A $2.1 million judgment against three major insurers is a sharp reminder that sitting on your hands during a claim can cost you the argument.
On March 11, 2026, the Supreme Court of New South Wales handed down its decision in Acciona Infrastructure Australia Pty Ltd v Zurich Insurance plc UK Branch [2026] NSWSC 185, ordering Zurich Insurance plc UK Branch, Great Lakes Reinsurance (UK) plc, and SCOR UK Company Ltd to pay $2,109,335.42 to construction firm Acciona Infrastructure Australia Pty Ltd.
The dispute traces back to 2013, when Acciona signed a design and construct contract with Queensland's Department of Transport and Main Roads to upgrade a stretch of the Bruce Highway. In February and then May 2015, severe weather events damaged work on the site. Acciona lodged two claims under its contract works insurance policy, seeking the cost of repairing the damage.
The insurers accepted parts of the claim but drew the line at what were labelled "Embankment costs." Their argument was straightforward: the repair work was not about fixing storm damage but about replacing defective road fill under a contractual direction. In their view, it was a defect, not damage, and the policy should not respond.
Acciona disagreed. It argued the storms caused cracking that let water seep into the embankment, leading to saturation, instability, erosion, and a significant reduction in the strength of the materials. Expert geotechnical evidence and testimony from Acciona's on-site project manager supported that position.
At the heart of the case sat a question familiar to anyone in construction insurance: where does "damage" end and "defect" begin? The policy was clear — claims for defects alone would not trigger coverage. But if damage existed, even alongside defects, the policy would respond. The court-appointed referee called this the "binary issue" and found that repair works carried out under a contractual direction could also be directed at repairing damage within the meaning of the policy.
The insurers pushed back, arguing they were denied procedural fairness and that the referee gave inadequate reasons. Justice Peden was not persuaded. The Court noted the insurers had received the key expert report before proceedings began, never sought to cross-examine the expert, and made no request for time to lead contradictory evidence. Both objections were dismissed.
On the question of statutory interest under section 57 of the Insurance Contracts Act 1984, however, the Court sided with the insurers. The referee had found the Embankment claim was not clearly formulated until the hearing itself, making it unreasonable to expect the insurers to have paid it earlier. That finding stood.
For insurers handling construction claims, the lesson here is pointed. Failing to engage with evidence-— whether by not responding to pre-litigation correspondence, not cross-examining experts, or not putting forward contradictory material - can leave very little room to object when findings go against you. And the damage-versus-defect question, as this case makes clear, is rarely as simple as picking one or the other.
