Evolution Precast Systems Pty Ltd v Chubb Insurance Australia Limited

The case of Evolution Precast Systems Pty Ltd v Chubb Insurance Australia Limited involved a dispute over whether Evolution was entitled to payment of defence costs prior to determining whether the third-party claim against Evolution was covered by the insurance policy issued by Chubb. The dispute arose from claims made against Evolution in relation to the Opal Tower Development in Sydney, which experienced structural issues leading to evacuation of its residents. Evolution sought advance payment of defence costs from Chubb, but Chubb declined, asserting that the claims against Evolution were not within the policy’s cover due to a professional liability exclusion.

The legal issues before the court were whether Chubb was obligated to pay Evolution’s defence costs under the policy and whether the defence costs clause was conditional on the claim falling within the general insuring clause but not within the exclusions. Specifically, the court needed to interpret Clause 5.3 of the policy, which dealt with the insurer’s right to defend claims, and determine whether Chubb was required to pay defence costs before it was established that the claims against Evolution were covered by the policy.

The court reasoned that Clause 5.3 did not impose a condition that the claim must fall within the general insuring clause but not within the exclusions for Chubb to be obligated to pay defence costs. The court held that the insurer’s obligation to pay defence costs was not dependent on the claim being within the exclusions, and therefore, Chubb was not obliged to pay the defence costs unless and until there was a judicial determination that the exclusion applied. Consequently, the court found that Chubb was not presently obliged to pay the defence costs incurred by Evolution.

In light of the court’s decision, it ordered that Chubb was not required to pay the defence costs incurred by Evolution, and Evolution was to pay Chubb’s costs of the application. This decision clarified the obligations of the insurer regarding defence costs in the context of insurance policies with exclusions, emphasizing that the insurer’s duty to pay defence costs is not contingent on the exclusions being applicable.