In the context of professional indemnity insurance, there have
been multiple instances in which claimants have attempted to join
– as a party to court proceedings – the insurer of an
In NSW, the application to join an insurer is usually made under
section 6 of the Law Reform (Miscellaneous Provisions) Act
The Court of Appeal's decision in Walter
Construction1 concluded that – in respect of
"claims made" policies – two events (in substance)
needed to have occurred in the same policy year, namely:
The "happening of the event" that gave rise to a
claim for damages or compensation.
The claim against the insured (alleged wrongdoer) triggering
the "claims made" policy.
An insurer (of an alleged wrongdoer) would only be joined to
proceedings, pursuant to section 6, if a claimant established both
of these elements.
The effect of the Walter Construction case was to place
significant hurdles in front of a claimant who wished to sue an
In recent times, claimants seeking to join insurers have had
In Sciacca2, Justice Schmidt permitted a
professional indemnity insurer to be joined to proceedings. Her
Honour allowed for the possibility that a claimant may have made an
oral claim against an insured in the same policy year as the
"happening of the event" that gave rise to the
In KCRAM3 a professional indemnity insurer
of a valuer was joined to proceedings. The facts were somewhat
complicated. The claimant was a mortgage insurer who had issued an
insurance policy to lenders. The Court concluded that the
"happening of the event" was when the mortgage insurer
had paid out money to the lender pursuant to its policy. It was
held that this occurrence was the damage suffered by the mortgage
insurer and was regarded as the "happening of the event"
giving rise to the mortgage insurer's claim for damages.
Late last year, Justice Davies in Malouf4
refused to join an insurer to proceedings. This was a professional
indemnity claim against a solicitor. His Honour concluded that the
"happening of the event" which gave rise to the
underlying claim was when the solicitor breached his
contract/retainer. Justice Davies concluded that, on this date, the
claimant's breach of contract claim was complete and
actionable. It was irrelevant that the claimant's loss
(perfecting the negligence cause of action) was occasioned at a
later point in time. Justice Davies concluded that "the
happening of the event" occurred well prior to the claim
against the insured which potentially triggered the policy.
While a body of highly technical law is developing in the
context of section 6 applications, the Court of Appeal in Western
Australia, late last year, found an alternate basis for permitting
a claimant to sue an insurer directly.
In QBE Insurance v Lois Nominees5, the
Western Australian Appeal Court (by majority) allowed a plaintiff
– who was a claimant against an insolvent insured, and who
was not a party to any insurance policy:
To seek a declaration that insurers were liable to indemnify
For those purposes permitted a claimant to proceed directly
against the insurer.
The Western Australian decision is a noteworthy development.
In NSW, insurers on "claims made" policies
(particularly professional indemnity insurers) have until this
point been entitled to take a measure of comfort from the extent of
technical hurdles thrown up by the Walter Construction and
If, however, NSW courts follow this recent Western Australian
decision, it will provide an easy avenue for claimants to avoid the
technical jurisprudence which has grown up in NSW around section
This is an issue which potentially promises broader insurance
coverage opportunities to policyholders, or to those seeking the
benefit of insurance issued to policyholders.
1The Owners - Strata Plan No.50530 v
Walter Construction Group Limited (In Liquidation) & Ors
 NSWCA 124 2Sciacca v Ace Insurance Ltd  NSWSC
798 3Genworth Financial Mortgage Insurance v KCRAM Pty
Limited (In Liquidation) (No.2)  FCA 1124 4Perpetual Trustees Victoria Ltd v Malouf
 NSWSC 1119 5QBE Insurance (Aust) Ltd v Lois Nominees Pty
Ltd  WASCA 186
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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