Limit (No 3) Ltd v Ace Insurance Ltd

Limit (No 3) Ltd, an Australian construction company, brought a claim against Ace Insurance Ltd, its excess insurer, in the Federal Court of Australia. The dispute arose from a claim for damages for property damage caused by the removal or weakening of ground support due to tunnelling and excavation work in Singapore. The underlying insurer, which had refused to indemnify Limit, argued that the damage was due to construction defects or arose out of the rendering or failure to render professional services, which were excluded from coverage. Ace Insurance, in turn, sought recoupment or contribution from the underlying insurer, contending that the damage was due to an occurrence covered by the policies and that the underlying insurer was liable to indemnify Limit under Singapore law.

The court was required to determine whether Limit was liable to third parties in accordance with Singapore law, whether a judgment, arbitral award, or formal settlement was necessary for the insurer to be liable, and whether the damage occurred within the period of the underlying policy. The court also needed to construe the insurance policies, including the professional services exclusion and the Difference in Conditions clause, and determine whether the excess insurer was entitled to recoupment or contribution from the underlying insurer. The court had to consider the admissibility of extrinsic material under Singapore law and the operation of the Wayne Tank rule where damage arises by reason of two or more causes.

The court found that the damage was due to construction defects and did not arise out of the rendering or failure to render professional services. The court held that the professional services exclusion clause did not limit the insured's liability to clients for whom it provided a professional service. The court also found that the damage arose out of more than one occurrence as defined in the insurance policies and that the excess insurer was entitled to recoupment or contribution from the underlying insurer. The court held that the requirements for contribution and recoupment were met, and the excess insurer was entitled to recoupment or contribution from the underlying insurer. The court also found that the reasonable precautions clause in the excess policy was not breached.

The court ordered that Ace Insurance was entitled to recoupment or contribution from the underlying insurer in the amount of AUD 25,424,181.67, along with interest at the rate of 4% per annum from 15 June 2018 until the date of satisfaction of the judgment.