Abstract

Principles for leave for direct action against insurer.

Whether 'sporting' applies to activity of yoga.

Article

Leave for Direct Action

The legal principles applicable to a grant of leave under the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) were stated in Zaki v Better Buildings Constructions Pty Ltd [2017] NSWSC 1522; Murphy, McCarthy & Associates Pty Ltd v Zurich Australian Insurance Ltd [2018] NSWSC 627; and Ritchie v Advanced Plumbing and Drains Pty Ltd [2019] NSWSC 1028, followed in Wigge v Allianz Australia Insurance Ltd [2020] NSWSC 150. In particular, “The requirement for leave under s 5(4) of the Act is one imposed to insulate insurers from exposure to untenable claims. The discretion to give leave to bring such a claim is to be exercised with this in mind. [The plaintiff] must have an arguable case against [the insured], there must be an arguable case that the Policy responds to it and there must be a real possibility that if judgment is obtained [the insured] would not be able to meet it ...”: Murphy.

Discretion as to Leave in Direct Action Against Insurer

In exercisiing its discretion as to whether to grant leave for a claimant to take direct action against an insurer of the wrongdoer, one of the relevant considerations is whether there is a real possibility that, if judgment is obtained, the insured defendants would not be able meet it. Bede Polding College v Limit (No 3) Limited [2008] NSWSC 887 at [6].  This may be resolved if the insured is bankrupt or in liquidation. Another factor  is the utility of joinder: Opes Prime at [20]. But while those matters which must be established before leave will be granted, the section does not mandate its making. That remains within the discretion of the Court. Wayland v Bird [2017] NSWCA 26, which must be exercised for the purpose for which it was conferred, that is, to ensure that insurer is not exposed to an unnecessary, unwarranted or inappropriate claim: Oswald v Bailey (1987) 11 NSWLR 715 at 717F-G, 725E; Tzaidas v Child [2004] NSWCA 252; (2004) 61 NSWLR 18 at [17], [107]; Opes Prime Stockbroking Ltd (in liq) (Scheme Administrators Appointed) v Stevens [2014] NSWSC 659 at [17]; Wayland v Bird at [20]-[26]. The question, in each case, is whether it is reasonable for the insurer to be joined. One factor is the likely cost to it.

A major difficulty is that the Act provides that the charge comes into existence at a time, and by reference to events which different from the circumstances in which the moneys to which the charge attaches or on which it descends become determinate and payable, namely, and the issue of priority of the charge depends upon the date on which it is determined only by way of judgment, award or settlement that the insured has the liability for which a claim may be made. Priiorto that there is nothing to which the charge can attach. Chubb Insurance Co of Australia Ltd v Moore [2013] NSWCA 212; 302 ALR 101. An insured is entitled to be indemnified against loss, and the right arises at the time when the liability is established in that way. Bradley v Eagle Star Insurance Co Ltd [1989] 1 AC 957 at 966; Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1 at 2526). Then, the insured is entitled to enforce it and, subject to exhaustion of the polivy’s limit of cover, and to recover the amount of the judgment, award or settlement. That there are other claims against him does not alter his right to indemnity in respect of the liability that has been determined. Without such a mark of priority, an insurer could not safely pay the first ascertained claim if the second claim might exceed the remaining cover. DSHE Holdings Ltd (receivers and managers appointed) (in liq) v Abboud; National Australia Bank Limited v Abboud [2017] NSWSC 579. But see BFSL 2007 Ltd (in liq) v Steigrad; Houghton v AIG Insurance New Zealand Limited [2013] NZSC 156; (2014) 1 NZLR 304

Activity –Sport and Yoga

If there were an issue as to whether yoga came within the phrase, “sport exercise or activity”, in an exclusion, it has been said that it is not entirely clear since three separate constructions are at least arguably available, one being that, if the word “sport” were read as adjectival qualifying what follows, it is not clear whether it qualifies only “exercise” or also “activity” as if the phrase were “sport exercise or sport activity”. One might think that yoga was plainly an “activity” but whether it is a “sport activity” is a more difficult question. Whether it is an “activity” in a list of items which includes “sport” and “exercise” and which provides as examples, “aerobics, athletics, football, aquatic, aerial or equestrian activity” raises further issues: Wigge v Allianz Australia Insurance Ltd [2020] NSWSC 150.