When changing its position on indemnity as an insurer can be a breach of its duty to act with the utmost good faith

An insurer seeking to change its position on indemnity under section 28(3) of the Insurance Contracts Act regarding non-disclosure may be estopped and be found to be in breach of its duty to act with the utmost good faith

 

The Federal Court of Appeal decision of Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 (FCAFC 2021) involved CTS 39788 (CTS), which was a body corporate of an apartment building in North Queensland (apartment building). The apartment building was occupied in 2009 and in late 2014, a number of building defects were identified, which included the soffit sheeting and eaves becoming detached in moments of high winds. The engineers CTS appointed in 2016 said the issue was due to poor construction of the roof framing – The spacing of the soffit lining did not meet the manufacturer’s installation recommendations (engineering report).

In late March 2017, Cyclone Debbie hit and caused damage to the roofs and water ingress. Just prior to Cyclone Debbie, CTS took out an Allianz public liability and property damage policy of insurance. However, CTS did not disclose the engineering report in its possession.

 

CTS then lodged a claim for property damage claim on its Allianz policy. Allianz became aware of the non-disclosure after the claim was lodged, however, still agreed to accept the claim and pay for the property damage due to Cyclone Debbie (not due to the defective construction) (resulting damage).

 

Following this, Allianz wrote to CTS offering to conduct the repairs for the resulting damage, but only if CTS first undertook the repairs from the defective construction. It placed a condition on its offer that if CTS did not proceed on this basis, that is, have the defective construction repaired first, it would withdraw its indemnity grant based on its non-disclosure of the defective construction and reduce its liability to zero, in accordance with s.28(3) of the Insurance Contracts Act (the Act) (the proposal).

CTS refused the proposal and issued proceedings against Allianz, relying on estoppel, election, waiver and the duty of utmost good faith.

 

At first instance, the trial judge found that Allianz was estopped from asserting reliance on s28(3) (non-disclosure), despite being entitled to invoke it, on the basis that it made an election to not exercise any rights arising from the non-disclosure initially. Thus, it waived its rights in this regard. The trial judge also found that attempting to change its initial grant of indemnity was a breach of Allianz’s duty to act in the utmost good faith.

On Appeal, Allianz was again unsuccessful.

 

Allianz argued that CTS had not shown detriment or that it was worse off by the proposal and change of its indemnity decision. The Court rejected this and found that the reliance on the initial decision itself may manifest the detriment. The Court likened this to a loss of opportunity.

Further, Allianz argued that the common law doctrine of election did not apply on the basis that s.28(3) of the Act did not confer a choice. The Court rejected this also, stating that the doctrine does apply in circumstances where an insurer is required to make a decision between two inconsistent positions.

Finally, Allianz argued that its duty of utmost good faith was not breached by its reliance on s28(3) of the Act, as it could have initially sought to rely on this to deny indemnity. The Court again disagreed, finding that the later denial was a breach of its duty to act in the utmost good faith and it was incorrect to determine its conduct via hindsight.

 

The key take-aways from this decision is that an insurer seeking to change its initial decision on indemnity, must do so in a timely manner and/or when there is new information that it did not previously consider. It must clearly communicate any changes with the insured. Otherwise, an insurer may be estopped from doing so, be found to have elected against that course and/or waived its right to do so. An insurer can also be found to have breach its duty of utmost good faith, when altering its initial indemnity grant in certain circumstances. The duty of utmost good faith is a term implied into every insurance contract in Australia.

 

Elit Lawyers by McGirr & Snell has many years of experience in the insurance area, acting on behalf of individual plaintiffs, including companies and sole traders, against incorrect indemnity decision provided by their insurance providers regarding coverage under their policy and contract of insurance.

 

Do not hesitate to contact Danielle Snell or Robert McGirr in relation to your defamation concerns.

 

 

Share
Email
Print

Get in touch

With us personally, it is just one more way we’re different.

Danielle Snell

CO-FOUNDER AND MANAGING PARTNER

.

Robert McGirr

CO-FOUNDER AND PARTNER

.

"

"I just wanted to thank you all for the hard work and dedication you put into my Workcover case. A special thanks to Aggie whom I'm glad I chose to support me."

Personal Injury

Shane

I just wanted to thank you all for the hard work and dedication you put into my Workcover case.

A special thanks to Aggie whom I’m glad I chose to support me and give me the step by step instructions on how to go about proving my case for a result in my favour.

Thanks again for all your advice.

"

"Aggie is the best lawyer in Common Law Claims I have ever worked with. Aggie helped me achieve an extraordinary outcome."

Common Law Claim

Ian

Aggie is the best lawyer in Common Law Claims I have ever worked with. Having seen a couple of large Law Firms l felt let down, being quickly shown the front door. Luckily for me a friend suggested seeing Aggie Vlahos (Partner).

Having engaged Aggie Vlahos gave me the confidence to continue with the injuries l knew were caused by heavy physical and repetitive work. I am also indebted to Brendan Johnson (Barrister) for his outstanding efforts!

She explained everything in a way I could easily understand and always got back to me quickly when I had questions even outside her working hours.

Aggie helped me achieve an extraordinary outcome. However, only charged fair fees.

If someone is seeking a legal help, I highly recommend Aggie Vlahos and Elit Lawyers.

P.S. Thanks to you so much Aggie

"

"I had the good luck to be recommended to Aggie Vlahos for handling my Estate Litigation Case. Through Aggie I achieved a very satisfying result."

Estate Litigation

Jan

I had the good luck to be recommended to Aggie Vlahos for handling my Estate Litigation Case. She was always available to me, no matter how big or small my concern was. She was kind, patient, easy to talk to and very understanding regarding my troubles.

The case was resolved within only 5 months, which I was grateful for. Through Aggie I achieved a very satisfying result.

I would have no hesitation in recommending her to others.

 

"

"If you want a safe, caring, professional group of lawyers and company, look no further than Aggie Vlahos and Elit Lawyers."

Family Law Matter

Michael

Thank you to Aggie Vlahos (Partner) and the staff at Elit Law, also James Eley (Barrister). You did a marvelous job in representing me in relation to my family matter and most importantly caring about me and providing a secure environment for me to navigate a very difficult situation.

The result you achieved was nothing short of amazing. The professionalism displayed on the day by Aggie and James blew me away. With their invaluable guidance and support we achieved a extremely favourable result.

If you want a safe, caring, professional group of lawyers and company, look no further than Elit Lawyers.

Great people, Great Service, Great Company.

 

"

"The best of the best plaintiff lawyers against insurance companies. We had a very tough and complex case and Danielle and her team settled with the insurance company for an optimal outcome."

Insurance Policy Holder

Home owner

The best of the best plaintiff lawyers team against insurance companies.

We had a very tough and complex case against insurance company that we lost our home and contents.  After disappointing and frustrating process from another law firm and firing them we found Danielle Snell and her team.

They are very dedicated, knowledgeable, passionate and possess great communication skills.  We couldn’t ask for more and settled with a optimal outcome.

"

"It’s great to be able to confidently refer clients to someone who can help and support them, and to feel that they are receiving the best service."

Senior Adviser

Financial Planner

We are so glad to have you in our referral channel.

It’s great to be able to confidently refer clients to someone who can help and support them, and to feel that they are receiving the best service.

Previous
Next

Can't find what you're looking for?