Mie Force Pty Ltd v Allianz Australia Insurance Limited  NSWSC 1606
The New South Wales Supreme Court has recently considered the construction of a general liability policy of insurance, as to whether a sub-subcontractor was an ‘insured’ or ‘agent’ as defined in the policy.
The Court held that a sub-subcontractor is not a subcontractor, and a subcontractor is not an agent.
Background: demolition, construction and fire
Rhino Demolition (Rhino) is a strip-out and structural demolition company. Both Rhino and the plaintiff company formed part of the wider Rhino Group of companies. Rhino operated as the trading entity of Rhino Group, and the plaintiff employed and supplied workers to Rhino.
In 2018, Rohrig entered into a demolition/construction contract for the General Gordon Hotel as head contractor. Rohrig subcontracted Rhino to perform certain demolition works as part of the project, and the plaintiff supplied its employees to Rhino for the project.
Allianz wrote a Construction Risks – General Liability Policy which covered ‘Rohrig and others’ for the project. The policy provided indemnity for property damage during the construction period to persons falling within the definition of ‘insured’ or ‘named insured’ under the policy. ‘Named insured’ was defined in the policy to include subcontractors.
On 30 July 2018, three of the plaintiff’s employees were undertaking works at the Gordon Hotel when a fire occurred and caused damage to neighbouring properties.
Separate proceedings were issued against Rohrig by the owners of the neighbouring property and the project developer respectively, with the plaintiff subsequently joined as a defendant in both proceedings. The plaintiff sought indemnity from Allianz, which was denied. Allianz accepted that Rohrig and Rhino were each ‘named insured’ under the policy but maintained that the plaintiff was not.
The plaintiff issued proceedings against Allianz, arguing it fell within the definition of ‘named insured’ because either:
- the word ‘subcontractor’ in the definition of ‘named insured’ should be construed as including sub-subcontractors (the plaintiff being a sub-subcontractor to Rohrig and subcontractor to Rhino); or
- the plaintiff was an agent of Rhino, and Rhino was a subcontractor to Rohrig.
The key issue was the proper construction and application of the definition of ‘insured’ in the policy, and whether it extended cover to the plaintiff.
Justice Peden held that the definition of ‘subcontractor’ did not include a ‘sub-subcontractor’, and ‘named insured’ was only intended to include legal entities who have a direct relationship with the insured (Rohrig). It was noted the language of the policy was unambiguous and included clear definitions and examples of persons included in each category.
If a broader meaning was given to ‘subcontractor’ within the meaning of ‘named insured’, it would render other parts of the definition a nullity, particularly subsequent references to sub-subcontractors. The Court also rejected the proposition that the plaintiff was a subcontractor to Rhino, as Rhino gave daily directions and instructions to the plaintiff’s employees and, therefore, never handed over responsibility for the works.
Finally, the Court concluded the plaintiff was not Rhino’s agent as the plaintiff was not authorised to perform Rhino’s contractual obligations. It was only contracted to provide labour.
It was therefore held that Allianz was entitled to deny indemnity to the plaintiff.
This common-sense judgment demonstrates the value of a carefully drafted, unambiguous policy definition of the insured.