Authors: Rebecca Stevens, Partner & Milton Latta, Special Counsel
It is often the case in multi-party claims that a contractual relationship will exist between one or more defendants or third parties. Where those arrangements are reduced to writing, the contract will almost invariably contain insurance and indemnity provisions. Occasionally, the insurance provision will provide that one party is to take out liability insurance for the benefit of the other party. The scope of this obligation has proved in the past to be fertile ground for disputes.
While there are well-established rules for construing contracts in a commercial context, the application of these rules to the interpretation of insurance clauses is often controversial, largely due to the fact-specific nature and purpose of each contract and the claim circumstances.
It is often argued, based on the decision of the New South Wales Court of Appeal in Erect Safe Scaffolding (Australia) Ply Limited v Sutton [2008] NSWCA 114, that the scope of the insurance covenant should be limited by reference to the scope of the indemnity provision in the contract. This argument was recently considered by the District Court of Western Australia in Garnett v Qantas Airways Limited [2019] WADC 89.
