Trident Insurance v McNiece

Trident General Insurance Co Ltd v McNiece Bros (1988) 165 CLR 107

Contract – Insurance – Public liability – Indemnity to insured and its contractors – Entitlement to indemnity

Facts:

McNiece was the main construction contractor for work being carried out at a limestone plant named Blue Circle. Blue Circle entered into a contract with Trident, an insurer. The policy covered work defects and public liability amongst other things. Under the insurance contract, Blue Circle, “the assured” was defined as including “all related companies, contractors and sub-contractors”. Insurance for public liability did not include “any claim arising under any Workmen's Compensation Law”. A worker, contracted to McNiece by an employment company, was seriously injured while driving a crane on sight. McNiece commenced action against Trident for indemnity.

Issues:

Whether McNiece was one of the “assured” parties under the insurance contract between Blue Circle and Trident.

Held:

The appeal by Trident was dismissed. It was found that even though McNiece was a third party, the wording of the contract it expressly referred to coverage of contractors and sub-contractors under the policy. Further, as a matter of business efficacy the policy was intended to cover any contractor working for Blue Circle at the time of any claim. The fact that Blue Circle were the only party to the contract and the only party liable for the insurance premium did not negate cover. Even though McNiece was a third party, they were determined to be entitled to indemnity in respect of a claim of negligence by their injured sub-contractor. The court effectively created an exception to the doctrine of privity of contract and the requirement that consideration should move from the promisee.