Two retentions, one policy. Which one applies? Australia's Full Federal Court has backed the insurers' reading.
On July 6, 2026, the Full Court of the Federal Court dismissed an appeal by software company Nuix, confirming that when a smaller-retention claim and a larger-retention claim are rolled into one, the bigger retention applies. A retention is the slice of loss the insured absorbs before cover starts - the insurer does not pay until loss passes that mark.
The dispute lived inside two Berkshire Hathaway-led policies: a public offering (POSI) policy tied to Nuix's 2020 float, and a directors' and officers' policy. Each set a $2,500,000 retention for Side B cover (reimbursing the company for what it pays its people) and a $10,000,000 retention for Side C cover (the company's own securities exposure). Each also had a "Related Claims" clause, clause 5.5, saying related claims "shall be considered a single Claim, and only one Retention shall be applicable to such single Claim."
The catch: the clause never said which retention. Senior counsel for Liberty conceded there was a "gap in the policy" - no words picking the first claim in time, none picking the highest figure.
How it started: Nuix listed on the ASX in December 2020. In 2021, ASIC issued statutory notices and, by mid-year, had commenced an investigation into Nuix, and class actions were filed in the Supreme Court of Victoria. ASIC sued Nuix on September 28, 2022. That November, Berkshire Hathaway said the ASIC investigation engaged Side B, the class actions engaged Side C, the two were a single claim, and the retention was $10 million.
Nuix's case was simple: the first claim in time sets the retention, so a Side B claim first meant $2.5 million, with nothing to raise it later.
The court did not accept it. Nuix's reading could not answer what happens when both claims arrive together - for instance, in one letter of demand. Pinning the result to filing order was "happenstance" with "no commercial logic," the court said. And a retention is meant to hold: the parties had agreed the company would wear the first $10 million of a securities loss, and a prior small claim should not quietly cut that to $2.5 million. As the reasoning went, "the larger will absorb the smaller."
Nuix argued the insurers' reading should have come with a "clawback" clause to recover money already paid at the lower figure. The court said the absence of one was not determinative - it simply meant no clawback was available.
The outcome: "the Insurers' construction is to be preferred." Leave to appeal was granted, the appeal dismissed, and Nuix ordered to pay costs.
For claims and underwriting teams, the lesson is direct. On wording like this, when aggregation folds mixed claims into one, expect the higher retention to govern unless the policy says otherwise - and if you want a different result, spell it out and settle the clawback question in the drafting.
This ruling decided the retention question only. The court noted the separate questions were heard early, before all the facts had settled, and that a wider coverage dispute is still on foot.
