A return to ‘normal’ - Napier City Council v Local Government Mutual Funds overturned on appeal

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A return to ‘normal’ - Napier City Council v Local Government Mutual Funds overturned on appeal

In August last year we reported on the High Court decision of Grice J in Napier City Council v Local Government Mutual Funds Trustee Limited (Riskpool). In that decision, Her Honour held that the Council was not indemnified under its professional indemnity insurance policy with Riskpool as the claim against it was in respect of both weathertightness and non-weathertightness defects. Consequently, the policy’s weathertightness exclusion clause applied to the entire claim. At the time, we commented that the decision may have come as a surprise to many in the insurance industry as it went against the approach taken by many insurers, which was to differentiate between weathertightness and non-weathertightness defects when considering indemnity. It was only when there was a defect which was caused or contributed to by an excluded peril that was excluded from cover.

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Russian cyber attack not “warlike” – clarifying the scope of the war exclusion

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Russian cyber attack not “warlike” – clarifying the scope of the war exclusion

Merck & Co v Ace American Insurance Co No: UNN-L-2682-18

It is not often that courts have occasion to look at the construction of the ‘war risks’ exclusion. In a novel argument, the insurer relied on the war risks exclusion to deny cover to an insured for losses arising from a cyber attack. The Superior Court of New Jersey held that it did not apply. In doing so, it provided useful clarification of the meaning of the exclusion.

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Indemnity focus:  the meaning of ‘control’

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Indemnity focus:  the meaning of ‘control’

Penfold v The Hollard Insurance Co Pty Ltd [2021] NSWSC 1322

Insurers and brokers are often presented with a difficult fact-specific question to resolve – is property within the physical and legal control of an insured? An insured’s legal responsibility will often turn on this, and so too may its coverage position. In this article we look at a recent Australian decision which held that property owners may have “control” of goods on their property even if they have not charged for storage and have not exercised any power over the goods.

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Focus on indemnity: Insurance Claim Time Barred – Clock Started Ticking Immediately

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Focus on indemnity: Insurance Claim Time Barred – Clock Started Ticking Immediately

Bann Carraig Ltd v Great Lakes Reinsurance (UK) Plc [2021] NIQB 63

This decision from the High Court of Northern Ireland is a cautionary tale for insureds not to delay too long after an insured peril before filing proceedings, and a reminder for insurers to consider potential limitation defences when faced with old claims.

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Who gets what?  Dividing recovery proceeds between insured and insurer

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Who gets what?  Dividing recovery proceeds between insured and insurer

Technology Swiss Pty Ltd v AAI Limited t/a Vero Insurance [2021] FCA 95

The Federal Court of Australia recently considered how to allocate between insurer and insured the proceeds of a recovery action against a third party. The case emphasises that an insurer has a right to share in the proceeds of a recovery action only to the extent that the insurer provides indemnity under the policy. Where the insurer pays a settlement to the insured for costs incurred by the insured which are not part of the indemnity provided by the policy then, absent a contractual right, the insurer has no right to share in the fruits of a recovery action. If the insurer wants to procure this right, it needs to ensure that the settlement agreement with the insured makes this clear.

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Focus on indemnity: insuring the careless, reckless or wilful insured

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Focus on indemnity: insuring the careless, reckless or wilful insured

It is commonplace for insurance policies to include an exclusion for deliberate or wilful acts, or a condition precedent that an insured must exercise ‘all reasonable care’. Such clauses intend to incorporate into the policy a requirement for a certain standard of behaviour by the insured: failure to meet that standard renders the insured uninsured.

Two recent Supreme Court decisions from Victoria, Australia, and the United Kingdom have highlighted that the clauses will be construed in light of the commercial purpose of a policy, which presumes that foolish behaviour is intended to be insured. The facts of these cases are useful illustrations of this principle.

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Special Report: A watertight weathertightness exclusion?

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Special Report: A watertight weathertightness exclusion?

Napier City Council v Local Government Mutual Funds Trustee [2021] NZHC 1477

In November 2018, we reported on the High Court decision of Hinton J in respect of an application by Local Government Mutual Funds Trustee (Riskpool) that a claim by Napier City Council be struck out. Riskpool had sought to strike out the Council’s claim on the basis that it had no tenable claim for indemnity as the plain meaning of the policy’s weathertightness exclusion clause (Exclusion) was that a “Claim” was excluded in its entirety if it was tainted by a weathertight defect.

Neither the High Court nor the Court of Appeal were prepared to strike out the Council’s application at an interlocutory stage. As a result, the proceeding returned to the High Court for a full hearing before Grice J in July and August 2020. In a lengthy decision handed down at the end of June 2021, Grice J found in favour of Riskpool and held that both weathertightness and non-weathertightness defects were caught by the Exclusion.

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