Liability insurance: costs as compensation

The question in Cantone v Insurance Australia Ltd [2022] FCA 1009 was whether a demand for a costs order in proceedings in which no actual claims were made against the assured but which were nevertheless defended by the assured constituted a "claim" for "compensation" against the assured. In the unusual circumstances of the absence of any claim against the assured there was no coverage for defence costs, and so the question became whether such costs formed part of the primary indemnity.

Worrells SA were a firm of forensic accountants. Two of the members of the firm were Messrs Cantone and Cooper. There were three professional indemnity policies in force for the periods 1 March 2017 to 1 March 2018, 1 March 2018 to 1 April 2019 and 1 April 2019 to 1 May 2020. The terms of the three policies were for all relevant purposes identical.