From roof collapse to coverage dispute: professional services exclusion under the microscope

In Rosenlund Constructions Pty Ltd v Certain Underwriters at Lloyd’s of London,¹ Jackman J recently delivered an important ex tempore decision on the construction of a professional advice or service exclusion in a Combined Public & Products Liability Policy. His Honour held that the exclusion applied to a demolition contractor (which was later deregistered) that had outsourced the design to an engineer but remained contractually responsible for it.

Background

Contracts

In November 2014, Lendlease Building Pty Ltd (Lendlease) engaged H Hassarati & Co Pty Ltd (Hassarati) to demolish the Qantas Credit Union Arena, previously known as the Sydney Entertainment Centre (Arena).

Hassarati subcontracted Grasso Consulting Engineers Pty Ltd (Grasso), a structural engineering consultant, to provide advice in relation to the demolition of the Arena’s roof, including on the sequence in which the roof structure could be demolished.

Hassarati also subcontracted Rosenlund Contractors Pty Ltd (Rosenlund) to demolish the roof of the Arena (Rosenlund Subcontract).

Demolition and collapse of the arena

In short, Hassarati provided Rosenlund with an iteration of the demolition methodology prepared by a Lendlease engineer (Revision P). The methodology contained a sketch that differed from the demolition sequence approved by Grasso and incorrectly indicated that an additional row of roof beams could be removed.

Rosenlund employees raised concerns about the methodology but were assured, by both Lendlease’s site engineer and Hassarati’s supervisor, that it had been engineered and should be followed.

On 19 March 2016, the roof collapsed onto an excavator owned and operated by Rosenlund. The excavator and its demolition boom were damaged beyond repair.

Proceedings

On 12 March 2024, Rosenlund obtained default judgment against Hassarati in the New South Wales District Court. Damages were later assessed in the amount of about $1 million.

In August 2024, Hassarati was deregistered.

Rosenlund subsequently sought to recover the amounts Hassarati owed it directly from Hassarati's insurer under section 601AG of the Corporations Act 2001 (Cth). This section allows a person to recover directly from the insurer of a deregistered company an amount payable under an insurance contract, provided the company had a liability to that person and the insurance contract covered that liability immediately before deregistration.

The policy

Hassarati held a Combined Public & Products Liability Policy (Policy).

Hassarati's insurers accepted that the insuring clause in the Policy was triggered. However, the exclusion for liability caused by or arising out of professional advice or services (PAS Exclusion) applied. The exclusion contained a limited write-back where the relevant advice or service was not given for a fee.

Decision

Jackman J delivered judgment ex tempore on the day of the hearing.

The Court dismissed Rosenlund's application because Hassarati passing on the demolition methodology and instructing Rosenlund to follow it despite their objections amounted to professional advice or services. His Honour also held, in the alternative, that Hassarati’s failure to check the demolition methodology against Grasso’s approved design was a failure to render professional advice or service, which likewise fell within the exclusion.

The first step in assessing the applicability of a professional advice or services exclusion is to understand precisely what the insured was retained to do. Under the Rosenlund Subcontract, Hassarati was responsible for the engineering design and was required to exercise its own professional skill, care and diligence. It also remained responsible for the advice and designs provided by its consultant. The fact that Hassarati had engaged Grasso did not reduce its role to simply passing on another party’s advice. By issuing Revision P and instructing Rosenlund’s employees to follow it, Hassarati adopted the methodology as part of its own professional services.

Rosenlund argued that the PAS Exclusion did not apply because Revision P was prepared by Lendlease and that was the proximate cause of the liability, rather than the professional services or advice provided by Hassarati. His Honour rejected that argument. Jackman J held that "arising out of" does not need a proximate cause, only a causal or consequential link, so it did not matter that Lendlease's sketch was the immediate cause.

Jackman J also held that the write-back did not apply. Although there was no separate fee identified for professional services, the contract price paid to Hassarati was consideration for all obligations it assumed, including obligations requiring professional skill and judgment. Hassarati's professional services were therefore given for a fee.

Key takeaways

• The decision in Rosenlund Constructions highlights that a contractor may still be providing professional services even when it engages an external consultant to undertake part of the design work. This is especially true where the contract requires the contractor to exercise its own professional skill and judgement.
• Insuring clauses and exclusions must be "read together in a harmonious way" so that effect is given to both.
• When considering whether a professional advice or services exclusion applies, the court will closely examine what the insured was contractually retained to do. Responsibility for reviewing, adopting or warranting a consultant’s design may be sufficient to bring the insured’s conduct within the exclusion.
• Passing on an incorrect design without checking it is not merely administrative — it can constitute professional conduct.
• Jackman J held that "arising out of" does not need a proximate cause, only a causal or consequential link.
• The case also demonstrates that a professional service may be given "for a fee" even where the contract does not allocate a separate amount to design or professional services. Payment for the overall contract price may be sufficient.

Read the full decision here.

¹ Rosenlund Constructions Pty Ltd v Certain Underwriters at Lloyd’s of London Subscribing to Policy Number 08070017 [2026] FCA 1442 (30 September 2026)