A classic “escape clause” in a Lloyd’s insurance policy has left Allianz empty-handed in a case of double insurance.

NSW Supreme Court Justice Kelly Rees this week found in favour of Lloyd’s after Allianz sought a contribution from the London insurer in the case of a road worker who was hit by a passing car and seriously injured.

The worker received some $1 million in damages from the road builder, Baulderstone Hornibrook, which was insured under two policies – one issued by Allianz, which paid the claim, and the other by Lloyd’s.

Because the claimant had received all that he was entitled to receive under both policies, the payment by one insurer discharged the obligation of both.

Justice Rees said the matter could be “decided simply enough by inquiring whether payment of the claim by one insurer… would provide the other insurer with a defence to a like claim against it”.

The Allianz policy was arranged by the Roads and Traffic Authority of NSW to cover construction risks for its contractors. The Lloyd’s public and products/contract works liability policy was arranged by Baulderstone Hornibrook’s parent company.

The Lloyd’s policy contained a general exclusion saying it “does not cover liability which forms the subject of insurance by any other policy”.

The Allianz policy provided that it would not respond to any loss “until such time as the limit of liability under… other primary and valid insurance has been totally exhausted”.

Allianz maintained that the exclusions cancelled each other out, in which case both insurers would be liable and “the one who pays can claim contribution from the other”.

But Lloyd’s said its policy operated to exclude cover for liability, unlike the Allianz policy. As such, it could not be properly described as providing cover for a risk that would be covered by the Allianz policy.

The legal arguments were complex, but Justice Rees found the simple escape clause in the Lloyd’s policy meant there was no “underlying insurance” as defined by the Allianz policy.

“It is not a case where the Allianz policy would respond but does not by reason of the existence of the Lloyd’s policy.

“Rather, the Allianz policy specifically contemplates a scenario where there is another policy… which [also] provides cover for a risk but does not ultimately result in an indemnity for the insured because of the precise wording of that other policy.”

Dismissing the Allianz case with costs, she said that in this case, “It seems to me that the Allianz policy responds to Baulderstone’s claim whilst the Lloyd’s policy does not”.