclusions—effect on insuranceOur discussion above has very briefly (and in little detail) touched upon some of the most obvious

Conclusions—indemnities and limitations of liabilityThese examples and the discussion above illustrate the importance of:

(a) clearly identifying and agreeing the objectives and intentions of the parties; and

(b) carefully reviewing proposed contractual indemnities and limitations of liability to ensure that they are consistent with the intentions of the parties and the proposed insurance coverage for the project.

Proportionate liability—‘we’re on the road to nowhere’Discussions of the national proportionate liability reforms will be dealt with swiftly for present purposes. In Victoria and New South Wales (but not in Queensland), participants in the construction and engineering industry have been familiar with the concept of proportionate liability (at least for—and restricted to—defective building work) for some time.21

Conceptually, proportionate liability focuses upon the respective fault or responsibility for a claimed loss and caps individual parties’ liability at the proportionate amount. Accordingly, there can be no claims for contribution in respect of an apportionable claim as a party’s liability will only ever be for its proportionate share. Claims for damages for pure economic loss and for damage to property—whether contractual or tortious—are apportionable claims.

This may be contrasted with the traditional joint and several approach—supported by the concept of contribution in tort claims—which allowed that where a party was either a joint wrongdoer (i.e. acting together), or one of several concurrent wrongdoers (i.e. acting

separately), to cause a single loss, then each party was liable for the whole amount of the loss.

Recall also that up until the legislative reforms following upon Astley v Austrust22 a defendant could not claim contribution in respect of claims for breach of contract and that had remained the case in a number of jurisdictions23 prior to the proportionate liability reforms.

The outstanding feature of the national proportionate liability reforms is that they are anything but national in the sense of being uniform.

Jurisdictional differences mean that the application of proportionate liability will be different in different jurisdictions. Schedule 2 sets out a table of proportionate liability legislation and identifies whether or not a party can ‘contract out’ of the relevant Act, and among which parties (concurrent wrongdoers) a court may apportion damages (in respect of an apportionable claim).

It can be seen that in Western Australia, New South Wales and Tasmania, it is likely that parties can, by express contractual provision, alter, limit or exclude the proportionate liability of parties. By contrast, in Queensland, ‘contracting out’ is expressly prohibited.

It may also be that although a party in the other jurisdictions which are silent on the issue but in which a party likely cannot ‘contract out’, capping liability in a fixed amount (without excluding a party’s proportionate liability) may be acceptable.

Perhaps an even more striking (and even less satisfactory) aspect of the national proportionate liability reforms are the jurisdictional differences affecting the courts’ obligations and/or discretions as to apportioning


problems associated with the proportionate liability legislation.

From an insurance perspective, parties should consider how the proportionate liability reforms might impact upon such considerations as:

(a) limits of indemnity—perhaps limits can be reviewed downwards leading to costs savings; and

(b) cover, including exclusions—if a party ‘contracts out’ of the proportionate liability regime (thereby increasing, by contract, the potential liability of a party which it would not otherwise have), then standard policy wording may operate to deny indemnity.

Accordingly, parties should carefully consider the possible impacts of proportionate liability legislation prior to entry into contract, and obtain professional advice as to its implications and draft accordingly.

CONCLUSIONS From the discussion above, it can be seen that:

(a) the identification and implementation of an appropriate risk coverage strategy from the outset;

(b) careful review of project documentation to ensure that the intentions and interests of participants under the desired risk coverage program are properly reflected; and

(c) careful monitoring of the actions events and circumstances during the course of a project,

are most important and may be critical to the ‘success’ of your project. Too often, the question of risk coverage forms only a small part of the negotiations and only then late in the piece—let’s hope that doesn’t remain the case.

We have also considered the related issues of:

(a) contractual indemnities and limitations of liability; and

(b) the implications of the national proportionate liability reforms.

Careful, precise and knowledgeable management and contract drafting is necessary to ensure an effective and integrated approach to risk coverage.

Schedule 1 to this paper suggests a ‘checklist’ of questions to consider when arranging, managing, or activating the risk coverage on any project. The checklist is not exhaustive, but it is hoped may provide a useful starting point for the types of questions which should be asked, or for developing your own checklist.

SCHEDULE 1

RISK COVERAGE CHECKLIST

Prior to contract 1. Have you selected an appropriate and adequate risk coverage program?

2. Have you given (and received) adequate disclosure of material matters?

3. Have you got the project documentation ‘right’?

• ‘named insureds’ properly specified;

• copies of the relevant policy wordings and schedules required;

• requirements as to limits of indemnity and periods of cover.

4. Are contractual indemnities and limitation of liability adequate and appropriate? How do they impact upon preferred insurance regime?

5. Have you considered the (possible) effect of applicable Commonwealth and State proportionate liability statutory regimes?

During the project 6. Has there been a circumstance, fact, event, occurrence, loss or a claim made, which requires notification?

7. Has there been a change in work scope, or a variation?

Making a claim 8. Has a claim (and notification) been made upon all relevant insurers (don’t make assumptions)?

9. What are your obligations under the relevant policy to assist in investigation and/or defence of claim and/or to refrain from making admissions or entering into compromises?

10. If the insurer fails to determine the issue of the grant of indemnity under the policy, should you (and if so, when) consider issuing a s41 notice? [requires insurer to elect; insured entitled to act as ‘prudent uninsured’ but still bound by other provisions of the policy].

11. What rights do you have to recover costs and expenses once you have made a claim for indemnity?


SCHEDULE 2

PROPORTIONATE LIABILITY LEGISLATION—A PARTIAL RECKONER

Legislation Can you contract out? Apportion between?VIC Wrongs Act 1958—Part IVAA

Commenced 1 January 2004

No (silent) S.24AI: court prohibited from considering position of non–parties

NSW Civil Liability Act 2002 Commenced 1 December 2004

Yes (maybe)—s3A(2) S.35: court has a discretion to consider absent defendants

WA Civil Liability Act 2002 Commenced 1 December 2004

Yes: s4A (1) S.5A: court must have regard to non–party concurrent wrongdoers

QLD Civil Liability Act 2003Commenced 10 April 2005

No: s7(3) expressly prohibits ‘contracting out’

S.31(3): court has a discretion to consider absent defendants

NT Proportionate Liability Act 2005 Commenced 05 May 2005

No (silent) S13(2)(b): court has a discretion to consider absent defendants

SA Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001Commenced 1 October 2005

No (silent) S8(2): court must have regard to non–party concurrent wrongdoers

TAS Civil Liability Act 2002Commenced 1 June 2005

Yes: s43C (2) subsection (1) S43B: court must have regard to non–party concurrent wrongdoers

ACT Civil Law (Wrongs) Act 2002Commenced 8 March 05

No (silent)

CTH Trade Practices Act 1974 No (silent) S87CD: court has a discretion to consider absent defendants

ATTACHMENT 1

PC–1, 1998—EXTRACT

9. RISKS AND INSURANCE

9.1 Risk of works Except where it arises from an owner’s risk, the contractor will bear the risk of and indemnify the owner against:

(a) any loss of or damage to:

(i) the works or a stage;

(ii) plant, equipment and work; and

(iii) unfixed goods and materials (whether on or off site), including anything provided by the owner to the contractor or brought onto site by a subcontractor, used or to be used in carrying out the contractor’s activities,

until:

(iv) in the case of loss of or damage to the works or stage, a notice of completion issues for the works or the stage; and

(v) otherwise, a notice of completion issues for the works or the last stage to reach completion; and

(b) after the issue of a notice of completion for the works or a stage, any loss of or damage to the works or the stage arising from any act or omission of the contractor during the defects liability period or from an event which occurred prior to the issue of the notice of completion for the works or the stage.

9.2 Other risks Except where it arises from an owner’s risk, the contractor will indemnify the owner against:

(a) any loss of or damage to property of the owner (other than property referred to in clause 5.1(a)); and

(b) any liability to or claims by a third party in respect of loss of or damage to property or injury to or death of persons,

caused by, or arising out of, or in any way in connection with, the contractor’s activities provided that the contractor’s responsibility to indemnify the owner will be reduced to the extent that an act or omission of the owner, contract administrator or an other contractor may have contributed to the loss, damage, injury or death.

9.3 Reinstatement During the period during which the contractor bears the risk of loss or damage under clause 5.1, the contractor must:

(a) subject to paragraph (b), promptly replace or otherwise make good any loss of, or repair the damage to, the works or a stage, any plant, equipment and work or any unfixed goods and materials used or to be used in carrying out the contractor’s activities; and

(b) where the loss or damage arises from an owner’s risk, only comply with paragraph (a) to the


extent directed by the contract administrator.

The contractor will bear the cost of such replacement, making good or repair except to the extent that the loss or damage arises from an owner’s risk, in which event this replacement, making good or repair will, to the extent the loss or damage arises from an owner’s risk (but subject to paragraph (b)), be treated as if it were a variation the subject of a direction by the contract administrator and clause 11.3 applied.

9.4 Insurance by owner The owner must from the award date effect the insurance (if any) specified in the contract particulars and must provide the contractor with a copy of the relevant insurance policies.

This insurance is subject to the exclusions, conditions and excesses noted on the policies and the contractor must:

(a) satisfy itself of the nature and extent of the owner’s insurance;

(b) if required by the contractor, take out insurance to:

(i) insure any risks not insured by the owner’s insurance; or

(ii) cover any such exclusions, conditions or excesses in that insurance,

which the contractor wants to insure against or cover; and

(c) where it bears the risk of the relevant loss or damage under clause 5.1 or is required to indemnify the owner under clause 5.2, bear the cost of any excesses in the owner’s insurance.

9.5 Contractor insurance obligations The contractor must:

(a) from the award date effect and have in place the following insurance with insurance with insurers and on terms

satisfactory to the contract administrator:

(i) unless the owner is required to effect any such insurance under clause 5.4, works insurance and public liability insurance;

(ii) workers compensation insurance; and

(iii) if an amount is included in the contract particulars for such insurance, professional indemnity insurance,

for the amounts referred to in the contract particulars;

(b) in relation to the workers compensation insurance:

(i) where permitted by law, extend the insurance policy to provide indemnity to the owner for its statutory liability to the contractor’s employees; and

(ii) ensure that each of its subcontractors has similar insurance to the workers compensation insurance covering the subcontractors’ employees;

(c) provide the contract administrator with a copy of any required insurance policy and evidence satisfactory to the contract administrator that the policy is current as required by the contract administrator from

time to time; and

(d) ensure that each required insurance policy includes provisions which require the insurer to inform the owner whenever:

(i) it receives a notice under or in connection with the insurance policy, including any claim; and

(ii) it gives any insured a notice under or in connection with the policy, which in the case of a notice of cancellation must be given to the owner 30 days prior to the cancellation of the policy; and

(e) ensure that it:

(i) does not do anything which prejudices any insurance;

(ii) if necessary, rectifies anything which might prejudice any insurance;

(iii) reinstates an insurance policy if it lapses;

(iv) does not cancel, vary or allow an insurance policy to lapse without the prior written consent of the contract administrator;

(v) immediately notifies the contract administrator of any event which may result in an insurance policy lapsing or being cancelled; and

(vi) gives full, true and particular information to the insurer of all matters and things the nondisclosure of which might in any way prejudice or affect any such policy or the payment of all or any benefits under the insurance.

9.6 Failure to insure If the contractor fails to:

(a) provide copies of any insurance policy together with evidence satisfactory to the contract administrator that the policy is current; or

(b) effect insurance which is with insurers and on terms satisfactory to the contract administrator,

as required by clause 5.5, the owner may, without prejudice to any other rights it may have, take out the insurance and the cost will be a debt due from the contractor to the owner.

9.7 Period of insurance The insurance which the parties are required to have in place under this clause 5 must be maintained:

(a) in the case of the works insurance, until the contractor ceases to bear the risk of loss


of or damage to anything under clause 5.1;

(b) in the case of public liability insurance and workers compensation insurance, until the later of:

(i) the end of the last defects liability period; and

(ii) the date upon which all defects have been rectified in accordance with the contract; and

(c) in the case of professional indemnity insurance, until the expiration of the period specified in the contract particulars following the last date of completion.

9.8 Notice of potential claim The contractor must:

(a) as soon as possible inform the owner in writing of any occurrence that may give rise to a claim under an insurance policy required by the contract;

(b) keep the owner informed of subsequent developments concerning the claim; and

(c) ensure that its subcontractors similarly inform the contractor and the owner in respect of occurrences which may give rise to a claim by them.

9.9 Procedure upon loss or damage If loss of or damage to any part of the works or a stage occurs whilst the contractor bears the risk of loss of or damage to the works or the stage under clause 5.1:

(a) the contractor must:

(i) make the works or the stage and the she safe and secure;

(ii) notify the relevant insurers and comply with their instructions; and

(iii) promptly consult with the contract administrator to discuss the steps to be taken to:

• comply with its obligations under clause 5.3; and

• ensure that, to the greatest extent possible, the contractor continues to comply with its other obligations under this contract; and

(b) upon settlement of a claim under the works insurance relating to this loss or damage:

(i) if required by either party, the money received from this insurance will be put into a bank account stipulated by the owner in the joint names of the owner and contractor; and

(ii) the money received from this insurance, excluding any amount provided for the fees of any of the owner’s consultants, will:

• be paid to the contractor in accordance with the procedure in clauses 12.6–12.8 as and when the contractor reinstates the loss of or damage to the works or the stage; and

• be the limit of the contractor’s entitlement to payment for reinstatement of the loss or damage.

9.10 Cross liability Where the contract requires insurance to be effected in joint names the party effecting the insurance must ensure that the insurance policy provides that:

(a) insofar as the policy may cover more than one insured, all insuring agreements and endorsements (with the exception of limits of liability) will operate in the same manner as if there were a separate policy of insurance covering each named insured;

(b) the insurer waives all rights, remedies or relief to which it might become entitled by subrogation against any of the parties covered as an insured and that failure by any insured to observe and fulfil the terms of the policy will not prejudice the

insurance in regard to any other insured;

(c) any non–disclosure by one insured does not prejudice the right of any other insured to claim on the policy; and

(d) a notice to the insurer by one insured will be deemed to be notice by all insured parties.

ATTACHMENT 2

AS 2124–1992—EXTRACT

18 INSURANCE OF THE WORKS

Alternative 1 Before the contractor commences work, the contractor shall take out an insurance policy covering all the things referred to in clause 16.1 against loss or damage resulting from any cause whatsoever until the contractor ceases to be responsible for their care.

Without limiting the generality of the obligation to insure, the policy shall cover the contractor’s liabilities under clause 16.2 and things in storage off site and in transit to the site.

The insurance cover may exclude:

(a) the cost of making good fair wear and tear or gradual deterioration but shall not exclude the loss or damage resulting therefrom;

(b) the cost of making good faulty design, workmanship and materials but shall not exclude the loss or damage resulting therefrom;

(c) consequential loss of any kind, but shall not exclude loss of or damage to the works;

(d) damages for delay in completing or for the failure to complete the works;

(e) loss or damage resulting from ionising radiations or contamination by radioactivity


from any nuclear fuel or from any nuclear waste from combustion of nuclear fuel resulting from any cause;

(f ) loss or damage resulting from the excepted risks (b) and (c) in clause 16.3.

The insurance cover shall be for an amount not less than the sum of:

(i) the contract sum;

(ii) the amount stated in the Annexure to provide for costs of demolition and removal of debris;

(iii) the amount stated in the Annexure to cover fees of consultants;

(iv) the value stated in the Annexure of any materials or things to be supplied by the principal for the purposes of the work under the contract; and

(v) the additional amount or percentage stated in the Annexure of the total of the items referred to in sub–paragraphs (i) to (iv) of this paragraph.

The insurance policy shall be in the joint names of the principal and the contractor, and shall cover the principal, the contractor and all subcontractors employed from time to time in relation to the work under the contract for their respective rights, interests and liabilities and, unless otherwise specified elsewhere in the contract, shall be effected with an insurer and in terms both approved in writing by the principal which approvals shall not be unreasonably withheld. The policy shall be maintained until the contractor ceases to be responsible under clause 16.1 for the care of anything.

Alternative 2 On or before the date of acceptance of tender, the principal shall effect a policy of insurance in relation to the work under the contract in the terms of the policy or proposed policy

included in the documents on which the contractor tendered. The policy or proposed policy shall include the name of the insurer. The principal shall maintain the policy while ever the contractor has an interest therein and the principal shall pay all premiums.

19 PUBLIC LIABILITY INSURANCE

Alternative 1 Before the contractor commences work, the contractor shall take out a public liability policy of insurance in the joint names of the principal and the contractor which covers the principal, the contractor, the superintendent and all subcontractors employed from time to time in relation to the work under the contract for their respective rights and interests and covers their liabilities to third parties. The policy shall also cover the contractor’s liability to the principal and principal’s liability to the contractor for loss of or damage to property (other than property required to be insured by clause 18) and the death of or injury to any person (other than liability which is required by law to be insured under a workers compensation policy of insurance).

The public liability policy of insurance shall be for an amount in respect of any one occurrence not less than the sum stated in the Annexure and, unless otherwise specified elsewhere in the contract, shall be effected with an insurer and in terms both approved in writing by the principal which approvals shall not be unreasonably withheld. The policy shall be maintained until the final certificate is issued under clause 42.8.

Alternative 2 On or before the date of acceptance of tender, the principal shall effect in relation

to the work under the contract a policy of insurance in the terms of the policy or proposed policy included in the documents on which the contractor tendered. The policy or proposed policy shall include the name of the insurer. The principal shall pay all premiums.

20 INSURANCE OF EMPLOYEES Before commencing work the contractor shall insure against liability for death of or injury to persons employed by the contractor including liability by statute and at common law. The insurance cover shall be maintained until all work including remedial work is completed.

The insurance shall be extended to indemnify the principal for the principal’s statutory liability to persons employed by the contractor.

The contractor shall ensure that every subcontractor is similarly insured.

ATTACHMENT 3

WORKS INSURANCE POLICY

INSURING CLAUSES

Section A This section, subject to the limitations, exclusions, terms and conditions hereinafter mentioned indemnities the Insured against loss or damage to the insured property (as defined herein) arising out of an occurrence happening during the period of insurance defined herein.

Section B This section indemnities the Insured in respect of the Insured’s legal liability for loss or damage to the insured property which occurs during the maintenance period/defects liability period (or any extension thereto or further


maintenance period/defects liability period).

Exclusions applicable to sections A & B This insurance does not cover:

1. any loss of use or occupancy howsoever caused;

2. penalties for non–completion of or delay in completion of contract or non–compliance with contract conditions;

3. loss or damage directly caused by defective workmanship, materials or design or wear and tear, or mechanical breakdown or normal upkeep or normal making good but this exclusion shall be limited to the part which is defective and shall not apply to any other part or parts lost or damaged in consequence thereof;

4. mechanically propelled vehicles other than vehicles, plant and equipment insured under this policy;

5. infidelity of Insured’s employees; [and/or]

6. plant and equipment parts which are damaged purely be virtue of their use other than external causes which are covered.

ATTACHMENT 4

LIABILITY POLICY—EXTRACT

Section 1—Insuring clauses In consideration of payment of the premium, the insurers will provide indemnity in accordance with, and subject to, the terms of this policy.

1.1 The insurer agrees to indemnify the Insured against legal liability for any claim for compensation first made against the Insured during the period of cover and which is notified to the insurers during the period of cover, in respect of any civil liability whatsoever

and howsoever incurred in the conduct of the professional business practice.

1.2 The insurer agrees to pay, in addition to the limit of indemnity, the costs and expenses incurred with the written consent of the Insurers in the defence or settlement of any claim covered by this policy. Provided always that if a payment in excess of the amount of indemnity available under this policy is made to dispose of a claim, the insurer’s liability for such costs and expenses incurred with its consent shall be such proportion thereof as the amount of indemnity available under this policy bears to the amount paid to dispose of the claim.

1.3 The insurer agrees that the Insured may notify a claim (in accordance with condition 4.1 reporting and notice) either during the period of cover or within twenty–eight (28) days after its expiry. Provided always that such claim was made against the Insured during the period of cover.

1.4 (a) ‘Unlimited retroactive cover’—unless a retroactive date is specified in the Schedule, this policy shall provide cover in respect of acts, errors or omissions committed (or alleged to have been committed) irrespective of when such acts, errors or omissions were committed (or were alleged to have been committed).

(b) ‘Limited retroactive cover’—where a retroactive date is specified in the Schedule, then this policy shall only provide cover in respect of acts, errors or omissions committed or alleged to have been committed after the retroactive date.

1.5 The insurer agrees to provide coverage in respect of any claim made against the Insured for breach or alleged breach of a contract for the provision of professional services.

1.6 The insurer agrees to provide coverage in respect of any claim for damages or compensation made against the insured under the terms of the Trade Practices Act 1974 (Cth), the Fair Trading Act 1987 (NSW), the Fair Trading Act 1985 (Victoria) or similar legislation enacted by the other states or territories of the Commonwealth of Australia or the dominion of New Zealand.

1.7 The insurer agrees to provide coverage in respect of any claim made against the insured, by any person, for libel or slander by reason of words written or spoken provided that such claim arises out of the conduct of the professional business practice.

1.8 The insurer agrees to provide coverage in respect of any claim made against the insured for any infringement of copyright, trademarks, registered designs or patents, or any plagiarism or breach of confidentiality.

1.9 The insurer agrees to provide coverage in respect of any claim made against the insured or for that proportion of any legal liability which attaches to the Insured arising out of any activities in which the insured is engaged as a joint venture or as a partner.

ATTACHMENT 5

PROFESSIONAL INDEMNITY POLICY Part B provides cover in respect of professional indemnity, and is generally expressed in terms of claims made against the insured. However, clause 5.1(b) expresses the ambit of cover extending to include the following:

EXTRACTInsuring clause

‘5.1 the company agrees to indemnify the insured against:

(a) ...;


(b) for loss or expense sustained by them and first discovered and notified to the company during the period of insurance;

whatsoever and howsoever incurred in the conduct of the business as defined and stated in the Schedule and including the activities of any professional party employed or engaged or previously employed or engaged by the insured.’

REFERENCES1. Refer to s8 of the Act

2. Refer to s9 of the Act

3. PC–1, 1998 defines works insurance to include project participants (i.e. principal, contractor, subcontractors, suppliers and consultants) as ‘joint’ insureds; AS2124–1992 (Attachment 2) expressly requires same—see clause 18, final paragraph of Alternative 1 at Attachment 2

4. See PC–1, 1998 (Attachment 1) at clause 5.5(a); AS2124–1992 (Attachment 2) at clause 18(i) to (v)

5. See PC–1, 1998 (Attachment 1) at clause 5.7(a); AS2124–1992 (Attachment 2) at clause 18

6. In this respect, the author considers it important that the contract provide for either the provision of copies of policy documents, required insurances or access to inspect same. PC–1, 1998 achieves this—see clause 5.5(c) (Attachment 1). The AS suite of standard contracts do not.

7. Penrith City Council v. Government Insurance Office of NSW (1991) 24 NSWLR 564.

8. For example, typically 6 years for negligence, but which period may be extended by legislation. In Victoria s134 of the Building Act 1993 (Vic)—10 years after issue of occupancy certificate)

9. See Eastend Real Estate Pty Ltd v CE Heath Casualty & General Insurance Co Ltd (1991) 25 NSWLR; FAl General Insurance Co Ltd v Perry (1993) 30 NSWLR 89; and the reasoning of the High Court on point in Antico v Heath Fielding Australia Ply Ltd (1997) 188 CLR 652; Rolf J in NSW Supreme Court in Einfeld v HIH Casualty & General Insurance Ltd

10. (2001) 204 CLR 641

11. (1997) 191 CLR 85

12. For a selection of these obligations affecting both the insured and insurer, you are referred to sections 13, 14, 21, 22, 23, 26, 35, 37 and 40(1) of the Act

13. See also the Insurance (Agents & Brokers) Act 1985 (Cth)

14. See for example, PC–1 1998 (Attachment 1) at clause 5.4

15. [See s48 of the Act; clause 5.10, Attachment 1; clauses 18 and 19 of the Attachment 2]

16. Woodside Petroleum Development Pty Ltd v H&R–E&W Pty Ltd (1998) 10 ANZ Ins Cas 1–395

17. See clause 1.2, Attachment 4]

18. F&D Normoyle Pty Ltd v Transfield Pty Ltd (2005) NSWLR 502

19. Ellington v Heinrich Constructions Pty Ltd [2005] 13 ANC Ins Cas 61–646

20. Andar Transport Pty Ltd v Brambles Lmited (2004) 217 CLR 424

21. Section 131 of the Building Act 1993 (Vic); s109ZJ of the Environmental Planning and Assessment Act 1979 (NSW)—both sections were repealed upon commencement of the Wrongs Act 1958 (Vic) and Civil Liability Act 2002 (NSW) amendments respectively.

22. Astley v Austrust Limited (1999) 161 ALR 155 confirmed

that claims for contribution were not available in respect of claims for damages for breach of contract.

23. e.g. reforms included: s9 of Law Reform (Miscellaneous Provisions) Act 1965 (NSW)—overcame the Astley problem; Wrongs Act 1958 (Vic)—overcame Astley; s4, Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA)—did not overcome Astley; s27A, Wrongs Act 1936 (SA) did not overcome Astley; equivalent legislation in ACT and NT—did not overcome Astley.

24. Refer to Schedule 2

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