NIBA welcomes clarity in third party claims on insurance money

NSW plaintiffs should be able to have direct access to the insurer where proceedings against the defendant is not possible or pointless, the NSW Law Reform Commission (NSWLRC) has recommended.

In its “Third party claims on insurance money: Review of s6 of the Law Reform (Miscellaneous Provisions) Act 1946” report, the NSWLRC says its recommendation clarifies areas of uncertainty in the current laws which rely on the concept of a “charge” over money that the insurer is required to pay under the insurance contract.

“Our recommendations do not increase the liability of insurers,” it says. “Like the current s6, the new provision should ensure that an insurer is not liable for more than the insurer would have been liable to pay under the insurance contract. It should also ensure that the insurer can rely on the same defences that the insured defendant could have relied on in an action brought by the plaintiff.”

NIBA CEO Dallas Booth has welcomed the new report and its recommendations.

“The current provision has raised concerns among insurers and brokers, particularly in relation to the potential impact on the capacity of insurers to pay legal costs under a D&O policy,” he says. “Implementing the proposed reforms will clarify the operation of the law, will allow D&O insurers to meet the legal costs of directors (subject to the terms of the policy), and will not add to the overall liabilities of insurers.”

Booth notes that the NSWLRC has indicated it would be preferable for the Commonwealth to pass a law of this nature, ensuring a consistent approach in all states and territories. “NIBA would certainly support that approach.”

However, pending that, NSW should still legislate to provide “a clearer, more effective provision than the current s6”, the commission has said.

Find out what the NSWLRC has recommended here.