Facts: Blue Circle Southern Cement entered into a contract of insurance with the Trident Insurance Co. Under the contract, Trident agreed to indemnify Blue Circle, its related companies, contractors and its suppliers against liability for injuries caused to non-employees. McNiece, a crane driver employed by another company, who was working at a construction site owned by Blue Circle, was injured and sought to claim indemnity from Trident under the contract of insurance. Trident argued that because McNiece was not a party to the insurance contract, he could not sue to enforce it.
Issue: Can a third party who is identified as a beneficiary under an insurance contract sue to enforce payment of an indemnity due under that contract?
Decision: Insurance contracts are an exception to the general doctrine of privity of contract.
Reason: Although the judges gave different reasons for their decisions, a majority of the High Court held that the doctrine of privity of contract should not apply in cases of insurance contracts. This is mainly because the reliance by third parties on insurance policies is widespread and to deny them the right to sue would cause great injustice.
Note: The exceptional nature of insurance contracts is now provided for by s 48 of the Insurance Contracts Act 1984 (Cth). However this provision had not yet been enacted when McNiece was injured.