By Louise Cantrill, Partner, Alesha Burke, Special Counsel and Cassandra McAlary, Lawyer
In Avant Insurance Ltd v Burnie [2021] NSWCA 272, Avant appealed an interlocutory decision joining it to proceedings commenced by Tara Burnie to the Court of Appeal of New South Wales. The basis of the appeal was that the primary judge erred in granting leave to join Avant to the proceedings pursuant to s.5(4) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (“the Act”).
The Court of Appeal’s decision is significant as it confirms that the Courts will consider issues associated with notification of claims under claims made and notified policies at an interlocutory stage when asked to join insurers to an action pursuant to the Act.
The decision also confirms the interaction between s.40(3) and s.54 of the Insurance Contracts Act 1984 (Cth) (“the Insurance Contracts Act”). In particular, it confirms that s.54 cannot be used to cure an insured’s failure to notify facts and circumstances of a claim in absence of a contractual obligation that requires the insured to give notice.
Background and primary decision
The plaintiff, Ms Tara Burnie, commenced proceedings in the District Court of New South Wales seeking damages for personal injury arising as a result of Leslie Blackstock’s alleged medical negligence. Mr Blackstock was formerly a registered medical practitioner and at the time of the alleged negligence, he held a Practitioner Indemnity Insurance Policy (the “Policy”) issued by Avant Insurance Limited (“Avant”).
The Policy between Mr Blackstock and Avant was a “claims made and notified” policy. The Policy expired without Mr Blackstock notifying Avant of any claim by Ms Burnie, or of any facts or circumstances that may give rise to such a claim.
Mr Blackstone had not appeared before the Court or filed any defence to the proceedings, and Ms Burnie submitted that if judgement was obtained against Mr Blackstone, he would not be able to meet it. As such, Ms Burnie sought leave to join Avant to the proceedings pursuant to the Act. Section 4(1) of the Act provides that if an insured person has an insured liability to a person (the claimant) may recover from the insurer in certain circumstances. However, s.5(4) of the Act provides that leave to join the insurer must be refused by the court if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law.
At first instance, Strathdee DCJ (“the primary judge”), granted leave to Ms Burnie to join Avant to the proceedings pursuant to s.5 of the Act, as she was satisfied that there was:
- a reasonable possibility that Mr Blackstock would be unable to satisfy any judgment; and
- an arguable case Mr Blackstock would, if found liable to Ms Burnie, be entitled to an indemnity under the Policy held with Avant as, during the period of the Avant Policy:
- a complaint had been made by Ms Burnie to Mr Blackstock’s clinic;
- Mr Blackstock was at the very least aware of claims being made against him by patients; and
- a subpoena was issued to Mr Blackstock relating to Ms Burnie.
The primary judge accepted that reference in the Product Disclosure Statement to s.40(3) of the Insurance Contracts Act indicated that if Mr Blackstone notified Avant in writing when he became aware of the facts that might give rise to the claim made by Ms Burnie during the Policy Period, then he would have been entitled to an indemnity from Avant. Her Honour held that Mr Blackstone’s failure to notify Avant of those circumstances was an act that could be forgiven by s.54 of the Insurance Contracts Act.
As such, the primary judge held that Avant did not discharge its onus disclaiming liability under the contract of insurance, or under any act or law, as required by s 5(4) of the Act and accordingly leave was granted to Ms Burnie to join Avant as a defendant.
Primary Issue of the Appeal
The primary issue on appeal was whether any liability Mr Blackstock may have to Ms Burnie was an insured liability under the Policy.
Avant’s position
Avant’s position was that Mr Blackstock held a “claims made and notified” policy. It contended that there was no claim against Mr Blackstock during the Policy Period, nor was there notification to Avant in writing about the claim during the Policy Period. As such, there was no “Claim” within the meaning of the Policy and any liability to Ms Burnie was not an “insured claim” within the meaning of s.4 of the Act.
Ms Burnie’s position
Ms Burnie’s position was the Policy was a “discovery” policy, rather than a “claims made and notified” policy and relied on the operation of ss.40(3) and 54 of the Insurance Contracts Act to establish that the Avant’s Policy responded to the Claim.
Decision of Court of Appeal
The Court of Appeal held that the Policy was a “claims made and notified” policy. It found that no claim was made against Mr Blackstock within the Policy Period and no notice of such a claim was given by Mr Blackstock to Avant.
The Court determined that, to invoke s.40(3) of the Insurance Contracts Act, it must be shown that Mr Blackstock gave notice in writing to Avant of facts that might give rise to a claim against him, as soon as was reasonably practicable after Mr Blackstock became aware of those facts but before the period of insurance expired. Mr Blackstock did not do so, and as such, s.40(3) of the Insurance Contracts Act did not apply.
In reaching its decision, the Court of Appeal found that there was no contractual term in the Policy requiring Mr Blackstone to provide notice of facts that might give rise to a claim under the Policy. Rather, reference to s.40(3) of the Insurance Contracts Act in the Product Disclose Statement merely reflected Avant’s compliance with its obligation under s.40(2) of the Insurance Contracts Act.
As the Policy did not contain any contractual obligation requiring Mr Blackstock to give notice to Avant of facts that might give rise to a claim under the Policy, s.54 of the Insurance Contacts Act could not cure Mr Blackstock’s failure to give such notice. Further, the Court of Appeal was satisfied that s.54 did not modify the operation of s.40(3) of the Insurance Contracts Act.
The Court of Appeal accordingly set aside the orders of the primary judge and dismissed Ms Burnie’s motion to join Avant to the proceedings with costs.
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