Last week’s decision of Highway Hauliers Pty Ltd v Maxwell [2012] WASC 53 (Highway Hauliers) has gone some way to clarify the ‘controversy’ and ‘mischief’ surrounding the judgment of Johnson v Triple C Furniture & Electrical Pty Ltd [2010] QCA 282 (Johnson). In Johnson, the Queensland Court of Appeal held that a third-party pilot’s failure to undergo and pass a skills review was not regarded as an act or omission to which section 54 of the Insurance Contracts Act 1984 (Cth) applied. Rather, the loss was simply excluded under the policy. In Highway Hauliers, the insured’s authorisation of third parties to drive trucks in circumstances where those drivers had failed to achieve a minimum score on a driving test was regarded as an act to which s 54 applied, and the insured was entitled to indemnity.  

Just a quick note to let you know that the 2011 edition of DLA Piper’s flagship annual publication for the insurance industry, Insurance Year in Review, will be available early next week. You can register to have a copy emailed to you here.
 
This edition’s central theme is the insurance implications of natural disasters – focusing on the official enquiries resulting from the Queensland floods and also on the issues facing insurers after the major incidents abroad.[Read More]

On 21 February 2012, DLA Piper Bangkok organised a luncheon seminar for insurance industry clients at the Dusit Thani Bangkok Hotel. Peter Shelford and John Goulios spoke on various insurance policy issues that have been emerging from the flood damage to properties in Thailand, including issues relating to business interruption losses.

Peter is based in Thailand and has been advising insurance companies in Asia on numerous cases over the past decade. John, based in Singapore and previously located in Melbourne, has been involved in advising Insurers on various natural disaster cases.

Click here for the presentation from this seminar.[Read More]

In Australian Securities and Investments Commission v Australian Lending Centre Pty Ltd (No 3) [2012] FCA 43, his Honour Justice Perram of the Federal Court of Australia found that certain lending practices of the defendants (or some of them) were unconscionable and misleading and deceptive.  

Although complex and detailed, the factual landscape of this matter revolved around loan transactions (or ‘proposed’ loan transactions) concerning five ‘clients’ of the defendants, including some in positions of special disadvantage by reason of their personal circumstances (for example, one had a degree of brain damage, another had minimal income and a limited grasp of English, many were in dire financial need). The Australian Securities and Investments Commission's (ASIC's) primary argument concerned what it alleged were unconscientious attempts by the defendants to get borrowers to sign ‘business purpose declarations’ in respect of what it says were personal loans, thereby attempting to avoid the operation of the former Consumer Credit Code (NSW). A further argument concerned alleged instances of ‘asset lending’; where the defendants advanced a loan to a borrower knowing full well that the borrower would default and the security would need to be called in.[Read More]

Following on from our entry on 23 November 2011, the House of Representatives Standing Committee on Economics has now (on 16 February 2012) tabled its Advisory Report on the Insurance Contracts Amendment Bill 2011 (Report).

In essence, the Report recommends that the Insurance Contracts Amendment Bill 2011 be passed. This Bill seeks to establish a standard definition of ‘flood’ and to legislate for the provision of a Key Facts Sheet, in relation to certain policies of insurance. The precise definition of ‘flood’ and the content of the Key Facts Sheet remain the subject of establishment by regulation. However, the Treasury has already issued draft regulations and will soon issue a discussion paper on the Key Facts Sheet. Whilst there is widespread support for these proposed reforms within the industry, there is still some hesitation, including due to the potentially confusing relationship between ‘flood’ cover and ‘storm’ cover, along with the potential for insureds to simply (and potentially erroneously) rely on the Key Facts Sheet rather than the relevant Product Disclosure Statement or other policy documents.[Read More]

On 10 February 2012, both the Federal Court of Australia (Kirby v Centro Properties Limited (No 2) [2012] FCA 70) and the Supreme Court of New South Wales (In the matter of Idoport Pty Ltd (in liq) (recs apptd); National Australia Bank Limited (& Ors) v John Sheahan (& Ors) [2012] NSWSC 58) handed down judgments concerning whether the production and/or inspection of otherwise privileged documents was permissible on the basis that there had been a waiver of such privilege. In both cases, the applications for the production and inspection of the requested documents were dismissed on the grounds that, amongst other things, there had not been any conduct inconsistent with the maintenance of such privilege.

Each of these cases contain a thorough and well-considered reasoning of legal authority from Australia and the United Kingdom. We here at Insurance Flashlight commend a detailed reading of each of these judgments to anyone who wishes to understand how best to maintain the valuable privilege that attaches to such documents.[Read More]

The NSW Court of Appeal has held that an offer of compromise is invalid if it is expressed to be 'plus costs as agreed or assessed'. The decision in Old v McInnes, which was delivered on 22 December 2011, will surprise many practitioners because the expression 'plus costs as agreed or assessed' has been used widely throughout New South Wales for a long time.

The Uniform Civil Procedure Rules (Rules) require an offer of compromise to be exclusive of costs (except where the offer is a verdict for the defendant). Noting that the offers under consideration offered to pay Mr Old's costs 'as agreed or assessed', the court held that neither of the offers was 'exclusive' of costs as required by the Rules. Therefore they were of no effect and Mr McInnes lost the favourable costs order he was awarded in the court below. Interestingly, while Beasley JA agreed that the offers were ineffective, she was of the opinion (dissenting) that the court should exercise its wide costs discretion and award Mr McInnes indemnity costs.  [Read More]

Waiting to settle all aspects of a multi-faceted claim before making a payment is not sufficient reason to delay paying out an undisputed aspect of the claim. In Oakland v Certain Underwriters, the Queensland Supreme Court considered a dispute concerning a Mortgage Indemnity and Impairment Policy. In its 31 January 2012 judgment, the court found that payment of the undisputed part of the claim should have been made within three months of the quantum being crystallised. The fact that policy response to another aspect of the claim remained contentious did not justify the delay in paying the claim and underwriters were found to be in breach of the policy. They were ordered to pay 10% pa interest from the time it was reasonable to pay and the time it was actually paid. The disputed policy issue was resolved in favour of underwriters. Click here to read the judgment. 

The DLA Piper Hong Kong Insurance Team recently posted about this recent High Court decision regarding insurance brokers' commissions here and here. As a further update to interested practitioners, we can report that the plaintiff (Hobbins) has, at the 11th hour, lodged an appeal against the decision with the Court of Appeal.
 
The appeal will no doubt take some time to be heard. This is unfortunate as there will be some on-going uncertainty, which may cloud a clear regulatory response from the SROs. However, we are confident that the key rulings in the case will be upheld if the matter does indeed come before the Court of Appeal. In the meantime, the High Court's decision remains good law and, as held by Reyes J, an insurance broker's commission is not a secret profit nor a breach of section 9 of the Prevention of Bribery Ordinance (PBO), so long as the commission is within 'normal' levels in a typical placing situation.
 

As posted by our Head of Insurance in Hong Kong, Will Harrison on 13 January 2012, the High Court of Hong Kong's recent decision in Hobbins v Royal Skandia Life Assurance & Clearwater International  has provided some much needed clarity in an area that has been fraught with uncertainty over the last few years. In his judgment, Reyes J determined that an insurance broker's commission is not a secret profit and not a breach of section 9 of the Prevention of Bribery Ordinance (PBO), if the commission is at a 'normal' level and within a typical placing situation.  His Lordship left open the question what disclosure would be necessary if the commission and circumstances were outside of the norm.[Read More]

Company directors and their insurers will welcome the proposed reforms announced by the Federal Government on 27 January 2012.  The exposure draft of the Personal Liability for Corporate Fault Reform Bill 2012 (Cth) (Reform Bill) addresses the mischief of derivative liability whereby directors can suffer personal criminal liability in circumstances where they may not be aware of, or don't have the ability to prevent, the commission of an offence by the company.  

Among the key changes proposed in the Reform Bill are that companies should be liable in the first instance and directors should not be liable for corporate fault “as a matter of course or by blanket imposition of liability across an entire act.”[Read More]