QBE Underwriting Ltd v Southern Colliery Maintenance Pty Ltd

QBE Underwriting Ltd (QBE) appealed from a judgment of the Supreme Court of New South Wales concerning a public and products liability insurance policy issued to Southern Colliery Maintenance Pty Ltd (SCM). The dispute arose from an employee of SCM who was injured while working in a coal mine. The employee sued both the mine owner and SCM. The mine owner then cross-claimed against SCM. A settlement was reached between the employee, SCM, and the mine owner. QBE, the insurer, declined cover for SCM, leading to the litigation.

The Court of Appeal was required to determine several key issues. These included whether the claim for breach of contract by the mine owner against SCM fell within the scope of the insuring clause of the policy, and whether the insuring clause extended to cover the mine owner's costs. Furthermore, the court had to consider the applicability of an exclusion clause relating to assumed liabilities. The court also examined SCM's duty of disclosure, specifically whether SCM had disclosed a contract with the mine owner that contained an indemnity, and if a letter referring to this contract, provided to QBE's agent, was sufficient to satisfy this duty, particularly in relation to the timing of the contract's existence. Finally, the court considered the scope of indemnity, including the reasonableness of the settlement and whether QBE was entitled to the benefit of a deductible.

The Court of Appeal reasoned that the insuring clause did not extend to cover the mine owner's costs, as these were not costs incurred by SCM in defending claims against it. Regarding the duty of disclosure, the court found that while the letter provided to QBE's agent referred to the contract, it was not sufficient to satisfy the duty of disclosure because it did not clearly indicate the existence of the indemnity provision within that contract, and importantly, the letter was provided after the contract had come into existence. Consequently, QBE was entitled to reduce its liability to nil under section 28 of the *Insurance Contracts Act 1984* (Cth). However, the court also found that the settlement amount was reasonable, but that QBE was entitled to the benefit of the deductible.

The appeal was allowed in part. The judgment entered in favour of SCM was varied by reducing the amount awarded from $265,000 to $215,000. The appeal was otherwise dismissed, and QBE was ordered to pay SCM's costs of the appeal.