FKP Commercial Developments Pty Limited v Zurich Australian Insurance Limited (No 2)

FKP Commercial Developments Pty Limited and Zurich Australian Insurance Limited appeared before the court in a dispute concerning the interpretation of a professional indemnity insurance policy. The applicants sought a separate question to be answered regarding the scope of their insurance cover. The court was tasked with determining whether the applicants' claim against them in the OC Proceeding was covered by the extension of cover clause in the policy. The policy's clause 3 required the insured to be "legally liable in the provision of the professional services" for the claim to be covered. The applicants argued that their provision of professional services was a necessary component of the factual matrix in which their liability arose, regardless of whether there was a causal connection between their services and the alleged defects.

The legal issues before the court involved interpreting clause 3 of the extension of cover and determining whether the applicants' professional services were a necessary component of the factual matrix. The court had to decide whether the requirement that the insured be "legally liable in the provision of the professional services" was a causal requirement or if it was sufficient for the provision of professional services to be a substantive element of the factual matrix in which the liability arose. Additionally, the court considered whether the lack of a causal connection between the provision of professional services and the alleged defects impacted the applicants' claim.

The court ruled that the requirement for the insured to be "legally liable in the provision of the professional services" was not a causal requirement, but rather the provision of professional services had to be a substantive element of the factual matrix in which the liability arose. The court found that the applicants' professional services were a necessary component of the factual matrix, even if there was no causal connection between their services and the alleged defects. Consequently, the court answered the separate question in the affirmative and ordered the respondent to pay the applicants' costs of the separate question. The matter was then stood over generally, with liberty to restore the matter on 48 hours’ notice.