Statutory definitions can alter the operation of double insurance

06 May 2022

The ACT Supreme Court found that a statutory provision can extend the definition of ‘the insured’ so that double insurance can be held to apply in circumstances where the insurance policies had been issued to different named insureds and would have otherwise not applied.

In Issue

  • Whether a statutory provision extended the definition of ‘the insured’ in a compulsory third-party (CTP) insurance policy so that the doctrine of double insurance could be applied to a workers’ compensation (WC) insurance policy that covered a differed named insured.

The background

Corey Bailey suffered personal injuries as a passenger in a motor vehicle accident on 2 August 2017. At the time of the accident, the vehicle was being driven by a fellow employee in the course of his employment. Both Mr Bailey and the driver were employed by Capital Constructions Labour Hire Pty Ltd (Capital) and had been placed with ACT Formwork Pty Ltd (ACT Formwork) though a labour hire agreement. Capital had a WC policy issued by Allianz Australia Insurance Limited (Allianz) and Mr Bailey made a claim for workers’ compensation payments.

Insurance Australia Limited, trading as NRMA (NRMA) was the CTP insurer for the vehicle involved in the accident. The CTP policy was issued to the registered owner of the vehicle, Rapid Formwork Constructions Pty Ltd (Rapid). Rapid was utilised as an assets company by ACT Formwork. Mr Bailey also made a common law damages claim under the CTP policy, which was settled by NRMA. NRMA subsequently brought proceedings against Allianz seeking a 50% contribution for the settlement of the common law claim invoking the doctrine of double insurance.

The dispute involved the application of section 20(b) of the now-repealed Road Transport (Third Party Insurance) Act 2008 (ACT) (TPI Act), which extended CTP cover to “anyone else who is vicariously liable for the person’s use of the insured motor vehicle”. Capital accepted it was vicariously liable for the relevant actions of the driver.

NRMA argued that under section 20(b) of the TPI Act Capital was deemed to be ‘the insured’ under the CTP policy so the doctrine of double insurance applied. Allianz argued that section 20(b) did not have the effect of elevating entities like Capital, which otherwise had no entitlement to cover, to the status of ‘the insured’ under a CTP policy.

The decision at trial

Having closely examined the authorities on the issue, McWilliams AsJ found that the rationale for the double insurance doctrine was fairness, such that the existence of a common policyholder across 2 policies was not a decisive factor. However, it was critical that both the risk and the insured were the same. Capital was held to be an ‘insured person’ under the CTP policy because it was vicariously liable for injuries caused by the driver under section 20(b) – a materialisation of the same risk insured under the CTP policy. The doctrine of double insurance was held to apply and NRMA was entitled to declaratory relief.

Her Honour reasoned that the authorities point to an approach of ‘substance over form’ for the application of the double insurance doctrine. Within this framework, and where the legislative intent for section 20(b) was not clarified by the TPI Act’s explanatory statement or otherwise, her Honour found it unnecessary to consider whether the legislature had appreciated that the inclusion of the relevant subcategory of ‘insured person’ within the legislation might impact the application of double insurance. Her Honour commented that the doctrine of double insurance would not have been held to apply in the alternate jurisdiction of NSW due to the different CTP statutory framework.

Implications for you

This case demonstrates that statutory definitions can alter the operation of double insurance when the Court applies the ‘substance over form’ approach that has developed through relevant case law. The decision reinforces the importance of considering the extent that any relevant legislation could interact and possibly extend entitlement to coverage under insurance policies.

Insurance Australia Limited v Allianz Australia Insurance [2022] ACTSC 75

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