The Federal Court of Australia has ruled that an insured, the Uniting Church in Australia Property Trust (UCPT) in New South Wales, was entitled to indemnity by relying on a bulk notification of a “problem.”
According to the global law firm Kennedys, the judge accepted that the UCPT made sufficient notifications. Therefore, it was entitled to indemnity under its policies.
Between 1991 and 2011, the UCPT held various professional indemnity (PI) insurance policies for continuous cover. It commenced proceedings seeking the following:
The UCPT claimed that from 2009 to 2011, it made four bulk notifications for Allianz Australia Insurance Limited (Allianz) covering facts that might give rise to claims within the meaning of s 40(3) of the Insurance Contracts Act 1984 (Cth) (ICA). Specifically, it claimed that – by operation of s 40(3) – the policies were engaged, and it was entitled to indemnity.
“This was because the facts it notified to Allianz over the course of the period concerned sexual or physical abuse involving former students, teachers, and staff of a school, which might give rise to claims against UCPT and which were notified as soon as was reasonably practicable after UCPT became aware of those facts,” Kennedys said.
However, since May 19, 2014, Allianz had either declined indemnity or otherwise reserved its rights related to all claims because the matters were known circumstances or occurrences that could give rise to claims and which were relevant to the insurer's decision to write the risk. It further claimed that the UCPT had breached its duty of disclosure.
The Federal Court confirmed the following matters regarding the notification of circumstances in Australia:
“Section 40(3) operates for the protection of both insureds and insurers by modifying the operation of certain contracts of insurance to cover claims made outside the period of cover, subject to the integral requirement that the insured notifies the insurer as soon as was reasonably practicable after the insured becomes aware of the facts forming the basis for the notification,” Kennedys said.
“As always, panel-appointed firms need to be cognisant of any notification of facts that they may receive, and insurers will need to consider the scope of their retainers with their agents (including defence counsel) in light of all the contractual documentation (including legal service agreements, costs agreement, procedural manuals, and other relevant documents),” Kennedys said.
“Bulk notifications could prove valid even if the scale of the ‘problem’ is not known at the time the bulk notification is made, and a court will consider the notification against the background at the time (including media reports).”
