Bank of Queensland Limited v AIG Australia Limited

The dispute in this matter concerned the interpretation of a civil liability insurance policy issued by AIG Australia Limited (the respondent) to Bank of Queensland Limited (the appellant). The core of the disagreement lay in whether a single "retention" or multiple retentions applied to a settlement sum and defence costs incurred by the appellant in a Federal Court representative proceeding. The appeal was heard by Bathurst CJ, Macfarlan and White JJA of the Court of Appeal of New South Wales.

The legal issues before the Court of Appeal were whether the settlement of the representative proceeding constituted a single "Claim" under the policy, and consequently, whether the appellant's liability for the settlement sum and defence costs constituted a "Loss" arising from that single claim. Central to this was the determination of whether a single retention applied, or if multiple retentions were triggered, particularly in light of the policy's aggregation and disaggregation clauses concerning related wrongful acts.

The Court of Appeal allowed the appeal, finding that the settlement of the representative proceeding was properly construed as a single "Claim" under the policy. Their Honours reasoned that the appellant's liability for the settlement sum and defence costs constituted a "Loss" resulting from this single claim. Consequently, the Court declared that only one "Retention" was to be borne by the appellant in respect of both the settlement sum and the defence costs. The Court also ordered the respondents to pay the appellant's costs of the proceedings at first instance and on appeal.