An insurer has lost its bid to avoid paying out for a construction site accident following a dispute over an axed policy and its subsequent liability for a damages settlement. 

AIG was providing public liability cover to builder George Hanna for a house project in Campsie, NSW, when a worker was hurt in a fall from scaffolding in October 2018. 

In August 2020, Mr Hanna lodged an indemnity claim with the insurer. But in a later phone call with AIG’s solicitor, Mr Hanna said that although he was the project’s registered builder, he was only helping a friend who wanted to use his builder’s licence number, and it was that friend who controlled the site. 

Mr Hanna confirmed this in a statement signed in December 2020. 

In May 2021, AIG avoided the policy, alleging Mr Hanna made fraudulent non-disclosures and had entered into an unlawful agreement with his friend. 

When the injured worker sued Mr Hanna in the District Court later that year for negligence and breach of statutory duty, Mr Hanna – who at this stage admitted running the site but denied liability – brought a cross claim against AIG seeking damages for wrongful termination of the policy. 

In explaining why he had “deliberately lied” during the phone call with AIG’s solicitor, he said: “I didn’t want to have anything to do with [the injured worker] or courts or solicitors ... I just wanted to be as far away as possible from these people.” 

Early in the hearing, the District Court judge made a consent ruling – agreed by both parties – for the worker, ordering that Mr Hanna pay him $430,000, with each to cover their own costs. That order was made over the objection of AIG, which was not a party to the worker’s claim, having avoided Mr Hanna’s policy. 

The judge then found Mr Hanna’s policy “was terminated wrongfully, albeit because of [Mr Hanna’s] actions” and should have responded to the worker’s claim. She found the consent judgment “activated the insuring clause in the policy”. 

At the NSW Appeal Court, AIG challenged the initial ruling, making a raft of arguments including that the primary judge “ought to have found that the respondent was required to prove that he was liable to the plaintiff [and] ought to have found that [the] respondent failed to prove that he was liable to the plaintiff”. 

But in a decision delivered last month, the higher court dismissed AIG’s appeal, and found the settlement with the injured worker was reasonable. 

“As Mr Hanna submitted, and as the primary judge found, AIG had repudiated the policy and he had accepted that repudiation,” the appeal judges’ ruling states. “Having entered into a settlement with [the worker], it was for him also to show that the amount of the settlement was reasonable having regard to the relevant circumstances, which ...  included the position in which [the worker] found himself and what he might have been held liable to pay if there had been a contest leading to a judgment or arbitral award. 

“He did not need to establish that he was liable to [the worker] in the manner ... alleged in the amended statement of claim; and the primary judge did not need to be satisfied that Mr Hanna was so liable.” 

Read the full judgment here.