Liability insurance: Defence costs

Defence costs clauses in liability policies are many and varied. The clause in Australasian Correctional Services Pty Ltd v AIG Australia Ltd [2018] FCA 2043 imposed an obligation on the insurers to pay defence costs. The insurers raised two defences: part of the claim against the assured was not covered by the policy, so that the costs should be apportioned; and the costs included both costs payable to the third party and costs incurred by the insurers for the purposes of a policy deductible.

The facts