The recent Federal Court decision in Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Limited [2023] FCA 190 arose out of historic claims of sexual and physical abuse at Knox Grammar School in Sydney, dating back to the 1970's.

The Uniting Church held professional indemnity policies with Allianz, which covered Knox.

Allianz had already been notified of:

  1. the arrests of three alleged perpetrators;
  2. various media reports relating to the arrests, which included facts relating to:
    1. the nature of the charges faced by the alleged perpetrators;
    2. the multiplicity of complaints and complainants emerging from the relevant incidents;
    3. the ongoing nature of the police investigations; and
    4. reports of police having received a "flood of new information"; as well as
  1. claims brought by two claimants.

By letters sent just prior to the Allianz policy lapsing, brokers for the insured purported to notify Allianz of "circumstances that could give rise to claims".

The claims were identified as "likely to be claims relating to: psychiatric injury and/or physical injury arising from physical assault, sexual assault, trespass to person, breach of fiduciary duty and/or negligence".

A number of potential claimants were identified in the notification under three classifications:

  1. "persons who have expressed an intention to seek redress";
  2. "persons whose school and/or employment records have been, or will be the subject of a warrant for production by the Police"; and
  3. "persons who might seek compensation or assistance in respect of the matters currently under investigation".

Also, the insured broadly gave notification of other persons, identities yet unknown, who may come forward alleging they were the subject of, witnesses to or otherwise affected by, alleged sexual abuse by the former Knox teachers:

"Where the insured gave notice in writing to the insurer of facts that might give rise to a claim against the insured as soon as was reasonably practicable after the insured became aware of those facts but before the insurance cover provided by the contract expired, the insurer is not relieved of liability under the contract in respect of the claim, when made, by reason only that it was made after the expiration of the period of the insurance cover provided by the contract." (p.235)

The Court held that s 40(3) of the Insurance Contracts Act 1984 (Cth) has two features:

First: the insured must have given the insurer, in writing, notice of facts that might give rise to a claim against the insured; and

Second: the insured must have done so as soon as was reasonably practicable after the insured first became aware of those facts, but before the insurance cover provided by the relevant policy had expired. S 40(3) is concerned with not relieving an insurer of liability "in respect of the claim".

The Court held that the section necessitates that there be "sufficient correspondence" between the facts notified to the insurer that are likely give rise to a claim, and a claim subsequently made or arising from those facts.

Furthermore, a "claim" for the purposes of s 40(3) does not necessitate that the notified facts identify the likely claimant or claimants. The notification may be of a "problem" which, in and of itself, may give rise to a claim (or claims) by persons or entities bearing particular characteristics, without the insured necessarily having knowledge of the quantum of such claims or the identity of the claimant or claimants.

Allianz argued that if a new fact emerges in a policy year, which, if added to some old fact known prior to the policy year, such that the two facts in combination might give rise to a claim, then notice of both facts must be given during the period of insurance of the policy year in question in order to engage s 40(3).

It was contended that the section did not permit accumulation of facts notified long before inception of the particular period of insurance.

The Court held that in the light of the history of prior notifications of facts, the cause of the "problem" or event (which is commonly followed by the making of claims) was readily apparent - the letters each referred to the ongoing police investigation which Allianz knew concerned allegations of historical sexual abuse against multiple former students by multiple former teachers of Knox.

These facts were of a character which, objectively understood, might give rise to claims for psychiatric injury and/or physical injury arising from physical assault, sexual assault, trespass to person, breach of fiduciary duty and negligence.

It was regarded as immaterial that a notification of a "problem" is described in general terms, or that the quantum, character or identity of claimants may be unknown at the date of the notification.

The Court emphasised that no notification can be considered in a vacuum, and it is a matter of fact and degree in each case as to whether the quality of facts notified are sufficient to enliven the subsection, which must be informed by an eye attuned for context and historical dealings between the insured and insurer.

If you have a query relating to any of the information in this case note, or would like to speak with a member of Holman Webb's Insurance Team in relation to a separate matter, please don't hesitate to get in touch with John Van de Poll, Team Leader and 2022 Lawyers Weekly Insurance Partner of the Year.

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.