The recent Federal Court of Australia decision in MS Amlin Corporate Member Limited v LU Simon Builders Pty Ptd 1 gives direction for insurers dealing with notifications of facts on a wider problem concerning the unsafe ACP products used by their insureds that might give rise to cladding claims.
Three sets of proceedings were commenced against LU Simon Builders Pty Ltd and LU Simon Builders (Management) Pty Ltd (Insureds) for alleged breaches concerning the use of ACPs as cladding for the construction of a 36-storey building in Melbourne, known as the Atlantis Towers. It was asserted that the cladding was combustible and not fire-resistant, thereby not suitable to be used in the external walls of the building (Atlantis Claims).
The Insureds' excess layer insurers commenced a proceeding seeking a declaration that insurance cover under the 2014/2015 "claims-made" professional indemnity policies (14/15 Policies) is not available in respect of the Atlantis Claims.
The decision in MS Amlin concerns only the preliminary question of whether the Insureds gave sufficient notification of facts under the 14/15 Policies so as to engage section 40(3) of the Insurance Contracts Act 1984 (Cth) and trigger cover for the Atlantis Claims under the 14/15 Policies, even though the claims were made after those policies had expired.
The Insureds relied on two notifications made on 5 and 14 May 2015 (Notifications).
The 5 May 2015 notification referred to a press release regarding an investigation into the Insureds by the Victorian Building Authority (VBA) for the use of combustible cladding material following the Lacrosse fire. In his decision, Justice Jackman noted that the press article referred to "an investigation into building practices" that indicated that the VBA was conducting a wider investigation into the building practices generally of the insured, and that it was not confined to the Lacrosse building.
The May 2015 notification also attached a document with comments from the Metropolitan Fire Brigade (MFB). Although the document concerned the Lacrosse building and the Alucobest product, Justice Jackman noted that the MFB had stated that "no like product has passed the test" for combustibility under AS1530.1 1994, and there was no certified CodeMarked product of this kind at the time of construction in 2010. His Honour therefore considered that MFB's comments related to ACPs more generally.
The 14 May 2015 notification attached a report by the MFB, which indicated that no ACP products had passed the test for combustibility and four media reports were hyperlinked referring to building audits by the VBA.
Justice Jackman also referred to the Insureds' answers on the Proposal for the 14/15 Policies, suggesting that the Insureds had widely used ACPs, which did not pass the test for combustibility.
In his decision, Justice Jackman endorsed the principles concerning section 40(3) as outlined in P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd's Ltd 2, including that a notification of "facts" be of objective matters that bear on the possibility of a claim being made, rather than matters of belief or opinion as to that possibility .
His Honour disagreed with Justice Lee's reasoning in the recent decision of Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Ltd 3 that expert opinion is precluded from being a "fact" that might give rise to a claim under section 40(3).
Instead, his Honour considered that where "opinion is given by a person in a position of public authority, such as the MFB or the MBS, the publication of that opinion may well be a most important fact that might itself give rise to a claim".
The opinion formed by the MBS that ACPs cladding used for Atlantis Towers was non-compliant, was formed in December 2018, well after the expiry of the 14/15 Policies; however, the opinion formed by the MBS in relation to the Lacrosse building in April 2015 (attached to the Notifications) referred to the problem relating to ACPs generally. Justice Jackman determined that this indicated a real and tangible risk of the MBS taking a similar stance in relation to other buildings which used ACPs (such as the Atlantis Towers).
His Honour therefore found that the Notifications were sufficient notifications of facts that might give rise to the Atlantis Claims, thereby engaging section 40(3), because they contained a press release and reports that referred to a wider problem concerning the unsafe ACP products used by the Insureds.
The key takeaways for insurers following this judgment are:
- Expert opinion, including opinions of public authorities with appropriate expertise, can be considered as "facts" that might give rise to a claim got the purpose of section 40(3).
- It is not necessary that a notification be given in a single document. Notifications can be supplemented and it is important to consider all notifications together.
- It does not matter that the potential claimants are not identified.
- It may not be necessary for the insured or the broker to have an intention to give notice of facts that might give rise to a claim for it be a valid notification.
Interestingly, the judgment did not rely on overseas authorities, such as Euro Pools and Kidsons, relating to a "hornet's nest" notification (which often arises out of a wide scale system problem where the cause and extent of the problem is unknown). Rather, the judgment relied on Australian authorities (P&S Kauter, Darshn and Uniting Church). This indicates that future judgments may be less reliant on overseas decisions as the body of law on section 40(3) develops in Australia.
1 FCA 581
2  NSWCA 136 at -
3  FCA 190 at -
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.