Clash of judgements on section 40(3) of the Insurance Contracts Act 1984

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By Stefan Sudweeks, Partner, and Genevieve Robinson, Paralegal

Section 40(3) of the Insurance Contracts Act is enlivened when an insured gives notice in writing to an insurer of facts that may give rise to a claim against the insured before the insurance cover provided by the contract is expired and the claim arises after the period of insurance has expired.[1] In the recent cases of Ms Amlin Corporate Member Limited v LU Simon Builders Pty Ltd and Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Ltd the Court has arguably broadened the sections scope by considering what amounts to notified facts.

Notifications

In the case of Ms Amlin Corporate Member Limited v LU Simon Builders Pty Ltd, the question before the Court was whether the respondents had given notice of facts that could give rise to the claim in a sense contemplated by s 40(3) prior to the expiry of the policies such that the insurers are not relieved of liability when the claim was subsequently made.[2] Jackman J found that the appropriate notification was provided. There were two notifications. First, an email sent within the policy period that had two attachments:

  • An article from the age; and
  • A document headed “Lacrosee Apartments – Documents”.

The second notification was an email with the subject line ‘Potential Claim’ that attached a copy of the standard design and construct contract “AS4300” and a copy of a Melbourne Fire Brigade report as it contained contributing factors.

Court’s Approach

Jackman J considered the 2021 decision of P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd’s Ltd in the NSW Supreme Court, where it was held that expert opinion is considered a fact. In this case, the second notification included an opinion from the Melbourne Fire Brigade report which the Court considered “may well be a most important fact that might itself give rise to a claim”’.[3]

The case supports the view that an expert opinion brought to the attention of an Insurer may be regarded as a notification of a fact even where the notification has the possibility of several potential claims. We say “may” because of what we say below.

Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Ltd

Notifications

In this case the Federal Court of Australia considered a denial of indemnity by Allianz for multiple claims.[4]  The question was whether notice had been provided under s 40(3).[5] Allianz were provided “bulk” notifications, in the sense that it was notified of several potential claimants and actual claimants in a notification.[6] Allianz contended that these notifications described a problem but did not constitute notification of facts that could potentially give rise to a claim.  Allianz also contended that due to initial reports and investigations being made earlier the subsequent notifications were not made as soon as possible.

Court’s approach

The Court found that bulk notifications, such as media reports, could be considered as notification of facts even if the issue is unknown when the notification has been made.

As to expert opinions being a fact, Lee J rejected a submission on behalf of Allianz that an opinion of an expert, such as a professional investigation, may constitute a “fact” for s 40(3).[7] Lee J’s reasoning was “that an opinion may form “the firmament” above a substratum of facts which support the process of reasoning that led to its adoption, but one must have regard to the terms of s 40(3) which concern the notification of facts which might give rise to a claim.”[8]

To what extent do the cases reconcile?

The two cases both consider “bulk” notifications may suffice. As such it would be prudent for insurers to consider the facts notified and investigate them as a claim may arise from the facts notified. To this extent, the cases reconcile.

However, the cases differ on what constitutes a fact within the bulk notifications. Jackman J disagrees with Lee J that the opinion of an expert is a fact sufficient to engage s40(3).

The cases might, however, be reconciled on this point too. Arguably it is not necessary to reject Lee J’s reasoning to find that a fact contained in an opinion might suffice to enliven s40(3) without having to accept the expert opinion itself.

[1] Insurance Contracts Act 1984 s 40(3).

[2] Ms Amlin Corporate Member Limited v LU Simon Builders Pty Ltd [2023] FCA 581 (‘LU Simon Builders’).

[3] Ibid 48.

[4] Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Ltd [2023] FCA 190 (‘Allianz Australia’).

[5] LU Simon Builders (n 2).

[6] Allianz Australia (n 4) 177.

[7] LU Simon Builders (n 2).

[8] Ibid 50.

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