Albion Insurance Co Ltd v Government Insurance Office (NSW)

[1969] HCA 55

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Kitto, Menzies and Windeyer JJ.

ALBION INSURANCE CO. LTD. v. GOVERNMENT INSURANCE OFFICE (N.S.W.)

(1969) 121 CLR 342

31 October 1969

Insurance

Insurance—Contribution between insurers—Identity of risk insured—Loss covered by two policies—General nature and purpose of policies different—Extent of rights and liabilities created under policies different—Workers' compensation policy with indemnity extended to include employer's common law liability—Motor vehicle third party policy covering employer's liability to employee arising out of use of motor vehicle.

Decisions

October 31.
The following written judgments were delivered : -
BARWICK C.J., McTIERNAN AND MENZIES JJ. This is an appeal from an order made by Street J. The plaintiff appellant had indemnified A. &V. Bence Pty. Ltd., under an employers' indemnity policy against a verdict and costs totalling $16,143.84 which the company became liable to pay to an employee for damages for negligence causing bodily injury. His Honour held that the plaintiff was not entitled to contribution from the defendant respondent, the Government Insurance Office of New South Wales, which had insured the aforesaid company under a third party policy effected under the Motor Vehicles (Third Party Insurance) Act and Regulations against liability in respect of a motor vehicle, the use of which gave rise to the bodily injury of its employee. In deciding as he did, his Honour simply followed an earlier decision of Myers J. in Government Insurance Office of New South Wales v. Royal Exchange Assurance of London (1965) 82 WN (Pt 1) (NSW) 468 . It is the correctness of this latter decision that now falls to be determined upon this appeal from the order made in the instant case. (at p343)

2. It is common ground that the verdict and costs paid by the plaintiff would have been payable by the defendant had the company claimed against the latter rather than the former. In other words, each policy indemnified A. &V. Bence Pty. Ltd. against liability for the sum of $16,143.84 damages arising from the company's negligence to an employee. (at p343)

3. The undisputed facts found by his Honour were as follows :

"The plaintiff is the insurer of A. &V. Bence Pty. Ltd.

under an employers' indemnity policy. This policy provides cover for the insured in respect of its liability to its employees under the Workers' Compensation Act, and it contains what is described as an 'Endorsement for Common Law Liability'.

The relevant portion of the endorsement is in these terms :

'Subject to the terms and conditions of this Policy it is hereby declared and agreed that the Insurer will indemnify the Employer against liability to pay damages at Common Law or under the Compensation to Relatives Act, 1897, as amended, for, or in respect of, personal injury to any employee who is a worker within the meaning of the Workers' Compensation Act, 1926-1954, and who at the time of the injury is in the direct employment of the Employer and is engaged in an employment to which this Policy expressly applies.'

The defendant is the insurer of this same company, A. & V. Bence Pty. Ltd., under the Motor Vehicles (Third Party

Insurance) Act. The third party policy, as is required by the Motor Vehicles (Third Party Insurance) Regulations, provides indemnity to the insured company in the following terms : 'Such insurer hereby agrees that during the period commencing and terminating as shown above, and during any period for which the insurer may renew this policy the insurer shall insure the owner and any other person who drives the motor vehicle, whether with or without the authority of the owner, against all liability (except a liability referred to in sub-section two of section ten of the said Act) incurred by the owner and/or the driver in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle in any part of the Commonwealth of Australia.'

On 28th March 1960, one Vescio, an employee of A. &V.

Bence Pty. Ltd., was injured when engaged in his employment. The circumstances of the accident are of no significance apart from the agreed fact that Vescio's injuries arose out of the use of the motor vehicle referred to in the third party policy issued by the defendant. At the time of the accident both the employers' indemnity policy issued by the plaintiff and the third party policy issued by the defendant were current and enforceable. Some three years after the date of his injury Vescio issued

a writ out of this Court claiming damages from A. &V. Bence

Pty. Ltd. The declaration in that action contained one

count alleging that A. &V. Bence Pty. Ltd. employed Vescio

to work at certain operations upon or near a certain motor

truck, which operations were under the management of A. & V. Bence Pty. Ltd., and that the company was so negligent

in and about various aspects of its employment of Vescio that he fell and sustained bodily injury. To this declaration

A. &V. Bence Pty. Ltd. pleaded the general issue and denied

the allegation of employment. Issue was joined on these pleas.

The present plaintiff undertook on behalf of A. &V. Bence

Pty. Ltd. the defence of these common law proceedings. They did not in fact go through to the point of being submitted to a jury for determination. In March 1964 the action was comprised by a verdict being entered by consent for Vescio in the sum of $14,143.85, from which about $1,500 was to be deducted as representing moneys paid to Vescio or on his behalf under the provisions of the Workers' Compensation

Act. On behalf of A. &V. Bence Pty. Ltd. and pursuant to

its obligations under the employers' indemnity policy the plaintiff paid the amount of the verdict and the costs due to Vescio on the settlement. The plaintiff gave the defendant a full opportunity to express its views in regard to the common law proceedings and kept the defendant fully informed of its conduct of the defence of the proceedings. Prior to the terms of settlement being filed in those proceedings, the defendant agreed that the terms represented a reasonable and proper compromise of Vescio's claim. It is conceded that the verdict represents a fair compromise. The accident causing the injury to Vescio in respect of which he sued and recovered this settlement was caused by or arose out of the use of the motor vehicle covered by the third party policy issued by the defendant. At the time Vescio suffered his injuries he was a worker within the meaning of the Workers' Compensation Act ; He was in the direct

employment of A. &V. Bence Pty. Ltd., and he was engaged

in an employment to which the policy issued by the plaintiff expressly applies. None of the exceptions available under either of the policies applies in the present case. It follows that both the employers' indemnity policy issued by the plaintiff and the third party policy issued by the defendant

contain provisions providing indemnity to A. &V. Bence

Pty. Ltd. in respect of liability on its part to pay damages to Vescio for his injuries." (at p345)

4. There is double insurance when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved. It began in the second half of the eighteenth century with Lord Mansfield's decisions with respect to marine insurers and there is no doubt that it now applies generally to insurance which provides the insured with an indemnity. There is no reason why the doctrine should not apply to insurance against liability to third parties and there is every reason in principle that it should. The doctrine, however, only applies when each insurer insures against the same risk, although it is not necessary that the insurances should be identical. Thus one insurer may insure properties A and B against fire and the other insurer may only insure property A against fire. Again, one policy may be for a limited amount and the other may be for an unlimited amount. One policy may cover the risk of a whole voyage and the other may cover only part of the voyage. Differences of this sort may affect the amount of contribution recoverable but they do not bear upon the question whether or not each insurer has insured against the same risk so as to give rise to some contribution. The element essential for contribution is that, whatever else may be covered by either of the policies, each must cover the risk which has given rise to the claim. There is no double insurance unless each insurer is liable under his policy to indemnify the insured in whole or in part against the happening which has given rise to the insured's loss or liability. (at p346)

5. In coming to the decision which he did, Myers J. carefully examined an employers' liability policy issued as here in accordance with the Workers' Compensation Act of New South Wales and the insurance effected under the Motor Vehicles (Third Party Insurance) Act, and came to the conclusion that the policy holder's liability to his servant suffering in the course of his employment an injury arising out of the use of a motor vehicle was not "the risk insured against by either policy". His Honour said (1965) 82 WN (Pt 1) (NSW), at p 472 :

"The plaintiff insured against the risk of a servant becoming entitled to compensation from his employer for any injury in the course of his employment, whether the right to compensation arose from the insured's negligence, or not. The defendant insured against the risk of any person becoming entitled to damages for injury arising out of the use of a motor vehicle caused by the negligence of the insured. I do not think that it can be fairly said that the insured company insured against the same risk with both the plaintiff and the defendant." (at p346)

6. It is at this point that we, with respect, have come to a different conclusion from that of his Honour. It seems to us that each policy did cover the very risk against which the policy holder did seek indemnity from one of the insurers. The matter can, we think, be decided simply enough by inquiring whether payment by one insurer of the policy holder's claim for indemnity would provide the other insurer with a defence to a like claim against it. It clearly would, and it would simply because the policy holder had by the payment made been indemnified against the risk insured against. He had received all that he was entitled to receive under both policies so the payment by one insurer would discharge both. Thus, payment by one is made for the benefit of both, and, contribution is equity. (at p346)

7. The decision whether Government Insurance Office of New South Wales v. Royal Exchange Assurance of London (1965) 82 WN (Pt 1) (NSW) 468 was correctly decided appears to us to be free from the authority of any decided case, although the decision of the Lord Ordinary in Sickness and Accident Assurance Association Ltd. v. General Accident Assurance Corporation Ltd. (1892) 19 Rettie 977 , supports the appellant's claim for contribution. There two policies covered loss by accident caused by trams and Lord Low said (1892) 19 Rettie, at p 980 :

"In marine insurance a rule which has been long recognized is that when the insured has recovered to the full extent of his loss under one policy, the insurer under that policy can recover from other underwriters who have insured the same interest against the same risks a rateable sum by way of contribution. The foundation of the rule is that a contract of marine insurance is one of indemnity, and that the insured, whatever the amount of his insurance or the number of the underwriters with whom he has contracted, can never recover more than is required to indemnify him. The different policies being all with the same person, and against the same risk, are therefore regarded as truly one insurance, and if one of the underwriters is compelled to meet the whole claim, he is entitled to claim contribution from the other underwriters, just as a surety or cautioner who pays the whole debt is entitled to claim rateable relief against his co-sureties or co-cautioners. There is no reason in principle in my opinion why the same rule should not be applied to other classes of insurance which are also contracts of indemnity, and this has been recognised by high authority in cases of fire insurance - North British and Mercantile Insurance Co. v. London, Liverpool, and Globe Insurance Co. (1877) 5 Ch Div 569 ." (at p347)

8. Counsel gave us references to textbooks in which the general principles are stated with unanimity that where there is double insurance then there is contribution and that there is double insurance when each insurance covers the same risk. It seems to us that it is not the principle but the application of the principle which has given rise to the problem that now falls for decision. Counsel for the respondent did rely upon some observations of Hamilton J. in American Surety Co. of New York v. Wrightson (1911) 27 TLR 91 ; (1911) 103 LT 663 , but what was said was obiter and it hardly touches the point at issue here. (at p347)

9. For the reasons which we have stated we consider that A. &V. Bence Pty. Ltd. was doubly insured against the risk of having to pay damages for its negligence causing the bodily injury suffered by its servant, and that the appellant, having indemnified the insured for the risk covered, is entitled to contribution from the respondent of one half of what was paid for damages and costs, i.e., $8071.92, one half of $16,143.84. (at p348)

10. In our opinion the appeal should be allowed. (at p348)

KITTO J. This appeal is from a decision of the Supreme Court of New South Wales (Street J.) dismissing a suit in the equitable jurisdiction of that Court for contribution between insurers. (at p348)

2. The plaintiff insurer had issued to a company called A. &V. Bence Pty. Ltd. a workers' compensation policy which contained a superadded clause indemnifying the insured against common law liability for injury to an employee engaged in an employment to which the policy applied. The defendant insurer had issued to the same company a policy in accordance with the Motor Vehicles (Third Party Insurance) Act, 1942 (N.S.W.), indemnifying the company against (inter alia) liability in respect of bodily injury to any person arising out of the use of a specified motor vehicle. An employee of the company insured, while engaged in an employment to which the workers' compensation policy applied, sustained bodily injury, through negligence for which the insured was responsible, arising out of the use of the specified motor vehicle, and he sued the insured at common law for damages. The plaintiff insurer took over from the insured the defence of the action, and with the concurrence of the defendant insurer it compromised the claim and paid damages and costs to the employee and costs which it had incurred in defending the action up to the time of the compromise. The reasonableness and propriety of the compromise are conceded. (at p348)

3. The plaintiff insurer asserts a right in these circumstances to recover from the defendant insurer one-half of its expenditure for damages and costs. No distinction is drawn by either party between the costs which the plaintiff incurred in defending the action and the damages and costs which it paid to the injured employee. The defendant resists the claim for contribution upon one ground only, namely that the case does not fall within the principle of law as to contribution between insurers, because the two policies, if each be considered as a whole, were different as regards subject matter, and differed so widely as regards the rights and liabilities they conferred that it would not be just and equitable to decree contribution between the insurers. The defence was based upon a judgment of Myers J. in a similar case : Government Insurance Office of New South Wales v. Royal Exchange Assurance of London (1965) 82 WN (Pt 1) (NSW) 468 ; and Street J., being assured by both parties that the matter would be taken on appeal to this Court whatever he might decide, very properly followed the judgment of Myers J. as a matter of comity and without staying to give the matter fresh consideration. (at p349)

4. The question now is whether Myers J. correctly interpreted the law as to contribution between insurers. After examining in detail the provisions of the two policies that were before him his Honour held that the case was not one of double insurance, because the insurances were upon different subject matters and for different risks. The subject matter of the one policy, he considered, was the liability of a master to his servant while the subject matter of the other was the liability of a motor vehicle owner to any person injured by the use of it ; and from the circumstances that the policies were issued in respect of different relationships, for different purposes, and in pursuance of different statutes exhibiting different objects, his Honour concluded that the risks insured against could not be regarded as the same. The argument that is put to the contrary may be condensed to the proposition that a right to contribution exists whenever a loss has occurred against which each of two or more insurers has contracted to indemnify the one insured, whatever differences there may be in other respects between the policies. (at p349)

5. The authorities on the topic show that this proposition is to be upheld as necessarily resulting from two fundamental principles of law. Their significance may be overlooked if the supposition is made, as it seemed to be in the argument of this case, that the rule as to contribution between insurers began as an arbitrary rule of marine insurance, "evolved apparently by Lord Mansfield" (as MacGillivray's Insurance Law, 4th ed. (1953), par. 1651, suggests by reference to Newby v. Reed (1763) 1 Bl W 416 (96 ER 237) , and Godin v. London Assurance Co. (1758) 1 Burr 489 (97 ER 419) , and extended to other kinds of indemnity insurance by decisions of the Courts such as North British and Mercantile Insurance Co. v. London, Liverpool, and Globe Insurance Co. (1877) 5 Ch D 569, 583, 587 . If this were the truth of the matter there would be no point in seeking in more general principle for illumination of the language of judgments which have insisted that a right of contribution between insurers arises only in cases of "double insurance" and depends upon identity of subject matter and of risk. But what Lord Mansfield was doing (sitting in a court of law, not equity, be it noted) was simply bringing together two principles. The first, a principle applicable at law no less than in equity, is that persons who are under co-ordinate liabilities to make good the one loss (e.g. sureties liable to make good a failure to pay the one debt) must share the burden pro rata. The second is that since a policy of marine insurance is a contract of indemnity only, so that where several insurers have separately insured the one person against the one loss that person, though he may upon suffering the loss sue any or all of the insurers, may not recover more in total than a single reparation for the loss, the relation between the insurers in such a case is analogous to the relation between several sureties for a debt. When it came to be recognized that a policy of fire insurance, no less than one of marine insurance, is a contract of indemnity, the analogy of suretyship was at once seen to apply : see Darrell v. Tibbetts (1880) 5 QBD 560, at p 563 , and the doctrine as to contribution has been applied accordingly. So it has in respect of other kinds of indemnity insurance : see e.g. Gale v. Motor Union Insurance Co. (1928) 1 KB 359 ; but whereas in regard to marine and fire insurance it was right to speak of a necessity for identity both of subject matter (e.g. the ship or house) and of risk (e.g. damage by fire caused in a particular manner) the corresponding point in regard to accident insurance is made by saying that each policy must insure the same person against the very loss that in the event he has sustained, or the very liability that in the event he has incurred. (at p350)

6. The general doctrine of contribution, as I have said, forms part of the common law. It was applicable by Lord Mansfield in Godin v. London Assurance Co. (1758) 1 Burr 489 (97 ER 419) and Newby v. Reed (1763) 1 Bl W 416 (96 ER 237) no less than by Lord Chief Baron Eyre when exercising the equitable jurisdiction of the Court of Exchequer in Dering v. Winchelsea (Earl) (1787) 1 Cox Eq Cas 318 (29 ER 1184) . This was because the basic concept was accepted by both law and equity as one of natural justice, as indeed it had been by the law of other countries since ancient times. (The historically-minded may care to consider, with Lord Watson's reference to the maritime law of Rhodes in Strang, Steel &Co. v. A. Scott &Co. (1889) 14 App Cas 601, at p 607 , Mr. Justice Story's Commentaries on Equity Jurisprudence, 3rd English ed. (1920), arts. 490 et seq., and an article on the Rhodian Law in the Yale Law Journal (1909), p. 225.) Lord Mansfield put the matter squarely on that ground : "If the insured is to receive but one satisfaction, natural justice says that the several insurers shall all of them contribute pro rata, to satisfy the loss against which they have all insured" (1758) 1 Burr 489, at p 492 (97 ER 419, at p 420) ; and indeed Mr. Justice Park, in his work on Marine Insurance, had described the principle of contribution as a principle of natural justice : see Sir William Blackstone's note to his report of Godin v. London Assurance Co. (1758) 1 Bl W, at p 105 (96 ER, at p 59) . The justification for the description may be seen from Dering v. Winchelsea (1787) 1 Cox Eq Cas 318 (29 ER 1184) itself and the notes to that case in White and Tudor's Leading Cases in Equity, 9th ed. (1928), vol. 2, pp. 488 et seq. The principle proceeded, as Lord Redesdale said in Stirling v. Forrester (1821) 3 Bli 575, at p 596 (4 ER 712, at p 719) which Lord Halsbury approved in Ruabon Steamship Co. v. London Assurance (1900) AC 6, at p 11 , "on a principle of law that must exist in all countries, that where several persons are debtors, all shall be equal". Lord Redesdale had observed that the principle was universal "that the right and duty of contribution is founded in doctrines of equity" (1821) 3 Bli, at p 590 (4 ER, at p 717) ; and the reference was not to doctrines peculiar to chancery but to doctrines of equity in the sense of "reason, justice and law", the expression used by Martin B. in Marsack v. Webber (1860) 6 H &N 1, at p 6 (158 ER 1, at p 3) . The judgment in Dering v. Winchelsea (1787) 1 Cox Eq Cas 318, at p 321 (29 ER 1184, at p 1185 itself had said that "If we take a view of the cases both in law and equity, we shall find that contribution is bottomed and fixed on general principles of justice" - "founded on equality, and established by the law of all nations" (to quote the same judgment as differently reported (1787) 2 B &P 270, at p 274 (126 ER 1276, at p 1278) ) - and it had gone on to show that law and equity were at one as to the nature of the right, though the doctrine of equality operated more effectually in a court of equity than in a court of law, and there were differences as to the mode and conditions of its application : see generally Halsbury's Laws of England, 3rd ed., vol. 14, pp. 492, 493, pars. 934, 935 ; vol. 22, pp. 266-268, pars. 527, 528. The right arises at law when "one of several persons has paid more than his proper share towards discharging a common obligation" : Davies v. Humphreys (1840) 6 M &W 153, 168-169 (151 ER 361, at pp 367, 368) ; Dimdore v. Leventhal (1936) 36 SR (NSW) 378, at p 385 , and it arises in equity when a liability of one of several to pay more than his share has been ascertained : Wolmershausen v. Gullick (1893) 2 Ch 514 ; McLean v. Discount &Finance Ltd. (1939) 64 CLR 312, at p 341 ; but for present purposes this difference is immaterial : what is important is the reason, namely that payment by the one discharges not only himself but each of the others, and qui sentit commodum sentire debet et onus. (at p352)

7. What attracts the right of contribution between insurers, then, is not any similarity between the relevant insurance contracts as regards their general nature or purpose or the extent of the rights and obligations they create, but is simply the fact that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained ; for that is the situation in which "the insured is to receive but one satisfaction" (to use Lord Mansfield's expression) and accordingly all the insurances are "regarded as truly one insurance" : Sickness and Accident Assurance Association Ltd. v. General Accident Assurance Corporation Ltd. (1892) 19 Rettie, at p 980 ; 29 Sc LR 836, at p 837 . (at p352)

8. In my opinion it follows from these considerations that the judgment in Government Insurance Office of New South Wales v. Royal Exchange Assurance of London (1965) 82 WN (Pt 1) (NSW) 468 is at variance with the true principle as to contribution between insurers and should be overruled. (at p352)

9. I agree that the appeal in the present case should be allowed. (at p352)

WINDEYER J. I agree that this appeal should be allowed. I agree in the reasons given by Kitto J. for that conclusion. The defendant in the Supreme Court (the present respondent) should, I think, have been held liable to pay to the plaintiff $8,071.92, being one half of the sum of $16,143.84, the amount which was paid by the plaintiff to the insured pursuant to the policy. (at p352)

Orders

Appeal allowed with costs. Order of the Supreme Court of New South Wales (Street J.) set aside. In lieu thereof order that the respondent pay to the appellant (1) $8071.92, one half of the sum of $16,143.84, being the sum paid by the appellant to the insured by way of indemnity, and (2) the costs in the Supreme Court.