The insurers of a structural engineering firm liable for losses resulting from negligence had agreed to indemnify its insured but no indemnity had yet been paid. The court held that the structural engineer’s liability insurers could not refuse to pay the claim on the basis that the insured had already been indemnified. Such a defence is only available where an indemnity provider, such as an insurer, had indemnified and actually paid the claim of the insured. It is the actual discharge by another insurer of the loss which is the subject of a claim that gives rise to the availability of a valid defence on the part of the second insurer to the effect that an indemnity has already been afforded to the insured. Unless and until there has been payment to the insured, there has been no indemnity in fact and no basis for a defence by the second insurer that indemnity has already been provided. If an insurer pays and there are two insurers covering the same risk, the other insurer does not have to pay the insured but there may be a right by one insurer to seek a contribution from the other insurer.

An insured who has two policies covering the same loss can decide to claim under one policy and not the other for a full indemnity. Once such an election is made and the indemnity is paid, a right of contribution exists between the insurers which has nothing to do with the insured whose claim is now fully indemnified. Alternatively rights can be pursued under the two policies covering the same risk with the two insurers jointly and severally liable for no more than the total loss.

On that wording the same result is likely to follow in a South African court.

[WSP Structures v Liberty Mutual Insurance Company t/as Liberty Specialty Markets [2023] FCA 1157]