In the last few years ‘other insurance’ clauses and section 45 of the Insurance Contracts Act, have received a lot of judicial attention. The leading case is the High Court decision Zurich Australia Insurance v Metals & Mineral Insurance. In the case below, the NSW Court of Appeal considered what happens when section 45 doesn’t apply and both policies contain ‘other insurance’ clauses.

Two companies sold a SAAB aircraft to a partnership, which leased the aircraft to an airline. Two years later the aircraft crashed and all 15 people on board died.

Relatives of the deceased brought a proceeding in the USA against various parties including the vendors of the aircraft. The vendors were indemnified under a SAAB-group policy.

Subsequently, the vendors learned that they fell within the description of ‘additional insureds’ under a QBE policy taken out by the lessors of the aircraft, and claimed indemnity under that policy as well. QBE refused indemnity on the basis that policy conditions about the provision of information concerning claims had not been complied with. The vendors sued QBE.

Both the SAAB and QBE policies contained an ‘other insurance’ clause, each limiting the available cover when another policy also provided cover. Applying the Metals & Minerals decision, the Court concluded that section 45 of the Insurance Contracts Act didn’t apply to the clauses because the vendors had not ‘entered into’ ‑ they had not directly contracted for ‑ either policy. In each case, they were seeking the benefit of a policy taken out by other parties.

The result was that the ‘other insurance’ clauses in each policy cancelled each other out, leaving the vendors free to seek indemnity under either policy. Having already sought and received indemnity, under the SAAB policy, they had no entitlement under the QBE policy, and so the vendors’ claim against QBE was dismissed.

The Court noted that it was up to the underwriters of the SAAB policy to claim a contribution from QBE on the basis of double insurance.

Lambert Leasing v QBE Insurance

‘Other insurance’ clauses still have life in them when the party seeking indemnity is not the party which took out the policy in the first place. In this case, because the party seeking indemnity under the two policies had not taken out either of them, neither ‘other insurance’ clause was neutralised by section 45, so the two clauses cancelled each other out.