The Federal Court has found AIG doesn’t need to contribute to Allianz claim payouts made after a building site gate fell on a traffic controller, causing physical and psychiatric injuries. 

The traffic controller and Victorian WorkCover Authority took legal action against Built Tech Hoardings, with the proceedings resolved by agreement. Allianz indemnified the company for a total $1.65 million as well as $36,959 in defence costs. 

Allianz sought a contribution from AIG on the basis that Built Tech allegedly held “double insurance” due to policies issued by both companies. 

AIG had provided an annual public liability policy for Icon group entities, while Build Tech, a subcontractor for the project in Brighton, Victoria, held an Allianz policy. 

The AIG policy contained a “difference in conditions” clause that meant its indemnity could be reduced to an excess arrangement in circumstances where a policyholder was also covered by other insurance. 

The clause as written applied to a “named insured”, which AIG said should instead be read more broadly as “insured”, and that this included Built Tech. It argued that otherwise there was the possibility of “absurd or uncommercial” results. 

Justice Roger Derrington says the parties recognise the AIG policy, which appears to be a broker’s policy, is poorly drafted, while the use of descriptions such as “insured”, “named insured” and “other insureds” is not “universally consistent or coherent”. 

The judgment handed down last week says taken on its face, the clause operates in an unusual manner that would be commercially unsound, given it puts a smaller group of “named insureds” in a less favourable position than unknown third parties and exposes AIG to greater risk. 

Justice Derrington says “the ineluctable conclusion is that a mistake has occurred” in expressing the intended operation of the “difference in conditions” clause. 

“Properly construed, the ‘difference in conditions’ clause should be read as applying to all insureds, with the consequence being that it applies to Built Tech, irrespective of whether it is characterised as a named insured or an insured,” the judgment says. 

“Accordingly, the AIG Policy operates as an excess policy in relation to Built Tech’s claims which have been indemnified by Allianz, and no double insurance arises.” 

The decision is here.