Helicopter Aerial Surveys Pty Ltd v Insurance Australia Limited (No 2) FCA 1360
What happens when a simple fix turns into a much bigger problem years down the track? This was the central issue in the decision of Helicopter Aerial Surveys Pty Ltd v Insurance Australia Limited (No 2) handed down on 7 November 2025, where the Federal Court had to decide whether remediation work performed years after faulty workmanship was just “correcting” that work, or actually remediating damage that had developed over time.
The Story Behind the Dispute
Back in 2015, Bradford Marine (Bradford) was hired to perform anti-fouling work on The Mishima. Instead of properly preparing the surface before applying the protective paint, Bradford painted over algae and rust. These fundamental failures would come back to haunt everyone involved. HAS, the vessel owner, paid GT Mac $92,149 in 2016 to fix Bradford’s mistakes.
But the story did not end there. By 2018, severe corrosion appeared. When GT Mac removed timber coverings in 2019, they found rust and corrosion far worse than anyone had expected. The original rust had spread and the cost to remediate this damage was $148,697.
HAS eventually won a judgment against Bradford for $260,000 plus $320,000 in costs. However, with Bradford deregistered in 2024, HAS turned to Bradford’s insurer (IAL), relying on section 601AG of the Corporations Act 2001 (Cth). This section allows a person to recover from the insurer of a deregistered company if the company had a liability and the insurance contract covered it immediately before deregistration.
The Insurance Question
The insurance policy excluded liability under clause 6.6 for “the cost of… correcting… any work done or undertaken by the Insured“. However, a writeback clause restored some coverage for “rectification of faulty workmanship consequent upon resultant damage,” but capped it at $25,000.
IAL argued that all remediation costs were simply “correcting” Bradford’s work, so only $25,000 should be paid.
The Court’s Decision
IAL also claimed that under section 601AG, claimants must prove that policy exclusions do not apply. The Court disagreed. Jackman J confirmed that insurers still bear the burden of proving an exclusion applies. Section 601AG is procedural; it helps claimants pursue insurers of deregistered companies but does not change substantive insurance law.
What Does “Correcting” Really Mean?
Drawing on R&B Directional Drilling v CGU Insurance FCA 458, Jackman J clarified that “correcting” means the direct cost of redoing defective work to the required standard. It does not mean the cost of fixing property damage caused by that work. In effect, the exclusion in clause 6.6 is narrow and the writeback in clause 3.4 is broader and covers damage that results from faulty workmanship.
So how did it play out?
It was found that:
- the work undertaken in respect of the 2016 Remediation of work, valued at $92,149 was work correcting Bradford’s original mistake. The exclusion applied, but clause 3.4 provided $25,000 coverage.
- the work undertaken four years later in 2019 for the amount of $148,697, for rust and corrosion that had spread well beyond the original problem was not just correcting Bradford’s work; but was remediating consequential damage that developed over time.
As IAL could not prove that the 2019 costs were purely for “correcting” Bradford’s work rather than addressing new damage, IAL was held liable for the full $148,697 under the insuring clause and was ordered to pay a total of $507,510.61 broken up as follows:
- $25,000 (2016 work under clause 3.4)
- $148,697 (2019 work under insuring clause)
- $13,813 (interest)
- $320,000 (legal costs)
The Principle
The decision confirmed that insurance exclusions are interpreted according to their natural meaning. “Correcting” defective work means redoing that work, not remediating ongoing effects years later. That difference matters, especially when those effects compound over time.
Here are a few key takeaways for relevant parties.
For insurers
Insurers bear the burden of proving exclusions apply even in section 601AG claims. When years pass between defective work and remediation, it becomes much harder to argue that all costs are just for “correction”, particularly where rust is involved given it does not stand still.
For claimants
Time is on your side. If you can show damage worsened or spread over time, you may be able to claim beyond narrow “correcting work” exclusions.
For policy drafters
“Correcting work” exclusions are narrow. If you want to exclude consequential damage, say so clearly. Writebacks using causal language i.e. “consequent upon,” or “resulting from” can extend coverage beyond what narrow exclusions capture.
The Bottom Line
Ultimately, the distinction between correcting faulty work and remediating consequential damage is more than just legal semantics. It can determine the outcome of a claim and the financial exposure for both insurers and insureds. As this case shows, time and the nature of the damage matter. For those drafting policies, clarity is key: if you intend to limit coverage, spell it out. If you want to provide protection for damage that unfolds over time, use language that captures those scenarios.
In insurance disputes, details make all the difference. Understanding how exclusions and writebacks operate in practice can mean the difference between a denied claim and a successful recovery.
A copy of the full decision can be located here.
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