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Australian Insurance Law Cover Notes

Section 40(3) of the Insurance Contracts Act 1984 (Cth)

The New South Wales Court of Appeal has held that an insurer’s reference in its policy to Section 40(3) did not impose upon the insurer a contractual obligation to cover claims arising from facts notified to the insurer during that policy’s period of insurance.

The Court also held that Section 54(1) of the Insurance Contracts Act did not remedy a failure to trigger Section 40(3).

A Broker’s Obligation to Give Proper Advice

The Supreme Court of South Australia has found that a broker breached its obligation to give its client insured proper advice about their insurance requirements, particularly the declared value of insured premises, the indemnity period and the sub-limits for additional costs of increased working capital and preparation costs.

The breach of this obligation became starkly apparent upon fire damaging the insured premises leaving the insured unable to recover from the insurer more than $3million.

Third Party Beneficiaries

A fire in commercial premises in Sydney destroyed the premises and goods stored in those premises at the time of the fire.

The New South Wales Supreme Court has upheld a claim for indemnity by the owner of the goods against the insurer of an ISR Policy taken out by the premises’ owner. In upholding this claim, the Court relied upon the ‘Interests of Other Parties’ clause and Section 48(1) of the Insurance Contracts Act.

Defective Cladding Liability in Victoria

In Victoria, amendments to the Building Act 1993 (Victoria) extend the limitation period from 12 years to 15 years after the date the date of issue of the occupancy permit, for a building action (any action (including a counter-claim) for damages for loss or damage arising out of or concerning defective building work) in connection with, or otherwise related to, a product or material that is, or could be, a non-compliant or non‑conforming external wall cladding product.

Business Interruption Loss Proceedings

Last week the Full Court of the Federal Court of Australia heard the appeals from the judgment of Justice Jagot in the latest series of test cases exploring policy responses to various business interruption claims (See Swiss Re International Se v LCA Marrickville Pty Limited (Second COVID-19 insurance test cases) [2021] FCA 1206 (8 October 2021)).

The Full Court’s decision will no doubt be anxiously awaited.

Edition 1 – 12 November 2021

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