In the construction industry, contractors are often requested to provide insurance cover for every interested party on the project.

There are differences between being a named insured compared with being merely noted as an interest on a policy. If a party is a named insured, it is known as a co-insured under the policy and it effectively has the same rights and obligations under the policy as the principal insured. In contrast, an interest noted might enjoy some benefits of being covered but not share all of the rights and obligations that a named insured would have. Both the named insured and an interest noted can make a claim on an insurance policy. Section 48 of the Insurance Contracts Act 1984 (Cth) (ICA) entitles an interest noted to make a claim on the policy for a loss where a party is specified as covered by the policy. However, s48 of the ICA does not go as far as making an interested party an insured under the policy.

Insurers can rely on an insured's conduct before the policy was incepted in defending a claim for indemnity. If the principal insured has made a misrepresentation before the policy commenced and/or breached its duty of disclosure owed to the insurer, courts have accepted that the insurer can refuse to indemnify the interest noted claimant. However, where the principal insured's deliberate act (e.g arson) causes the loss under the policy, courts have held that insurers are not entitled to refuse to indemnify an interest noted claimant.

In contrast, a named insured will not be contaminated by the conduct of the principal insured where this occurs without the named insured's knowledge.

The named insured also has the right to:

  • serve on an insurer, a notice requiring the insurer to admit liability to indemnify the insured and advise whether the insurer intends to manage a third party claim within a reasonable timeframe;
  • demand a copy of the insurance policy; and
  • serve other notices under the Building Act.

However, a named insured also has the following duties and obligations:

  • to comply with the obligation to make disclosure of all matters relevant to the insurer's decision to accept the risk and if so, on what terms;
  • to inform the insurer of any change in circumstances which increases the risk insured; and
  • to pay premiums.

An interest noted does not presently have the above rights or obligations.

The distinction between a named insured and an interest noted may, in the future, be largely removed. However, until the law is amended, a party is on balance, better protected if it is a named insured rather than an interest noted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.