Abstract

Article

Misrepresentation or Non-disclosure

For the English test of operable misrepresentation or non-disclosure, see Zurich Insce v Niramax Group [2021] EWCA 590. an insurer can avoid the contract only if it was induced to write the precise contract which was written, including as to its terms. The inducement must be a real and substantial cause, at least to the ‘but for’ degree. There is no presumption of inducement.

 

Contempt of Court

For principles asto the nature and degreeof penalty to be imposed on a party for contempt of court by way of fraudulent evidence as to circumstances concerning a claim, see Axa Insurance UK v Reid [2021] EWHC 993 (QB).

 

Declaratory Order

 

A declaratory order has utility if it has the effect of protecting an insurer’s rights of recoupment by way of subrogation. Technology Swiss Pty Ltd v AAI Limited trading as Vero Insurance (No 2) [2021] FCA 393

 

Status of Settlement Between Insurer and Insured - Subrogation

If the insurer and insured settle the issue of indemnity and proceedings are taken to recover recoupment from another third party, the dominus litis, in such proceeings may depended upon the construction and interpretation of the deed of settlement. Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243; 15 ANZ Insurance Cases 61-780 at [306]–[307]; Technology Swiss Pty Ltd v AAI Limited trading as Vero Insurance [2021] FCA 95. The principles are discussed in MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance [2020] FCA 1716 at [18]

It is the insurer’s indemnification of the insured by paying the sum insured and making good the loss which gives rise to its right of subrogation and in the context of subrogation and recoupment, on the indemnity principle an insured whose loss is covered is not entitled to be more than fully indemnified for his loss. Castellain v Preston et al. [1883] UKLawRpKQB 69; (1883), 11 Q.B.D. 380 (C.A) at p. 389; Simpson & Co. et al. v. Thompson, Burrell et al. (1877) 3 App. Case 279 at p. 284; Ledingham et al. v. Ontario Hospital Services Comm et al. (1974), 46 D.L.R.(3d) 699, [1975] 1 S.C.R. 332, 2 N.R. 32.: Burnand v Rodocanachi Sons & Co (1882) 7 App Cas 333 at 339. Subrogation is the insurer’s right in equity to pursue a wrongdoer in the name of the insured for the loss for which it has indemnified the insured.

Though it has been held that he insurer’s payment to the insured under a settlement may not amount to indemnity in that it is not being made pursuant to the policy, but rather to bring an early end to the legal proceedings and as a public relations gesture: Wellington Insurance Co Ltd v Armac Diving Services Ltd (1987) 38 DLR(4^th) 462, this is too narrow, and if general coverage is not in issue, and the parties intend a satisfaction of or reduction of loss under the policy, the strict legalities of contractual cover will not defeat the equity if the payment is made bona fide in settlement of a claim under a policy which is contested. It would amount to indemnity sufficient to support subrogation. If there is no dispute as to coverage, and the parties honestly intend a satisfaction of or reduction of loss under the policy, the strict legalities of contractual cover will not prevent the equity from arising. The equities of subrogation and of recoupment are matters of substance rather than form, and upon commercial good sense and right behaviour, including the duty of good faith. The meaning of the terms of compromise is important, but are not comprehensively determinative.  Technology Swiss Pty Ltd v AAI Limited trading as Vero Insurance [2021] FCA 95.

If the payment was not legally required under the policy but was honestly intended to be a satisfaction of a loss under it, the right to subrogation remains: King v Victoria Ins. Co., Ltd., [1896] UKLawRpAC 12, but it does not exist if there is no policy. John Edwards and Company v Motor Union Insurance Company Limited [1922] 2 KB 249 at 255. There must be a policy of indemnity out of which the right of indemnity springs: State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd [1969] HCA 59; 123 CLR 228 at 240–241, together with payment: John Edwards. A bona fide even if mistaken belief that the cover applies and a payment thereunder will also suffice to raise the equity of subrogation: King, even if the parties are in dispute as to its extent but the payment is mutually intended to reduce the loss claimed under the policy. This reasoning extends to the settlment of a dispute as to whether the policy responds at all, at least to the extent that the payment can be seen as ex gratia, the insurer reserving its rights. Sydney Turf Club v Crowley [1971] 1 NSWLR 724, and it is entitled to be subrogated to the insured’s rights against the real insurer. ICI Australia Operations Pty Ltd v Workcover Authority of New South Wales [2004] NSWCA 55; 60 NSWLR 18; Wabbits Pty Limited v Godfrey [2009] NSWSC 1299; Advanced Arbor Services Pty Limited v Phung [2009] NSWSC 1331. Thus, a payment may be treated as indemnity under the policy if from the parties’ agreement in all the surrounding circumstances and whether derived expressly, impliedly or inferentially it was their mutual intention to reduce the loss insured against. Brooks v MacDonnell [1835] EngR 864; (1835) 1 Y & C Ex 500; 160 ER 204 Austin v Zurich General Accident and Liability Insurance Co Ltd [1944] 2 All ER 243; Bupa Australia Pty Ltd v Shaw [2013] VSC 507; (2014) 18 ANZ Insurance Cases 61-989; Insurance Corp of British Columbia v Teck Metals Ltd [2020] BCJ No 295. Contra: Qureshi (Guardian ad litem of) v Nickerson [1991] BCJ No 624; 77 DLR(4^th) 1.

If the parties do not express themselves, the surrounding circumstances can assist in the inference or implication of mutual intention.  An insurer who wishes to maintain rights of subrogation or recoupment to sums paid to settle or compromise a dispute about coverage should identify what is paid by way of compromise or indemnity under the policy, even if disputed and in that sense ex gratia or compromised, and subject to reservation of rights. This may require agreement with the insured. Guesswork or unsupported hypothetical assessment for its benefit is not available. Technology Swiss Pty Ltd v AAI Limited trading as Vero Insurance [2021] FCA 95.

Allocation of Moneys Recovered

As to the allocation of of moneys recovered in an action brought by the insured without the assistance of the insurer when the insurer has partly indemnified the insured, it is entitled to priority against the recovery moneys for any additional costs unrecovered. Assicurazioni Generali De Trieste v Empress Assurance Corporation Limited [1907] UKLawRpKQB 138; [1907] 2 KB 814 at 822 Technology Swiss Pty Ltd v AAI Limited trading as Vero Insurance [2021] FCA 95.