Can claimants drag your insurer into construction litigation?

Claimants regularly try to pull insurers into proceedings early in order to secure leverage, lock in coverage positions, and improve recovery prospects by targeting deeper pockets.

The Supreme Court of Victoria’s recent decision in Waldren Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2025] VSC 74 (Waldren) confirms that approach won’t always work.

In Waldren, the Court made it clear that if an insurer has accepted cover and is paying for and managing the insured party’s defence, it is usually unnecessary to join the insurer to the proceeding in its own name.

For builders, contractors and developers, that provides important clarity about how insurance-backed disputes will be managed.

Waldren in a nutshell

The owners of Pacific Werribee Shopping Centre sued Probuild for alleged design defects in the construction of a major extension.

Key features of this dispute included:

• Probuild was subject to a deed of company arrangement (DOCA);
• The claim focused on design defects, not workmanship;
• Probuild’s primary professional indemnity insurers accepted cover, funded defence costs, and took control of the defence; and
• The plaintiffs applied to join the primary insurers as defendants, arguing this was necessary to avoid future insurance disputes and to protect their recovery position.

Why the Court refused insurer joinder

The Court rejected the joinder application for four key reasons.

1. No denial of cover = no insurer joinder.
   • Courts consider a range of factors when determining whether to join an insurer, including whether the insurer has denied indemnity and / or whether there is a genuine coverage dispute.  In this case, there was no such denial or genuine dispute.
2. Insolvency does not change the rule
   • Probuild’s insolvency and DOCA did not justify insurer joinder.  Statutory protections for third parties still applied, and there was no evidence the insurers would refuse to pay any covered judgment. 
3. Design vs construction defects did not require insurer joinder
   • Although the Court would need to determine whether the defects were design defects (covered by Probuild’s insurers) or construction defects (not covered), this issue could be resolved without insurer involvement.
4. Insurers’ binding undertakings
   • Probuild’s insurers gave an undertaking to be bound by the Court’s final findings,  eliminating the risk of inconsistent decisions or later insurance litigation.

Key takeaways for contractors

• Insurance wording is critical to coverage outcomes.  Seek legal advice immediately upon becoming aware of a potential claim – aligning legal and expert strategy with insured risk is key. 
• Early insurer engagement matters.  Notify insurers early and fully of claims made against you, this strengthens coverage positions and reduces downstream disputes.
• Acceptance of cover usually keeps insurers out of court and avoids disputation of coverage later.  Securing written confirmation of cover as soon as possible can prevent claimant from attempting insure joinder later.
• Insolvency planning should include insurance strategy.  Where  financial distress is possible, insurance considerations should form part of early advice.

More information

For tailored advice on how construction insurance matters contact:

This is a guide only and does not constitute legal advice.