Wotton + Kearney | Insurance Year in Review 2009 the Year in Review
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INSURANCE SPECIALIST FIRM OF THE YEAR Copyright © Wotton + Kearney 2009 First published in 2009 by Wotton + Kearney Insurance Lawyers Tel +61 2 8273 9900 Fax +61 2 8273 9901 Level 5, Aurora Place 88 Phillip Street Sydney NSW 2000 Australia PO Box R235 Royal Exchange NSW 1225 DX 10465 SSE Email sydney@ wottonkearney.com.au Tel +61 3 9604 7900 Fax +61 3 9670 4699 Level 3 600 Bourke Street Melbourne VIC 3000 Australia DX 182 Melbourne Email melbourne@ wottonkearney.com.au www.wottonkearney.com.au 2 Wotton + Kearney | Insurance Year in Review 2009 The Year in Review David Kearney Managing Partner Tel (02) 8273 9916 [email protected] Welcome again to the annual Wotton + Kearney Insurance Law Review. Twelve months ago insurers began to experience a decline in value across most asset classes as the Global Financial Crisis (GFC) took hold. Realised and unrealised losses resulted as the biggest single capital event in the past 30 years unfolded. However, as we move into improving economic conditions, it appears our industry has benefited from past failings. Heavier regulation and a greater focus on price modelling, both a corollary of the collapse of HIH earlier this decade, has allowed the insurance industry to move through the GFC relatively unscathed. Certainly the industry remains well capitalised in comparison to other related industries. Of course the impact on classes of insurance with a longer tail are still not clear and will put pressure on operating ratios in the future. In this publication we review for example significant developments in Directors & Officers and Financial Institutions insurance, both likely to cause insurers involved in these classes ongoing concern. Looking internally, in 2009 we were thrilled to be recognised as a leader in the provision of legal services to the insurance market when named as the Insurance Specialist Law Firm of the Year at the ALB Australasian Law Awards. I would like to think that award reflects the consistent provision of quality legal advice across the broad areas of insurance business in which our insurance clients are involved. Against that background, I am again very optimistic that this publication will allow those with an interest in insurance law to build or reinforce an understanding of important developments across the broad claims landscape. 4 November 2009 Insurance Specialist Firm of the Year - ALB Australasian Law Awards 3 Services Wotton + Kearney is a boutique insurance law firm. Our sole focus is insurance law and we act for a diverse range of risk carriers, underwriting agents, brokers and corporate insureds providing litigious and general advisory services. As the only Australian law firm based in more than one city focusing solely on insurance law, we have a detailed understanding of the insurance industry in Australia and of the litigation landscape relevant to the successful resolution of insurance claims. Our commitment to the insurance industry extends to overseas markets, particularly the London insurance market which continues to play a significant role in the writing of Australian risks. Our service offering is broad. We have expertise in all forms of insurance claims litigation including claims relevant to: + Professional Indemnity + Public and Products Liability + ISR/Commercial Property + Construction/Contract Works + Directors & Officers Liability + Class Actions 4 Wotton + Kearney | Insurance Year in Review 2009 Contents Wotton + Kearney Insurance Year in Review – 2009 The year in review – an overview David Kearney, Managing Partner 3 Developments for insurers generally GFC: the Impact on Insurance 14 Kiri-Ana Libbesson and David Brady look at the impact of the recent financial crisis on insurance premiums and claims activity Insurers exposed: Plaintiffs getting their hands on policy terms 16 Following a surge in recent applications including Kirby v Centro Properties Limited and Lehman Brothers Australia Ltd v Wingecarribee Shire Council, Patrick Boardman and Richard Bassingthwaighte discuss whether insurers will continue to come under pressure to disclose and produce policy terms QBE v Lumley: A restatement of contribution principles 19 Gareth Horne looks at the Victorian Court of Appeal’s review of the issue of contribution and its underlying equitable principles ACE v Moose: Enforcing the jurisdictional bargain 22 Adam Chylek considers the factors leading to the granting of a permanent anti-suit injunction in ACE Insurance Limited v Moose Enterprise Pty Ltd Australian court gives effect to the term ‘retroactive date’ 25 Charles Simon and Clare Branch look at the willingness of an Australian Court to adopt the industry meaning of the term ‘retroactive date’ and accept the commercial purpose of a clause inserted by Underwriters in the judgment of Towry Law v Chubb Insurance & Ors Nino v MLC Ltd: Interest under section 57 of the Insurance Contracts Act 28 Matthew Foglia looks at the application of section 57 to a total permanent disability claim for which the Insurer finally admitted liability after five years of examinations Tidswell Financial Services Ltd v Sovereign Capital Ltd: A more convenient venue 30 for an indemnity dispute Matthew Foglia considers venue issues in the Federal Court Insurance Specialist Firm of the Year - ALB Australasian Law Awards 5 Contents Developments for insurers generally When is circumstantial evidence sufficient to prove fraud? 32 Hannah Keane considers the recent NSW decision in West End Aeronautical plc v QBE Insurance (Australia) Limited where an insurer successfully proves fraud relying only on circumstantial evidence Chief Commissioner of State Revenue v Qantas: Stamp duty on premiums paid to 34 unregistered insurers Catherine Osborne and Matthew Foglia look at the recent Court of Appeal decision in Chief Commissioner of State Revenue v Qantas which may see the State Revenue making significant stamp duty refunds Terms of an insurance policy: Where does the onus of proof lie? 36 Olympia Samolis looks at which party has the onus of proving the limit of indemnity in an insurance policy where the policy is no longer in existence, as considered by the NSW Court of Appeal in QBE Insurance (Australia) Ltd v Stewart Section 6 actions against insurers: A low bar for claimants 38 Anthony Bagnette reminds insurers of the ease with which they can be joined to proceedings in NSW as evidenced in LaTrobe Capital and Mortgage Corporation Ltd v ACE Insurance Ltd Amendments to pleadings: Costs no longer an all-healing panacea 40 Dian Turner examines the increased weight given to case management principles in the High Court’s recent decision of Aon Risk Services Australia Limited v Australian National University GST on legal costs may be unrecoverable 42 Juliet Eckford considers Boyce v McIntyre which limits the circumstances in which GST can be recovered on legal costs Drafting your way out of section 45 of the Insurance Contracts Act 43 Judy Truong looks at the landmark case of Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pty Ltd & Ors and considers whether it is possible for an insurer to sever an underlying insurance that offends s45 of the Insurance Contracts Act and also considers the equitable right of contribution between co-insurers involved in dual insurance situations The broker’s duty of care: BMW Australia Finance Ltd v Miller & Associates 45 Matthew Foglia looks at a broker’s duty of care to premium funders Dawes Underwriting Aust Pty Ltd v Roth: Proving fraud or fraudulent 46 misrepresentation in cases of non disclosure Lisa Feltz looks at the high hurdle Insurers face under section 28 of the Insurance Contracts Act 6 Wotton + Kearney | Insurance Year in Review 2009 Public & Product Liability Product Liability: What is the ‘occurrence’? 50 Robin Shute considers the operation of the concept of ‘occurrence’ in a product liability insurance policy by reference to the decision of Selected Seeds Pty Ltd v QBEMM P/L A shot across the bows of private statutory causes of action for personal injury 53 Charles Thornley considers the NSW Court of Appeal decision in Wynn Tresidder Management Pty Ltd v Barkho in which the Court gives a strong indication that a breach of the Occupational Health and Safety Act Regulations does not confer a private cause of action on a member of the public So, is it advice or not? 55 Claire Tingey looks at Transfield Services (Aust) Pty Limited v Hall which considers the doctrine of a non-delegable duty of care in circumstances involving independent contractors engaged in extra-hazardous activities and the difficulties with policy interpretation when activities of the insured are not properly defined in the policy schedule Limitations, labour hire and occupiers’ liability: A review of common public liability 58 issues Belinda Henningham looks at the NSW Court of Appeal’s recent examination of limitation and labour hire principles in Bostik Australia Pty Ltd v Liddiard Insurance payments no ‘set off’ to damages 60 Karen Jones reviews the decision of Papadopoulos v MC Labour & Anor (Ruling No 2) which clarifies when a plaintiff’s receipt of separate benefits can be successfully argued as a ‘set off’ to a claim for damages Loss of chance: Will the High Court revolutionise the law of recovery for personal 61 injury? Charles Simon and Cassandra Wright discuss the NSW Court of Appeal decision of Gett v Tabet which establishes that there is no right of recovery of damages to a plaintiff, in a medical negligence claim, who establishes that a breach of duty