Cover For Legal Costs – A Surprising Result

Wesfarmers Federation Insurance Limited v Stephen Wells t/as Wells Plumbing [2008] NSWCA 186

How can an insured recover its defence costs when the claim isn't covered?

D&O insurers can advance defence costs on the basis they can recover them if the court makes adverse findings, e.g. dishonesty on the insured's part. However outside this context we tend to assume that if the liability is not covered then nor are the defence costs. This case shows that it is not so straightforward.

Background

Stephen Wells t/as Wells Plumbing was sued in the District Court of NSW by Adam Hubbard over injuries suffered by Mr Hubbard on 18 December 2001 in the course of plumbing works undertaken by Mr Wells. Mr Hubbard alleged that he was an independent contractor to Mr Wells and that Mr Wells had breached a duty of care owed to him.