Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd

The case between Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets and Icon Co (NSW) Pty Ltd concerns third-party liability claims for serious building defects that occurred after practical completion but within the 12-month defects liability period. Icon, a construction company, sought coverage under two separate insurance policies with different insurers. The insurer of the annual policy denied coverage on the grounds that the defects occurred outside the policy period, while the underwriter of the later policy also denied coverage, stating it was outside the scope of the policy's coverage. The dispute reached the court with the central legal issues being the proper construction of the insurance policies and whether the policies provided coverage for defects that occurred within the defects liability period.

The court examined the policy wording, focusing on the definitions of "Product" and "Completed Operations" and the "run-off" condition to determine the extent of coverage. It considered whether the completed building and its component parts were considered "products" within the policy and whether "Completed Operations" only covered damage occurring within the policy period for completed projects with expired defects liability periods. The court also evaluated the relevance of the distinction between "Products Liability" and "Completed Operations" and the implications of the conjunction "and/or" in the policy language. The court found that the insurer of the annual policy had correctly denied coverage as the defects occurred outside the policy period. Regarding the later policy, the court concluded that the building must be treated as a totality rather than its component parts, and thus, if there was a scope of cover for "Completed Operations" confined by the policy terms, it applied to the entire building and each part of it.

The court also addressed the issue of equity and whether the parties held a common intention to effect contracts commencing cover. It noted that the parties were represented by experienced insurance brokers, and while the intentions of the parties and the brokers were relevant, the court gave weight to the trial judge’s assessment of witness credibility. The court found that the intentions of the parties and the brokers did not alter the proper construction of the policy terms.

Ultimately, the court did not find that the mutual intention and what Icon sought from QBE were legitimate contextual material for construing the QBE policy. The court held that it was incorrect to assume, without evidence, that there was no cover during the defects liability period for contracts commenced before the insurance period. The court affirmed that the insurer of the annual policy correctly denied coverage, and the underwriter of the later policy also correctly denied coverage based on the policy terms. The court did not find that the completed building and its component parts were "products" within the policy, and therefore, the scope of cover for "Completed Operations" applied to the entire building.

The court made no orders regarding the form of orders at the time of the decision, leaving it to the parties to file any submissions within seven days.