QBE Insurance (Australia) Ltd v CGU Workers Compensation (NSW) Ltd  NSWSC 377 (“QBE v CGU”) considers the decision of Zurich Australia Insurance Ltd v GIO General Ltd  NSWCA 47 (the “Tiger case”). These cases discuss how insurers’ conduct in reaching settlement of a claim may impact upon entitlement to contribution.
QBE v CGU represents the first significant judicial analysis of the decision of the Tiger case. The Tiger case considered the principles to be applied when determining whether double insurance exists and, accordingly, whether contribution is required between insurers. Please see our previous alert for a summary of the decision in the Tiger Case.
The decision in QBE v CGU
On 7 November 2005, Mr Horwood suffered significant injuries while driving a forklift. Mr Horwood was employed by Megbuy Pty Ltd. The forklift was registered in the name of Levira Pty Ltd. QBE Insurance (Australia) Ltd provided compulsory third party insurance for the forklift. CGU Workers Compensation (NSW) Ltd provided workers compensation insurance (which extended to Mr Horwood) to Megbuy.
In January 2008, Mr Horwood commenced proceedings against Megbuy in the District Court. He contended that Megbuy was his employer and the owner of the forklift, and asserted that Megbuy’s liability to him was governed by the Motor Accidents Compensation Act 1999 (NSW). QBE (the CTP insurer) assumed carriage of the proceedings on behalf of Megbuy. Liability was admitted in November 2009, but QBE alleged contributory negligence on the part of Mr Horwood. On 7 December 2009, Heads of Agreement were entered into between Mr Horwood, QBE and CGU. The proceedings were settled on 10 December 2009, and the District Court made orders in favour of Mr Horwood for $1,500,000. QBE paid that sum shortly. It was noted that CGU had not agreed to or acquiesced in Megbuy's admission of ownership of the forklift. It was not a matter of particular significance to QBE whether or not the owner of the forklift was Megbuy or Levira as CTP insurance passes with ownership of the vehicle. However, whether or not Megbuy was the owner of the forklift was important to CGU as it only insured Megbuy; it did not insure Levira.
QBE sought contribution from CGU alleging that there was double insurance because both entities had insured Megbuy in respect of the same loss.
Issues and findings
The right to contribution arises where two contracts exist, each being a contract of indemnity covering an identical loss (or liability) that an identical insured has suffered (or incurred).
In AMP Workers Compensation Services (NSW) Ltd v QBE Insurance Ltd (2001) 53 NSWLR 35 (the “AMP case”), the NSW Court of Appeal extended the principle's operation to encompass some situations where two insurers covered the same loss but did not indemnify the identical insured but only because of a choice exercised by the injured party as to which party to sue. There, it was held that an insured's decision to claim against one insurer rather than the other, or both, should not be allowed to unjustly enrich the other. Accordingly, contribution was available so both insurers would be liable to share the burden equally. The principle in the AMP case was considered in the Tiger case.
Justice Beech-Jones in QBE v CGU referred to the decision of Giles JA in the Tiger case. In particular –
57. Since contribution involves sharing a common burden, the first insurer must establish the liability for which it must provide indemnity under its policy. However, if the liability of the first insurer's insured has been judicially determined or has been the subject of a reasonable compromise, that suffices for contribution, and the second insurer cannot put in issue in contribution proceedings the liability of the common insured.
Justice Beech-Jones held that the relevant question was therefore whether QBE’s liability had been the subject of a reasonable compromise. In so holding, Beech-Jones J found that the statements in  of the Tiger case were part of its ratio and thus binding upon his Honour. His Honour went on to hold that:
- Megbuy was the owner of the forklift;
- alternatively, if all that was required to find contribution was whether QBE was reasonable in causing Megbuy to admit ownership, then his Honour found that QBE had acted reasonably;
- Megbuy was liable to Mr Horwood; and
- alternatively, the settlement of Mr Horwood’s claim against Megbuy represented a reasonable compromise of the liability alleged against Megbuy.
Therefore QBE was entitled to contribution from CGU.
QBE v CGU differs factually from the Tiger case in two important respects. First, in QBE v CGU, CGU (the workers compensation insurer of Megbuy) had not agreed to or acquiesced in Megbuy's admission of ownership of the forklift. In the Tiger case, GIO, (the workers compensation insurer of Tiger) concurred in Zurich (the third party insurer of the coach) shouldering the burden of indemnifying the insured Caringbah as “owner” of the coach. Therefore Giles JA held that it would not be consistent with natural justice and general principles of justice on which contribution on the basis of double insurance rests that GIO should not have to share the burden.
On the hypothesis that Tiger, GIO’s insured, was the only owner of the coach, Giles JA in the Tiger case left open the question of whether, in the absence of GIO’s concurrence in the course taken by Zurich, Zurich would have been entitled to seek contribution from GIO where Zurich had no obligation to indemnify the party who was sued (Caringbah) on the basis that it was not the owner of the vehicle. Zurich would have had an obligation to indemnify Tiger if it had been the party sued. Giles JA (at ) stated:
“[it] may be that would take the contribution principle beyond the confines of legal structures of which the plurality spoken in Friend v Brooker at , and be what was there described as no more than an idiosyncratic exercise of discretion.”
Secondly, unlike the Tiger case, Megbuy (found as the owner of the vehicle) was the party sued. Therefore the element of voluntariness in paying the claim, attributed to Zurich in the Tiger case, was not present in QBE v CGU.
Putting aside Justice Beech-Jones’ finding that Megbuy was the owner of the forklift and that it was liable to Mr Horwood, a real question arises whether in the absence of concurrence on the part of CGU, a reasonable compromise by QBE is enough to establish QBE’s entitlement to contribution from CGU. This question appears to have been left open by the Tiger case. Query whether in the absence of concurrence on the part of the insurer and findings as to liability, the statements in  of the Tiger case (assuming that it is part of the ratio), means that a reasonable compromise by one insurer is enough not only to establish a liability on the part of the other insurer, but a coordinate liability for which an entitlement to contribution arises.