An Australian supreme court was faced with the question whether a sub-subcontractor was a named insured or agent of the named insured under a general liability policy relating to demolition work on a construction site where a fire attributed to the conduct of the sub-subcontractor caused damage. The court held that on the policy wording the sub-subcontractor was not covered under the policy. The sub-subcontractor had provided labour to the subcontractor and the workers were controlled by the subcontractor and not doing subcontracted work.

The definition of “Insured” in the policy covered a group of legal persons within the words of “Named Insured”. The policy referred to “any contractor or sub-contractor of any tier” which expressly contemplated a chain of subcontractors. A broader meaning for “subcontractor” would render irrelevant the constraint in the policy limiting coverage to other persons subject to a “contract with or assumption of responsibility” by a person already insured. There was no evidence that the contract entered into between the subcontractor and sub-subcontractor included an agreement for the sub-subcontractor to carry out certain parts of the work that the subcontractor had contracted to do. Using the labour of the sub-subcontractor did not mean the subcontractor handed over responsibility for those parts of the work done by the workers. The sub-subcontractor was also not an “agent” of the subcontractor. The court found it unnecessary to decide the point but said that, if it had been required to do so, there was no agency because the sub-subcontractor was not doing work on the subcontractor’s behalf but was contracted to provide labour. The sub-subcontractor was also not “under the control of” the subcontractor because the selection of and direction on site of the workers did not amount to control nor active management of the sub-subcontractor itself. The subcontractor was not obliged by a contract or “assumption of responsibility” to insure the sub-subcontractor according to the facts. The claim against the insurer failed.

The court quoted an 1897 English court decision where it was said “no word is more commonly and constantly abused than the word ‘agent’”.

Mie Force v Alliance Australia Insurance Limited [2022] NSW SC 1606