Australia: Claims For Interest And The Insurance Contracts Act

The Supreme Court of Victoria recently held that an insurer's bona fide view that it had a defence to an insured's claim under an insurance contract was irrelevant to determining the date from which the insurer is liable to pay interest to the insured under s57 of the Insurance Contracts Act 1984 (Cth) (Act).

The case involved a claim by the insured under a policy of insurance it held with the insurer relating to the loss of plant and equipment in a mine in Central Africa (the insured's loss). The insured's loss was first identified and notified to the insured's broker in March 2001. In early April 2001, the insurer appointed a loss adjustor who prepared a preliminary report which stated that "...the present situation represents a case of theft...". The report did not identify the person/party that committed the theft. Further correspondence was exchanged between the insured, the insurer and the loss adjustor between May 2001 and January 2003. Of significance was the insured's letter to the insurer on 31 August 2001, requesting that the insurer advise the insured what it should do to recover the insured's loss. The insurer did not directly respond to the insured's letter but instead, requested further documents and information (request for further particulars) to clarify the circumstances surrounding the insured's loss. A response to the request for further particulars was provided in January 2002. The insurer formed the view that the documents and information were insufficient to make a conclusive determination on whether the policy responded.

The insured commenced proceedings against the insurer in May 2003 (the first claim). The insured amended its Statement of Claim on 5 separate occasions to include further claims (the second claim). The trial judge gave judgment in favour of the insured. However, issues related to interest payable on the judgment sum and an argument on costs remained outstanding. This article is intended to deal with the issue of interest only.

The insurer conceded that it was liable to pay interest under s57 of the Act and there was no issue as to the applicable rate of interest. The issue related to the determination of when the insurer's liability to pay interest commenced. Section 57(2) of the Act relevantly states:

(2) The period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount....

The insured argued that interest pursuant to s57(2) ought to be calculated from 1 May 2001 in respect of the first claim (being the date that the loss adjustor provided its first report), and from 11 May 2006 in respect of the second claim (being the date that all issues were put in dispute). The insurer argued that interest should run from 1 August 2007, being four weeks from when the insured filed its final amended pleading, thereby providing the insurer with a full understanding of the insured's claim.

The trial judge referred to the decisions of Hams v CGU Insurance Ltd [2002] and HIH Casualty & General Insurance v Insurance Australia (No 2) [2006], both of which quoted and agreed with the decision of Cole J in Bankstown Football Club Ltd v CIC Insurance Ltd [1993]. In that case, Cole J held that a bona fide view that there was a dispute in relation to entitlement under an insurance contract is irrelevant in determining the time in which it would have been unreasonable for an insurer to withhold payment under the insurance contract for the purposes of s57(2) of the Act. He further held that once an insurer is found to be liable to pay under an insurance contract, then the insurer is deemed to have known of its liability to pay under the insurance contract even if, at all relevant times, it held a bona fide view that it was not liable.

In the present case, the trial judge accepted that the insurer took a bona fide view that the insured did not establish that the policy responded to the insured's claim. However, adopting the decisions above, the trial judge held that the insurer's bona fide view was not relevant to the application of s57. He further held that although the insured's pleading changed on various occasions, the substance of its claim did not change, that is, the insured's claim was to invoke the policy to cover the insured's loss.

On the issue of when it became unreasonable for the insurer to withhold payment under the policy, the trial judge referred to the decision in VL Credits v Switzerland General Insurance Co Ltd [1991]. In that case, the court held that a reasonable period for an insurer to investigate issues relating to an alleged arson and to enable the insurer to determine whether the insurance policy responded and if so the amount to pay, was four months.

The trial judge held that the Insured was in essence seeking a response from the insurer in respect of the nsurer's liability under the policy when it wrote to the insurer on 31 August 2001 seeking advice on what it should do to recover the insured's loss. The fact that the circumstances surrounding the insured's loss were unclear resulting in the insurer's request for further particulars does not mean that the insurer could defer a decision on liability under the policy until such time as the picture became clear. The trial judge said four months after 31 August 2001 was a reasonable time for the insurer to investigate the insured's claim. Therefore, the insurer was liable for interest under s57 of the Act from 1 January 2002.

Having regard to the Courts application of the principle in VL Credits v Switzerland General Insurance Co Ltd, insurers must ensure that investigations necessary to determine policy response are carried out without any undue delay.

McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance Plc (No 2) (2009) 15 ANZ Insurance Cases 61-794; [2009] VSC 49 (20 February 2009)

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.