PINNACLE LIVING PTY LTD AND ANOTHER V QBE INSURANCE (AUSTRALIA) LTD

[2023] VSC 621, Victoria Supreme Court, Justice Osborne, 26 October 2023

Insurance – Construction All Risks – Damage by fire – Offer by employer's insurers to pay $2.6 million – Whether binding settlement contract – Effect of claim under the policy on the settlement

PL through a subsidiary operated a retirement village in Victoria.

In 2013 TVM entered into a contract under which Method was to carry out improvements to the retirement village community centre. In accordance with the contract, Method procured an insurance policy with Ace covering the works against loss or damage. PL had its own insurance with QBE which covered loss of or damage to existing structures.

The community centre was destroyed by fire on 6 May 2013. After negotiation, PL signed a Release on 29 August 2014 which stated that PL confirmed that it would accept $2.6 million as the cost of reinstatement. PL was subsequently paid $2,229,613.19 for the cost of reinstatement of the community centre from QBE and $420,386.81 from Ace. In the present proceedings PL sought to recover $420,386.81 from QBE under the policy or alternatively under the Release.

It was held that the claim would be refused.

(1) The Release constituted a binding settlement contract. While there was a distinction between acceptance of a claim and a settlement agreement, in the present case there was a binding settlement agreement for the sum of $2.6 million.

(2) PL had, however, abandoned the Release when it claimed under the policy against QBE for the unpaid balance. It had therefore been fully indemnified.