WEIR SERVICES AUSTRALIA PTY LTD V AXA CORPORATE SOLUTIONS ASSURANCE

[2017] NSWSC 259, New South Wales Supreme Court, Justice Hammerschlag, 17 March 2017

Insurance (liability) - Claim settled by assured prior to arbitration award - Award dismissing claim against assured - Whether insurers liable for settlement - Whether insurers liable for defence costs - Meaning of "occurrence" - Claims condition

Weir, an Australian company, entered into an agreement with a Philippines corporation, Phil Gold, under which Weir agreed to do certain refurbishment work - including welding - on a semi-autogenous grinding mill. The circumferential weld installed by Weir disintegrated in July 2011, leading to the failure of the SAG Mill. Phil Gold commenced arbitration proceedings in December 2013, seeking damages of some US$68 million. In December 2015, before the conclusion of the arbitration, the parties entered into a "cap and collar" agreement under which Phil Gold agreed that if it was successful in recovering damages from Weir, the amount would be capped at US$10,725,000 (the cap) in consideration for Weir agreeing to pay Phil Gold a minimum fixed amount of US$2 million whatever the outcome of the arbitration proceedings (the collar).The award, issued on 16 January 2016, dismissed Phil Gold's claim. That meant Weir was liable to pay US$2 million under the collar, and along with defence costs, totalling US$7.6 million. There were two relevant policies held by Weir, issued by AXA: a global liability policy issued in England governed by English law, and a local broadform liability policy issued in Australia governed by the law of New South Wales. The global policy applied if there was no cover under the broadform policy. The court dismissed claims under both policies.