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Commercial Transactions . Module 11 - Insurance Summer Session 2006/07. Contracts of Insurance. At the conclusion of this module students will be expected to have a good understanding and working knowledge of:

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Commercial transactions

Commercial Transactions

Module 11 - Insurance

Summer Session 2006/07


Contracts of insurance

Contracts of Insurance

At the conclusion of this module students will be expected to have a good understanding and working knowledge of:

  • The special characteristics of Contracts of Insurance e.g.…formalities, utmost good faith, regulated by ICA, coverage

  • Duty of disclosure, problems with misrepresentation (especially ss. 13, 21, 21A, 22,)

  • Failure to perform duties after contract is made (s. 54)

  • Consequences of failure in these duties for both insurer and insured (ss.28,60,31)

  • The Insurers right of subrogation (s.66)

  • Fraudulent claims (s.56)

  • Relevant sections of the ICA and relevant cases to support statements of law and interpretation.


Commercial transactions

INSURANCE

The Scheme of REGULATION

COMMONWEALTH

1.Marine Insurance Act 1909

2.Life Insurance Act 1995

3.Insurance Contracts Act 1984

4.Insurance (Agents and Brokers) Act 1984

NSW

Insurance Act 1902

Also:Unfair Contracts Act 1980

General Contract Law

Consumer Credit Law

Common Law e.g. insurable interest, utmost good faith, misrepresentation, fraud, crimes


Commercial transactions

The Insurance Contracts Act 1984

To what does it apply? See ss. 4,8,9,11.

Policies entered into from 1.1.86

It does NOT apply to contracts

  • For reinsurance

  • Health insurance

  • To which a friendly society is a party

  • To which Export Finance and Insurance Corporation is a party

  • Governed by Marine Insurance Act

  • For workers compensation

  • For compulsory third party insurance

  • Policies underwritten jointly by an insurer, and state or NT .

  • Concerning aircraft engaged in commercial operations with insurance covering war risks

    Act meant to codify law. Common law and equity still apply unless expressly or impliedly excluded. S. 7


Commercial transactions

INSURANCE CONTRACT ACT

LONG TITLE

An Act to reform and modernise the law relating to certain

contracts of insurance so that a fair balance is struck

between the interests of insurers insureds and other

members of the public and so that the provisions included in

such contracts, and the practices of insurers in relation to

such contracts, operate fairly, and for related purposes.


What is a contract of insurance

What is a contract of Insurance?

For prudential reasons, Insurers are required to be licensed and to maintain certain requirements as to capital and the like.

As the collapse of HIH showed, significant problems for the rest of the economy flow if insurers are unsound or engage in unsatisfactory practices leaving insureds without cover.A current (2006) discussion on the same issue concerns foreign based insurers doing business in Australia; while not being subject to our prudential regulation.

We should therefore be clear as to what a contract of Insurance is, so that we may properly advise clients who develop financial products, and the application of other Codes and legislation.e.g. electronic transactions Act.


Insurance

INSURANCE

A contract of INSURANCE is a contract by which one party, the INSURER, in consideration of a sum of money called the PREMIUM, undertakes to pay to another person called the INSURED, a sum of money or its equivalent on the happening of a specified uncertain EVENT.


Commercial transactions

MEDICAL DEFENCE UNION V. DEPARTMENT OF TRADE (1980) 1 Ch 82 Facts

  • Medical Defence Union Ltd had 80,000 members; dentists, doctors.

  • Each member had contractual right to require union to consider properly a request for assistance in relation to a claim made against a member.

  • As a result of consideration, union might indemnify member.

  • Department of Trade alleged this meant union was entering contracts of insurance and subject to Insurance Companies Act 1974.

  • Union denied allegation and sought declaration in HC.


Medical defence union v department of trade 1980 1 ch 82 decision

MEDICAL DEFENCE UNION V. DEPARTMENT OF TRADE (1980) 1 Ch 82 Decision

Sir Robert Megarry VC

1. Drew on 3 elements necessary in a contract of insurance as per Prudential Insurance Co. v. Inland Revenue Commissioners (1904)2 KB 658 as read in light of Gould v. Curtis (19113) 3KB84 ---

  • Contract provides assured will become entitled to something on the occurrence of some event. What Is “Something”? …Some Benefit…or Money Or Money’s Worth?

  • The event must be one which involves some element uncertainty

  • Assured must have insurable interest (old case)

    2. Did not aspire to comprehensive definition, but saw nothing in authorities to support very wide and extensive generalisation such as “benefit”. Insurance implied contracting for something certain; not relying on a request for a discretion to be exercised in his favour. Surrounding facts did not support it either. No variance of fees in line with frequency claims. Wide services and general nature of business of union far removed from general nature of those generally accepted as insurers.


Insurance media and information releases 03 044 asic friday 7 february 2003

INSURANCEMedia and Information Releases 03-044 ASICFriday 7 February 2003

(ASIC) obtained orders in the Federal Court against Barclay MIS Landlord Protection Plan (VIC) Pty Ltd, and seven related companies, which operate out of each Australian state and territory (collectively referred to as the Barclay group).Both ASIC and APRA made claims against the Barclay group in the proceedings.

ASIC took this action after forming the view that the 'landlord protection' products sold by the Barclay group to between 120,000 and 150,000 landlords throughout Australia, were contracts of insurance. The landlord protection products provided a range of different benefits, including reimbursement for lost rent, and payments for property damage.

Under the Financial Services Reform Act, which came into effect on 11 March 2002, it was unlawful to issue insurance products without holding an Australian Financial Services Licence (AFSL), issued by ASIC, or without authorisation to act as an insurer from the Australian Prudential Regulatory Authority (APRA). No entity within the Barclay group was authorised to act as an insurer, or held an AFSL.


Insurance media and information releases 03 044 asic friday 7 february 20031

INSURANCEMedia and Information Releases 03-044 ASICFriday 7 February 2003

Cont.

The Court also declared that since 11 March 2002, each entity in the Barclay group ha been carrying on a financial services business without an AFSL.

Mr David Banks, a director, undertook to the Court that he would not offer any of the above products for sale, other than the Barclay Basic product. During the proceedings, the Barclay group advised the Court that they proposed to commence selling two new products, known as the Basic Assistance Plan and the Total Assistance Plan. The Court ruled that although these products are not contracts of insurance, they were financial products and, as such, the Barclay group was required to hold an AFSL in order to offer these products for sale. Mr Banks also undertook to the Court that the Barclay Group will not offer these products for sale without first applying for, and obtaining an AFSL.

The Barclay group is not in any way related to Barclays Bank.


Rights of third parties

Rights of third parties

Many examples

Householders policy which covers family members, a credit provider

Disability cover or income replacement cover issued for the benefit of a member of a superannuation fund.

Public liability cover extended to cover a principal

Contract works cover extended to cover a sub contractor

Credit car covers effected by a bank for the benefit of cardholders

Some disadvantages for third parties:

They may never see policy schedule and wording

Reliant on contracting parties for those things

A non-contracting party, so usually excluded from negotiations


Third party rights to the benefit of a contract of insurance

Third party Rights to the benefit of a contract of insurance

Trident General Insurance Co Ltd v. McNiece Bros Pty Ltd (1988) 165 CLR 107 the HC recognised a common law “insurance” exception to privity of contract around the time of the commencement of the ICA and the enactment of s. 48.

S. 48 makes it the general rule for insurance contracts.

As both the common law and Insurance law develops, it is possible that the third party’s position may be better under one or the other and so both should be analysed in any particular case.


Commercial transactions

Insurance Contracts Act s. 48

  • (1)“Where a person who is not a party to a contract of general insurance is specified or referred to in the contract, whether byname or otherwise, as a person to whom the insurance cover provided by the contract extends, that person has a right to recover the amount of his loss from the insurer in accordance with the contract notwithstanding that he is not a party to the contract.

  • (2) Subject to the contract, a person who has such a right-

    • (a) has, in relation to his claim, the same obligations to the insurer as he would have if he were the insured; and

    • (b) may discharge the insured’s obligations in relation to the loss.

  • (3) The insurer has the same defences to an action under this section as he would have in an action by the insured”


Insurer rights to the benefit of a defence against the insured s 48 3

Insurer Rights to the benefit of a defence against the insured s. 48(3)

Interpretation of 48(3) has depended, to an extent, on the nature of the conduct alleged against the insured.Where an insurer would have been able to rely on a defence of non-disclosure in a claim brought by the insured, the insurer can also rely on that non-disclosure against a third party.See Baltica. On the other hand, where fraud by the insured has been involved, it has been held that the third party beneficiary has not been tainted with the conduct of the insured.


Commercial transactions

COMMONWEALTH BANK OF AUSTRALIA V. BALTICA GENERAL INSURANCE CO

(1992) 28 NSWLR 579

The facts

  • Baltica insured a building against fire

  • Insured were owners

  • Policy stated it extended to Commonwealth as Mortgagee

  • Building damaged by fire.

  • Bank claimed indemnity, was refused, sued.

  • Baltica relied on non-disclosure by insured as defence to claim under s. 48 ICA


Commonwealth bank of australia v baltica general insurance co 1992 28 nswlr 579 the decision

COMMONWEALTH BANK OF AUSTRALIA V. BALTICA GENERAL INSURANCE CO (1992) 28 NSWLR 579- The decision

Giles J.

  • s. 48 enacted to overcome problems re third parties; especially situation where loss of third party not loss of insured and third party not a party to the contract.

  • The section means what it says. Baltica defence stands.


Commercial transactions

INSURANCE

The former common law requirement for an insurable interest

Some legal or equitable interest in subject matter of insurance

To distinguish from gambling and to avoid moral hazard

Requirement was sometimes quite harsh in the outcome:

Macaura

Shareholder and unsecured creditor held to have no insurable interest.

Truran

MD wanted his company to buy a bulldozer and made loose arrangement. Found only to have only “confident expectation” that a purchase would occur. No right he could enforce and therefore no insurable interest.

  • See the position under ss. 16,17,18 Insurance Contracts Act

    Relevance of common law is in interpretation of use of expression, relevance of changes to law and in areas outside general insurance. Note that with some insurances, one must still have an insurable interest. Under Marine Insurance Act it is a gaming contract if no insurable interest.


Commercial transactions

MACAURA V. NORTHERN ASSURANCE CO (1925) AC 619

1.M sold all the timber on his estate to Irish Canadian Saw Mills Ltd.

2.In return he received all company shares.

3.Within 8 months, company had cut down and sawn up all timber.

4.6 months later M took out fire insurance over the timber with NA

5.Fire destroyed almost all timber soon afterwards.

6.M claimed indemnity. Refused. He sued and appealed all the way to H of L.

Lord Buckmaster

  • True that timber owned by the company, but practically the whole interest in company owned by appellant and facts suggested only person interested in preservation of timber.

  • But no insurable interest as creditor or as shareholder.


Commercial transactions

TRURAN EARTHMOVERS V. NORWICH UNION FIRE INSURANCE SOCIETY, (1976) 17 SASR 1

Truran and Hamlyn were old friends. Hamlyn had bulldozer Truran wanted to purchase. Both thought it worth $40,000.Truran lent money to Hamlyn from time to time and there was an understanding that price would be reduced by amount loans. Hamlyn wanted to insure bulldozer

Truran had it added to existing policy of Mr. T’s Company, Truran Earthmovers P/L. Bulldozer damaged by fire. Truran Earthmovers claimed under policy. Claim knocked back and sued in SCSA.

Bright J.

  • Did Truran Earthmovers have an insurable interest?

  • Judge felt he should lean towards finding one if he could; but it must be an interest law will recognize or protect on legal or equitable principles.

  • Although Truran had confident expectation of becoming owner, neither he nor his company ever acquired a right to purchase.

  • No right of property law would recognise or protect.


Commercial transactions

Duty of utmost good faith

Uberrimae fidae

At common law, duty on both parties to disclose to each other all matters known to them which are material to the risk. Voidable by aggrieved party. Unenforceable by offending party

Duty now codified in Insurance Contracts Act s. 13

Duty of disclosure: See ss. 21, 21A, 22 and 28

1. Insurer must advise of duty. S. 22

2. Insured must tell insurer everything insured knows (common law was an objective test) that will increase their chances of making a claim.

3. Must tell before issue, renewal, extension, variation or reinstatement.

Insured does not have to tell anything that:

· Reduces chances of a claim s. 21(2)

· Everybody knows s. 21(2)

· Insurer knows or should know in ordinary course of business s. 21(2)

· Insured indicates it does not want to know. Note blank answers might be waiver by insurer s. 21(3) and not necessarily misrepresentation s. 27


Duty of good faith disclosure

Duty of good faith, disclosure

If insured does not comply; (ss 28-33) Insurer may:--------

  • Reduce payment made under policy s. 28(3) to position it would have been in if there was disclosure

  • Refuse payment

  • Cancel Policy (ss.59,60)

  • Treat policy as if it never existed, if fraud involved s. 28(2)


Insurance contracts act s 13 duty of utmost good faith

INSURANCE CONTRACTS ACTs. 13DUTY OF UTMOST GOOD FAITH

A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.


Commercial transactions

s. 21 THE INSURED’S DUTY OF DISCLOSURE

(1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:

(a) The insured knows to be a matter relevant to the decision of the insurer

whether to accept the risk and, if so, on what terms; or (b) A reasonable person in the circumstances could be expected to know to be a matter so relevant.

(2) The duty of disclosure does not require the disclosure of a matter:

(a) That diminishes the risk; (b) That is of common knowledge

(c) That the insurer knows or in the ordinary course of the insurer’s business as an insurer ought to know; or (d) As to which compliance with the duty of disclosure is waived by the insurer.

(3) Where a person: (a) Failed to answer; or (b) Gave an obviously incomplete or irrelevant answer to; a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter.


Insurance contracts act 1984 sect 21a

INSURANCE CONTRACTS ACT 1984SECT 21A

(1)This section applies to an eligible contract of insurance unless it is entered into by way of renewal. (2) The insurer is taken to have waived compliance with the duty of disclosure in relation to the contract unless the insurer complies with either subsection (3) or (4).

(3)Before the contract is entered into, the insurer requests the insured to answer one or more specific questions that are relevant to the decision of the insurer whether to accept the risk and, if so, on what terms.

(4)Before the contract is entered into, both:(a) the insurer requests the insured to answer one or more specific questions that are relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; and (b) the insurer expressly requests the insured to disclose each exceptional circumstance that: (i) is known to the insured; and (ii) the insured knows, or a reasonable person in the circumstances could be expected to know, is a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; and (iii) is not a matter that the insurer could reasonably be expected to make the subject of a question under paragraph (a); and (iv) is not a matter covered by subsection 21(2).


Insurance contracts act 1984 sect 21a1

INSURANCE CONTRACTS ACT 1984SECT 21A

(5)If: (a) the insurer complies with subsection (3) or (4); and (b) the insurer asks the insured to disclose to the insurer any other matters that would be covered by the duty of disclosure in relation to the contract;the insurer is taken to have waived compliance with the duty of disclosure in relation to those matters.

(6) If: (a) the insurer complies with subsection (3); and (b) in answer to each question referred to in subsection (3), the insured discloses each matter that: (i) is known to the insured; and (ii) a reasonable person in the circumstances could be expected to have disclosed in answer to that question; the insured is taken to have complied with the duty of disclosure in relation to the contract.

(7)If: (a) the insurer complies with subsection (4); and (b) in answer to each question referred to in paragraph (4)(a), the insured discloses each matter that: (i) is known to the insured; and (ii) a reasonable person in the circumstances could be expected to have disclosed in answer to that question; and (c) the insured complies with the request referred to in paragraph (4)(b);the insured is taken to have complied with the duty of disclosure in relation to the contract.

(8) In any proceedings relating to this section, the onus of proving that a matter is an exceptional circumstance covered by subparagraph (4)(b)(iii) lies on the insurer.

(9) In this section: "eligible contract of insurance" means a contract of insurance that is specified in the regulations.


Insurance contracts regulations 1985 eligible contracts of insurance act s 21a 9

INSURANCE CONTRACTS REGULATIONS 1985 Eligible contracts of insurance (Act s 21A (9))

(1)A contract of insurance is an eligible contract of insurance if it: (a) is for new business; and (b) is wholly in a class of contracts that is declared to be a class of contracts in relation to which Division 1 of Part V of the Act applies. Note: The following regulations declare certain classes of insurance contracts for Division 1 of Part V of the Act: * regulation 5 (motor vehicle insurance);* regulation 9 (home buildings insurance where insured is a natural person); * regulation 13 (home contents insurance); * regulation 17 (sickness and accident insurance); * regulation 21 (consumer credit insurance); and * regulation 25 (travel insurance)

(2)A contract of insurance is an eligible contract of insurance if: (a) it is not mentioned in subregulation (1); and(b) it is for new business; and(c) the insurer, before the contract is entered into, gives to the insured: (i) a written notice in accordance with the form set out in Part 3 of Schedule 1; or (ii) an oral notice in accordance with the words set out in Schedule 2; or(iii) a notice otherwise complying with subsection 22 (1) of the Act clearlyinforming the insured of the general nature and effect of the duty ofdisclosure and the general nature and effect of section 21A of the Act.


Insurance contracts regulations 1985 schedule 1

INSURANCE CONTRACTS REGULATIONS 1985 SCHEDULE 1

Writing to inform insureds of general nature and effect of duty of disclosure (subregulation 3 (1)).

Part 1: Contracts of General Insurance

Your duty of disclosure: -

Before you enter into a contract of general insurance with an insurer, you have a duty, under the Insurance Contracts Act 1984 , to disclose to the insurer every matter that you know, or could reasonably be expected to know, is relevant to the insurer's decision whether to accept the risk of the insurance and, if so, on what terms.

You have the same duty to disclose those matters to the insurer before you renew, extend, vary or reinstate a contract of general insurance.


Insurance contracts regulations 1985 schedule 11

INSURANCE CONTRACTS REGULATIONS 1985 SCHEDULE 1

Your duty however does not require disclosure of matter:

- that diminishes the risk to be undertaken by the insurer;

- that is of common knowledge;

- that your insurer knows or, in the ordinary course of his business, ought to know;

- as to which compliance with your duty is waived by the insurer.

Non-disclosure

If you fail to comply with your duty of disclosure, the insurer may be entitled to reduce his liability under the contract in respect of a claim or may cancel the contract.

If your non-disclosure is fraudulent, the insurer may also have the option of avoiding the contract from its beginning.


Insurance duty of disclosure example

INSURANCEDUTY OF DISCLOSURE-example

Before you enter into a contract of general insurance with an insurer, you have a duty under the Insurance Contracts Act 1984 to disclose to the insurer every matter that you know, or could reasonably be expected to know, is relevant to the insurer's decision whether to accept the risk of the insurance, and if so, on what terms.

You have the same duty to disclose those matters to the insurer before you renew, extend, vary or reinstate a contract of general insurance.

Your duty however does not require disclosure of matters: -

  • That diminish the risk to be undertaken by the insurer;

  • That are of common knowledge;

  • That your insurer knows or, in the ordinary course of his business, ought to know;

  • As to which compliance with your duty is waived by the insurer.


Insurance duty of disclosure cont

INSURANCEDUTY OF DISCLOSURE Cont.

Examples of information which are relevant to insurers are:-

(i) Past claims experience;

(ii) A cancellation of a previous insurance policy or refusal by an insurer to renew a policy previously held by you;

(iii) Any unusual features of the subject matter of the insurance which might increase the likelihood of a claim under the policy.

If you are uncertain about whether or not a particular matter should be disclosed to the insurer, please contact our office.

Non-disclosure

If you fail to comply with your duty of disclosure, the insurer may be entitled to reduce his liability under the contract in respect of a claim or may cancel the contract.

If your non-disclosure is fraudulent, the insurer may also have the option of avoiding the contract from its beginning.


Insurance disclosure

INSURANCEDISCLOSURE

Mary is applying for travel insurance for SEAsia.

In the personal questionnaire applicants are asked if they have ever had a genetic test.

Mary has participated in a screening program for sickle cell disease and the genetic test revealed she was a carrier.

Does Mary have a legal duty to answer Yes? Yes, otherwise false and misleading.

Does Mary have a legal duty to reveal the result? On current knowledge, No, as carrier status for sickle cell gene actually reduces the risk of developing malaria. Section 21 (2) ICA states that an insured is not required to disclose a matter that diminishes the risk.

However, as knowledge changes, it may be relevant to increasing risk and should then be disclosed.

The insurer may know more about such things from its data banks than the typical insured. They collect sophisticated statistical data and may one day have access to medical records and genetic screening data.


Insurance disclosure cont

INSURANCEDISCLOSURE Cont.

Risks also change.

An example of how things change can be seen from HIV. Once considered an imminent death sentence, it is now not so clear with many individuals surviving more than 10 years. Some may not develop AIDS at all. We are not sure any more.

We also have to consider the particular insurance applied for. A history of lower back pain may be very relevant to income protection insurance (time off work) but may not be relevant to life insurance if they are not of a type which shortens life.

We also need to view things from the point of view of the insurer as well as our own. A house that has been rewired by its inexpert owner rather than a qualified electrician would be a greater risk for an insurer, but perhaps not for the insured.


Commercial transactions

MAYNE NICKLESS V. PEGLER (1974) 1 NSWLR 228

Mr. Klokas bought a car. NRMA issued a cover note for $900. 2 days later Klokas ran into a truck belonging to Mayne Nickless. Klokas died and Pegler was administrator of estate. Mayne Nickless sought declaration that NRMA bound to indemnify Pegler for verdict against him by Pegler re damage to the truck. Klokas had had previous serious accident arising from his own negligence, while a learner, which was not disclosed.

Does Duty disclosure apply to cover note?

Cover note issued at request of vendor pending completion of formal proposal and issue of policy.Because cover note is contract of insurance, duty of disclosure notwithstanding no formal proposal submitted.

Accident not disclosed. Voidable. Avoided. No insurance contract.

Was the non-disclosure material? Note this case is pre Insurance Contracts Act .“a fact is material if it would have reasonably affected the mind of a prudent insurer in determining whether he will accept the insurance and if so, at what premium and on what conditions.”

Material non-disclosure here. No contract of insurance


Commercial transactions

MUTTON V. INSURANCE CORP OF IRELAND

(1985) 3 ANZ Insurance Cases 60-630

Mutton insured truck with ICI. Proposal asked about accidents and driving offences. Mr. Mutton economical with disclosure. Proposal further asked re Driver, Watt. Watt also less than forthcoming. Truck stolen from Mutton’s yard. Mutton claimed indemnity but did not get it. Sued ICI

Yeldham J. SCNSW

  • ICI has not sought to rely on incomplete or incorrect statements. (basis of policy, incorporated) Rather non-disclosure made policy voidable and ICI entitled to avoid it. (extends to non-disclosure of material facts which insured should in the ordinary course of business ought to have known)

  • Statements re Watt grossly inaccurate but not satisfied Mutton knew about his many driving convictions.

  • Failure to disclose material facts?

  • Loss by theft in same yard before, non-disclosure convictions for overloading and having defective vehicles entitled insurer to avoid.


Commercial transactions

ADVANCE (NSW) INSURANCE AGENCIES V. MATTHEWS

(1989) 166 CLR 606

Matthews was partner in business which suffered fire. Claim made and rejected. 6 years later, he and wife insured home contents.

Q4 of proposal: Have you ever had any claim rejected?

Q5 : Are there any other facts which should be disclosed?

Mr. and Mrs. M answered No to both questions. Within a fortnight home burgled and damaged by fire. Refused indemnity. Insurer sought declaration in SC. Refused. Appealed to CA failed. Appealed to HC.

HC. Mason CJ, Dawson, Toohey and Gaudron JJ

  • Court reviewed long title to Act…clearly meant to codify law and replace common law…referred to ss.21, 24 and 28, 31.

  • Found reference to insured meant each co-insured.

  • Questions therefore directed to each co-insured.

  • Was it fraudulent?….28(2)..if the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.


Permanent trustee australia limited v fai general insurance company limited inliq hca 25 8 may 2003

Permanent Trustee Australia Limited v. FAI General Insurance Company Limited (inLiq) HCA 25 (8 May 2003)

Permanent had professional indemnity insurance for 1 Oct 90 to 30 Sept 91 with Sedgwick as broker. FAI was one excess insurers. In Aug 91, Permanent instructed Sedgwick to begin renewal process. However, by then Sedgwick was concerned about FAI’s financial stability as it had been downgraded by Standard and Poors. It decided not to place with FAI if it could do so elsewhere. On 20 Sept 91, the lead underwriter asked for more information and given short time left for renewal suggested cover be extended 30 days. Sedgwick sought agreement of all insurers, including FAI.

No mention was made of Sedgwick’s intention not to renew. FAI agreed to extension. During 30 day extension, Permanent notified circumstances which ultimately lead to a claim for $100m, of which $36m fell to insurers including FAI, who refused to pay.


Permanent trustee australia limited v fai general insurance company limited inliq hca 25 8 may 20031

Permanent Trustee Australia Limited v. FAI General Insurance Company Limited (inLiq) HCA 25 (8 May 2003)

Cont.

First instance judge found as fact that FAI’s underwriter believed it would be invited to quote and it would not have granted extension if it knew Permanent did not intend to invite it to participate. Also found Permanent had breached duty of disclosure under s. 21(1)(a) by failing to inform FAI of intention not to renew. NSW CoA upheld finding and held that employee had misrepresented insured’s position under s. 26(2) by omission and found that the knowledge of the broker was knowledge of Permanent for the purpose of s. 21(1)(a) and therefore Permanent had made a misrepresentation under s. 26(2).

HC by majority of 3/2 held Permanent did not breach duty of disclosure and did not misrepresent risk. It distinguished between matters relevant to acceptance of risk and those matters of a commercial nature (this case). Too big a burden on insured because range of commercial considerations that would have to be disclosed “almost boundless” and would defeat purpose of Act to ameliorate pre-existing CL rules on disclosure.


Commercial transactions

Misrepresentation

At common law misrepresentation of a material fact in negotiations leading to contract enables insurer to avoid it regardless of whether innocent or fraudulent.

Usual problems are with answers to questions or

“Basis Clause”-at the end a declaration that insured warrants everything is correct and this forms part of contract.

Warranty becomes condition in insurance law See. Dawsons v. Bonin

See s. 18 Insurance Act 1902 (NSW)

If a failure by insured to observe or perform a term or condition may reasonably be excused because insurer not prejudiced by failure, court may excuse. Does not affect duty disclosure/uberrimae fidei.Prejudice easy to prove for most insurers.

See also ss. 26-28 Insurance Contracts Act

s.26-certain statements not misstatements

s.27-failure to answer questions

s.28-remedies for non-disclosure, misrepresentation


Insurance dawsons v bonnin 1922 2 ac 413

INSURANCEDAWSONS V. BONNIN, (1922) 2 ac 413

Dawsons insured a lorry with Bonnin. Proposal filled in by broker.

Q2 asked for proposer’s address. Broker wrote: 46 Cadogan Street, Glasgow (correct)Q4 asked for address at which lorry would usually be garaged.Broker wrote: “Above address” (incorrect). Too big for Cadogan Street.Signed by secretary and mistake not noticed.

Basis clause in policy.

Lorry destroyed by fire.

Claimed indemnity unsuccessfully.

HL

Although not a material misstatement, basis clause a separate and independent condition.Mere untruth enough to render contract voidable.


Commercial transactions

PLASTEEL WINDOWS AUSTRALIA V. CE HEATH UNDERWRITING AGENCIES (1990) 19 NSWLR 400

Plasteel suffered loss by fire. When they sued Sun, held there was no valid policy. Sued broker for not having arranged valid policy; succeeded

Broker could not pay and so Plasteel sued his professional indemnity insurer, Heath. So did broker. Heath won. Plasteel appealed to CA

Samuels JA

Did Broker breach duty of disclosure and/or make misrepresentation within Act? If so, what is the appropriate relief?

Q11a proposal- Is it the practice of your Firm to sign proposals on behalf of your clients? Answer was No False to appellants knowledge. Judge decided it was a practice at the time.

Onus of proving application of s. 26(1) lies on proponent and of s. 26(2) upon insurer.

s. 28 applies and could be avoided. Fraudulent.

Doubted that Broker had standing to argue s. 31. In any case, insurers had suffered prejudice.


Commercial transactions

INSURANCE CONTRACT ACT s. 28

REMEDIES -NON-DISCLOSURE AND MISREPRESENTATION

1. This section applies where the person who became the insured under a contract of general insurance upon the contract being entered into:

(a) failed to comply with the duty of disclosure; or (b) made a misrepresentation to the insurer before the contract was entered into;

but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into.

2. If the failure was fraudulent or the misrepresentation was made fraudulently; the insurer may avoid the contract.

3. If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.


Insurance suncorp v cheihk 1999 nswca 238

INSURANCESuncorp v. Cheihk (1999) NSWCA 238

Cheihk insured his Porsche in January 1996. It was renewed in January 1997 and in February 1997, it was stolen. Suncorp refused to indemnify him for theft on the basis that he had fraudulently failed to disclose details of his poor driving record. Alternatively, he had breached his duty of disclosure under s. 21.

Cheihk had an abysmal driving record from 1987. He had accumulated lots of points for traffic infringements which led to cancellation of his licence. Then in July 1996 he was convicted of driving while disqualified and had his licence cancelled for 6 months.

Judge found for Cheihk - not guilty of fraudulent non-disclosure. Also Suncorp had not complied with s. 22 because the reference to duty of disclosure was hidden away and unhighlighted in any fashion….did not “clearly inform”. Onus on insurer to show it had complied.

CA confirmed decision of Judge.


Commercial transactions

INSURANCE CONTRACT ACT s. 31

COURT MAY DISREGARD AVOIDANCE

IN CERTAIN CIRCUMSTANCES

31 (1). In any proceedings by the insured in respect of a contract of insurance that has been avoided on the ground of fraudulent failure to comply with the duty of disclosure or fraudulent misrepresentation, the court may, if it would be harsh and unfair not to do so, but subject to this section, disregard the avoidance and, if it does so, shall allow the insured to recover the whole, or such part as the court thinks just and equitable in the circumstances, of the amount that would have been payable if the contract had not been avoided.


S 31 in certain circumstances

S.31 …..in certain circumstances

2. The power conferred by subsection (1) may be exercised only where the court is of the opinion that, in respect of the loss that is the subject of the proceedings before the court, the insurer has not been prejudiced by the failure or misrepresentation or, if the insurer has been so prejudiced, the prejudice is minimal or insignificant.

3. In exercising the power conferred by subsection (1) the court: a) shall have regard to the need to deter fraudulent conduct in relation to insurance; and b) shall weigh the extent of the culpability of the insured n the fraudulent conduct against the magnitude of the loss that would be suffered by the insured if the avoidance were not disregarded; but may also have regard to any other relevant matter.

4. The power conferred by subsection (1) applies only in relation to the loss that is the subject of the proceedings before the court, and any disregard by the court of the avoidance does not otherwise operate to reinstate the contract.


Commercial transactions

60 Cancellation of contracts of general insurance

(1) Where, in relation to a contract of general insurance:

(a) a person who is or was at any time the insured failed to comply with the duty of the utmost good faith; (b)…. failed to comply with the duty of disclosure; (c) …..made a misrepresentation to the insurer during the negotiations for the contract but before it was entered into; (d) ….failed to comply with a provision of the contract, including a provision with respect to payment of the premium; or (e) the insured has made a fraudulent claim under the contract or under some other contract of insurance (whether with the insurer concerned or with some other insurer) that provides insurance cover during any part of the period during which the first-mentioned contract provides insurance cover; the insurer may cancel the contract.


60 cancellation of contracts of general insurance cont

60 Cancellation of contracts of general insurance cont

(2) Where:

(a) a contract of general insurance includes a provision that requires the insured to notify the insurer of a specified act or omission of the insured; or (b) the effect of the contract is to authorize the insurer to refuse to pay a claim, either in whole or in part, by reason of an act or omission of the insured or of some other person; and, after the contract was entered into, such an act or omission has occurred, the insurer may cancel the contract.

(3) A reference in subsection (2) to an act or omission of the insured includes a reference to an act or omission of the insured that has the effect of altering the state or condition of the subject-matter of the contract or of allowing the state or condition of that subject-matter to alter.

(4) Where a contract of insurance is: (a) a contract that is in force by virtue of section 58; or (b) an interim contract of general insurance; the insurer may at any time cancel the contract.


After the contract is made

After the contract is made

In many contracts, there is a requirement for the Insured to do things after the contract is made-keep insurer informed, provide up to date information, notify accidents or incidents, claims.

E.g. Professional Indemnity Insurance-one must notify as soon as one is aware of a potential claim-a mistake, negligence.

Can the insurer refuse a later claim if this condition of the contract is not met?


Commercial transactions

54 Insurer may not refuse to pay claims in certain circumstances

(1) Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer’s liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced as a result of that act.

(2) Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.


54 insurer may not refuse to pay claims in certain circumstances cont

54 Insurer may not refuse to pay claims in certain circumstances cont.

(3) Where the insured proves that no part of the loss that gave rise to the claim was caused by the act, the insurer may not refuse to pay the claim by reason only of the act.

(4) Where the insured proves that some part of the loss that gave rise to the claim was not caused by the act, the insurer may not refuse to pay the claim, so far as it concerns that part of the loss, by reason only of the act.

(5) Where: (a) the act was necessary to protect the safety of a person or to preserve property; or (b) it was not reasonably possible for the insured or other person not to do the act; the insurer may not refuse to pay the claim by reason only of the act.

(6) A reference in this section to an act includes a reference to:

(a) an omission; and (b) an act or omission that has the effect of altering the state or condition of the subject-matter of the contract or of allowing the state or condition of that subject-matter to alter.


Commercial transactions

FERRCOM V. COMMERCIAL UNION ASSURANCE CO OF AUSTRALIA (1993) 176 CLR 332

F had unregistered crane. Insured as such with Commercial. F registered crane so it could be driven from Canberra to Sydney, but did not tell Commercial as it was meant to do under cl. 1(a) of policy. Crane damaged in Sydney. Commercial would not pay.

Contrary to c. 1(a) of policy. s. 54 applicable?

F submitted that it was. Commercial cannot avoid liability; only reduce liability by an amount which fairly represents the prejudice

  • Court accepted evidence that, had it known, Commercial would have cancelled the policy and only insured at higher rate with endorsement excluding liability

  • The amount which “fairly represents” the prejudice suffered …in losing the opportunity to go off risk is the equivalent of the liability prima facie imposed on Commercial by s. 54(1). The prima facie liability imposed by s. 54(1) is thus “reduced” to nil.


Insurance moltoni corporation pty ltd qbe insurance ltd high court 2001 hca 73 december 13 2001

INSURANCEMOLTONI CORPORATION PTY LTD & QBE INSURANCE LTDHigh Court (2001) HCA 73 December 13, 2001

Insurance Contracts Act ss.9, 54

Moltani claimed under its employers liability insurance for indemnity for damages of $349,837+ costs obtained by an employee, who had sued Moltani for damages for his injuries.

The policy indemnified Moltoni:

1. where Moltoni was legally liable to make any payment under the Workers Compensation and Assistance At 1981

2. against legal liability to pay damages…at Common law for personal injury sustained by any person employed….if such injury is an injury in respect of which such person is entitled to recover both compensation under the Workers Compensation and Assistance Act and…damages independently thereof….

It was a condition of the Policy that Moltani should give notice of any injury "as soon as practicable after information as to the happening of such, or of any incapacity arising therefrom, comes to the knowledge" of Moltoni or its representative. "due observance and fulfilment" of the conditions was a condition precedent to liability.


Insurance moltoni corporation pty ltd qbe insurance ltd cont

INSURANCEMOLTONI CORPORATION PTY LTD & QBE INSURANCE LTDCont.

Moltoni did not give notice of the injury until 17 months after it happened.

QBE denied liability/liability was 0 because it had been prejudiced in 3 ways: (s. 54 Insurance Contracts Act)

  • It had lost the opportunity to investigate the accident and injuries in a timely way.

  • The employee had returned to work and then suffered another injury; which prevented it investigating the injuries from the first accident.

  • Had it been notified in accordance with the Policy it would have arranged rehabilitation and medical treatment different from treatment given.

    In addition, QBE said that this was a workers compensation policy and because of section 9, Insurance Contracts Act did not apply.

    Moltoni cont. - s. 54 "by reason of some act" includes an omission.

    It is necessary to measure actual financial damage that has been or will be sustained as a result of the relevant act or omission.


Insurance moltoni corporation pty ltd qbe insurance ltd cont1

INSURANCEMOLTONI CORPORATION PTY LTD & QBE INSURANCE LTDCont.

This must be measured by reference to what WOULD have happened (as distinct from what COULD or MIGHT have happened) if the act or omission had not occurred.

It is only if a right would have been exercised, but was not and insurer suffered prejudice that can be represented in monetary terms that s.54 is engaged. If insurer does not prove, on the balance of probabilities, that it would have exercised the right in question, it fails to demonstrate that its liability for the claim should be reduced.

Because of an absence of evidence of comparable cases, policies, prejudice not established. QBE had not proved what WOULD have been done; only that it had rights and what MIGHT have been done. This was not enough.


Moltoni s 9 aspect

Moltoni-s. 9 aspect

s. 9 - One of the exceptions from the Insurance Contracts Act:

Except as otherwise provided…this Act does not apply to or in relation to contracts and proposed contracts:…

(e) entered into or proposed to be entered into for the purposes of a law that relates to:

(i)workers compensation

Here a single policy document covers two distinct insurances in two different clauses.

One insurance was undertaken for the purposes of a relevant law; the other was not.


Directors and officers insurance

Directors and Officers Insurance

As well as policies to protect commercial enterprises against physical events-eg,fire, theft, spoiling etc-an important policy for Directors of enterprises is D&O.


Insurance disclosure and misrepresentation

INSURANCEDisclosure and Misrepresentation

Two large ENRON insurers of Directors and Officers liability denied liability saying they had relied on what turned out to be “material misrepresentations”.

Directors and Officers Insurance usually excludes fraud and intentional misconduct, convictions etc but can cover the cost of regulatory inquiries, legal advice up to a point. Each director effectively has their own individual policy and so non-disclosure relates to each one.

It is normal for insurers to rely on the audited accounts at the proposal stage to assess and price the risk for the insurance.

Would they have insured at all?

Would they have insured at a higher premium?

What should the Directors/Officers disclose?

Is it information the insurer should know? Risk of certain business? Countries with less strict accounting rules? Analysis of accounts? Off balance sheet analysis?


Corporate governance to become condition for directors insurance

Corporate Governance to Become Condition for Directors Insurance?

From an interview with Nancy Milne on 9.10.2003 and a CCH article by Erica Vowles October 16, 2003.

While corporations are focusing on corporate governance within their organisations, directors may find the governance ratings of their Company playing an increasingly important role in the type of directors and officers (D&O) insurance they receive.

“The underwriters are looking at risks with far more scrutiny…They are digging into a company’s governance structure, they’re looking at risk management, they’re looking at the business and how the board and management conduct themselves. So there is a lot more due diligence being done by insurers than in the past.”

Ms. Milne said insurers were also making decisions based on industries that may have made heavy claims in the past. “There is some resistance to providing D&O insurance in the financial services industry. This means it is harder and more expensive for financial services organisations to get D&O insurance.”

Ms Milne added the increasingly “onerous obligations” on directors was also contributing to the increased diligence with which insurers are assessing their clients. As a result of the perceived increased risk associated with certain companies and their directors, the emphasis insurers were placing on the corporate governance health of a company might increase in the future.


Corporate governance to become condition for directors insurance1

Corporate Governance to Become Condition for Directors Insurance?

Cont.

“I think the insurers will drive some of this emphasis (on corporate governance). While you’ve got ASX corporate governance rules that companies have to essentially abide with or explain why they haven’t, I think insurers may well require a similar level of corporate governance in unlisted companies before they are prepared to provide cover,” she said. It may well be one of those things that will become a condition of insurance.

Another issue of concern for directors was whether or not the One Tel case would impact on all directors when seeking an advance of defence costs in the event of a court case. The insurer was able to deny coverage for defence costs by a fraud and dishonesty exclusion.

“The court said in this case that insurers were at liberty to withhold overage until the directors have been exonerated from charges of fraud and dishonesty. That is a decision that has caught everyone by surprise because the insurance lawyers and industry have proceeded on the basis that the fraud and dishonesty exclusion would occur in the instance of a final judgement actually finding a director guilty of fraud and dishonesty.”


Corporate governance to become condition for directors insurance2

Corporate Governance to Become Condition for Directors Insurance?

Cont.

“This causes a real dilemma because defence costs can be very substantial in these types of cases. You’d have to be very wealthy, I think, to be able to afford to fund the defence of one of these cases. That’s why the indemnity from the company is so important”.

One of the first things Directors need to consider is that D&O insurance is just one part of their protection for exposures. And they also need to look at the indemnities that are available from the company itself, normally in the form of a deed of access in indemnity or in the constitution of the company”, she said. Those can be quite important as the Corporations Act now allows companies to advance defence costs in the event of a claim being made against a Director. I think it is very important that they thoroughly check out their insurer because some are probably better than others in dealing with claims and are more “insured” friendly. And they should talk to their brokers and the insurer and what their track record is on claims.”

Ms. Milne said increased vulnerability of the sources of insurance open to directors might be prompting some to consider retiring early. “I think it is having an impact because a director is putting any assets they own on the line really. If their insurance fails and they’re not in a position where they are entitled to an indemnity from their company in respect to a claim, it is an obvious exposure”.


Insurance one tel

INSURANCEOne.Tel

Former One Tel director Jodee Rich, chief financial officer Mark Silbermann and Chairman John Greaves suffered a number of setbacks in the One.tel scenario.

On the insurance front, CGU their D&O insurer, refused to pay their defence costs to an ASIC action citing: It can avoid the policy due to fraudulent non-disclosures and/or fraudulent misrepresentation.

The insurer claimed that:

  • Mr. Silbermann stated falsely on the policy application form that his occupation was a chartered accountant.

  • Brad Keeling concealed bankruptcies

  • Directors knew representations in the 1999 annual report and proposal form were false and/or were recklessly indifferent to the truth or falsity of them.

    Fraud and dishonesty exclusion clause 3.1.

    See comments on construction of exclusion clauses generally and this one in particular.In addition, the parties application to have two actions…the one against CGU for legal costs and a civil action brought against them by ASIC heard together….so that the costs orders might be aligned, no doubt…..was rejected by the NSW Supreme Court.


Relevance of express terms

Relevance of express terms

Note the different outcomes for Silbermann and Wilkie in the OneTel cases because of the different terms of their policies.


Fraudulent claims

Fraudulent claims

According to a study commissioned by IAG, 5% of all claims were “fraudulent” or “inflated”-TV stolen was bigger or better than it really was, or car headlight damaged in last week’s accident instead of 3 years ago.

“I think people become involved in insurance fraud if they think they can get away with it. But it is puzzling that people see insurance fraud as acceptable while banking fraud is not.”The monetary value of this would have been $832m in 2003.

Survey by Insurance Council of Australia in 2002 found 57% people tried to claim more than their loss was worth. Another 31% sometimes exaggerated their claims.

Other types of fraud-arson, bogus car theft, organised crime.


Moments in insurance

MOMENTS IN INSURANCE

A Charlotte, NC lawyer purchased a box of rare and expensive cigars, then insured them against fire (among other things). Within a month, having smoked his entire stockpile of these cigars, and not yet having made even his first premium payment on the policy, the lawyer filed a claim against the insurance co.

In his claim, the lawyer stated the cigars were lost "in a series of small fires." The insurance company refused to pay, citing the obvious reason: the man had consumed the cigars in the normal fashion. The lawyer sued.....and won!

In delivering the ruling, the judge agreed with the insurance company that the claim was frivolous. However, the judge stated that the lawyer held a policy from the company in which it had warranted that the cigars were insurable, and had guaranteed that it would indeed unsure them against fire, without defining what is considered "unacceptable fire” - and was obligated to pay the claim.

Rather than endure a lengthy and costly appeal process, the insurance company accepted the ruling and paid $15,000.00 to the lawyer for his incendiary bamboozle.

After the lawyer cashed the cheque, the insurance company had him arrested on 24 counts of ARSON!!! With his own insurance claim and testimony from the previous case being used against him, the lawyer was convicted of intentionally burning his insured property and sentenced him to 24 months in jail and a $24,000.00 fine.


Insurance s 56 fraudulent claims

INSURANCEs. 56 Fraudulent Claims

1.Where a claim under a contract of insurance, or a claim made under this Act against an insurer by a person who is not the insured under a contract of insurance, is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim.

2.In any proceedings in relation to such a claim, the court may, if only a minimal or insignificant part of the claim is made fraudulently and non-payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to the claim, such amount (if any) as is just and equitable in the circumstances.

3.In exercising the power conferred by subsection(2) the court shall have regard to the need to deter fraudulent conduct in relation to insurance but may also have regard to any other relevant matter.


Insurance tiep thi to v aami ltd 2001 3 vr 279

INSURANCETiep Thi To v. AAMI Ltd (2001) 3 VR 279

Tiep owned a car insured by AAMI. Her 15 year old son damaged the car while driving it without her consent. Because she (mistakenly) thought her insurance would not cover an unlicensed driver, she lied about the circumstances when making a claim. AAMI denied her claim on the basis that it was fraudulent and relied on s. 56. It also argued that the false claim constituted a breach of the duty of utmost good faith (s. 13).

At first instance, Magistrate held claim not fraudulent because if true circumstances disclosed, policy would have covered. Altho Tiep had breached obligation of good faith, AAMI not prejudiced and so could not refuse to pay the claim (see s.54).AAMI appealed to SC and won. Tiep appealed to CofA and lost.


Insurance tiep thi to v aami ltd 2001 3 vr 2791

INSURANCETiep Thi To v. AAMI Ltd (2001) 3 VR 279

Cont.

Tiep argued purpose of s. 56 was to limit consequences of fraudulent claim to reduction of liability of insurer by extent of prejudice. CofA said No. s. 56 only altered common law by limiting insurers remedy to denial of claim rather than avoidance and to enable court to award payment where only a minimal or insignificant part of the claim is fraudulent and it would be harsh and unfair not to pay the remainder. There was a moral/public policy dimension preserved by s. 56. The existence of an underlying valid claim does not render fraud irrelevant. s. 54 has no application to cases within s. 56(1). S. 54 modifies the effect of contracts of insurance whereas the entitlement of an insurer to refuse to pay a fraudulent claim is derived from a statutory prescription. S. 56 not to be watered down by using s.54.

Some discussion of circumstances when a claim can be said to be fraudulently made. Claim is fraudulent if false statement knowingly made in connection with claim for the purpose of inducing Insurer to meet claim. Other judges said this was not exhaustive; may include reckless false statements and might overlook false statement covering up personal embarrassment only.


Commercial transactions

INSURANCE CONTRACTS ACT

S. 66

Where: -

(a) the rights of an insured under a contract of general insurance in respect of a loss are exercisable against a person who is his employee; and

(b) the conduct of the employee that gave rise to the loss occurred in the course of or arose out of the employment and was not serious or wilful misconduct,

The insurer does not have the right to be subrogated to the

rights of the insured against the employee.


Commercial transactions

INSURANCE

BORAL RESOURCES (QLD) V. PYKE

(1992) 2 Qd R 25

  • Pyke employed by Boral to drive truck and spray bitumen.

  • After 17 hr day, he ate two pies and drank 12 beers.

  • Drove off, towing large trailer of bitumen

  • Fell asleep at wheel, trailer overturned, lots of damage

  • Boral indemnified by insurer who sued Pyke (in the name of Boral)

    Involves construction of s. 66 which limits occasions an insurer may bring action by subrogation where negligent employee. See specific word of section

    Employer would have been successful in action for negligence and so s. 66(a) satisfied.

    Drink driving is serious misconduct within s. 77(b).


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