Pinnacle Living v QBE Insurance [2023] VSC 621

The decision in Pinnacle Living v QBE Insurance [2023] VSC 621 concerned two issues of interest. 

The relevant facts were as follows. A fire on a construction site caused about $3 million loss and damage. Two insurers were on risk. One under an Industrial Special Risks Policy. The other under contract works insurance. Contract works risk was excluded under the first policy. Two proceedings resulted. The first was brought by the owner against the builder. The second was brought by the owner and its parent as co-insured for indemnity under the Industrial Special Risks Policy. The first proceeding resolved.

The plaintiffs had settled with the Industrial Special Risks Policy insurer by Deed for $2.65 million (First Release). The issue was whether the Industrial Special Risks Policy insurer was obliged to pay the full $2.65 million or whether that sum was partly to be paid by the contract works insurer. A total of $2.65 million from both had been received but the plaintiffs contended the Industrial Special Risks Policy insurer was obliged to pay that sum itself on the basis that its part payment was not an accord and satisfaction of the First Release. That contention was accepted but the claim failed because an election had occurred by pleading an amendment in the course of the proceeding.

The first amendment abandoned the plaintiffs’ claim under the First Release. Instead, they sought indemnity under the QBE policy for the full cost of rectification. Two years later, they again amended essentially reverting to their original claim. Election occurs when a choice is made between inconsistent rights with sufficient knowledge to know of the inconsistency. The plaintiffs were entitled to claim both under the First Release and to also assert an alternative claim for indemnity under the QBE policy. The Rules so permitted. However, when the plaintiffs amended the Statement of Claim the first time they abandoned their claim under the First Release. At the time, the insurer’s defence at all material times was that the First Release was not binding. The key holding was that the plaintiffs' conduct, including their silence in response to QBE's defence and pursuit of a claim for full indemnity under the QBE policy, conveyed an intention to walk away from the First Release. The plaintiffs therefore found themselves in the unfortunate situation of having abandoned two viable causes of action against QBE.

Martin Scott KC and Laina Chan

Liability limited by a scheme approved under professional standards legislation