The Federal Court says IAG is responsible for a claim after its customer was found liable for a poor paint job on a ship.

The case centred on exclusions for faulty workmanship and the extent of the insurer’s liability for remedial work carried out years later.

Ship owner Helicopter Aerial Surveys (HAS) successfully sued Bradford Marine, and when Bradford was deregistered it sought to recover under Bradford’s marine trades public and products liability policy, written by IAG brand CGU.

Bradford Marine did the paint job in 2015, but HAS soon found defects and another company performed rectification in 2016 and 2019.

Judge Ian Jackman says IAG accepted the 2016 rectification work fell within its coverage, but its position on the 2019 job was “substantially different”. The rust and corrosion left in place in 2015 may have worsened and become more expensive to remedy, and may have appeared in new areas of the vessel. It was likely some of the 2019 work involved removing rust and corrosion that was not present in 2015.

The judge says insurers have to prove a loss falls under an exclusion.

IAG failed to establish the cost of the 2019 work related solely to correcting faulty workmanship by Bradford in 2015, as distinct from remedying damage caused by its work. This meant IAG had not proved any of the cost fell within the faulty workmanship exclusion, and so the insurer was liable for the full cost of the 2019 work.

HAS originally won $260,000 when it sued Bradford, and Judge Jackman rules IAG should pay $173,697 under the policy. With interest and costs the total judgment is for $507,510.

Read the judgment here.