Shortly prior to Christmas, the Federal Court of Australia announced its intention to establish, commencing in March 2016, a specialist insurance list. The list is intended to deal principally with short matters (less than 2 hours), particularly those involving questions of policy interpretation or the operation of insurance legislation. It is not intended to deal with all insurance matters.
It is intended that the list will provide a streamlined and expeditious method of resolving such questions and will be available for use even where the questions may not necessarily resolve the whole of the dispute in which the question arises.
The new Insurance List is likely to be utilised in two key circumstances. Firstly, for the determination of separate questions within a broader dispute. Secondly, to provide a specialist forum for seeking declarations as to the proper construction of construction policies or legislation which may have a broader relevance to an insurer's business.
Frequently insurance coverage disputes (particularly those involving a third party claim) can involve insurers being joined to costly and time intensive proceedings. In an effort to avoid costs and move the coverage dispute towards resolution lawyers acting for insurers may seek to have the insurance issues (or one of more of them) heard separately, and in advance of, the broader dispute.
The Federal Court Rules provide a specialist forum for the hearing of such separate questions. Generally, a matter will be suited to the determination of a separate question(s) where it is just and convenient for the order to be made. In exercising that discretion, the following factors will usually be relevant:
- whether the factual foundation for the determination of the question has been resolved including by the parties submitting a statement of agreed facts. [A question will generally not be suitable for separate determination where factual questions have not been resolved or agreed. While the Court may be prepared to make factual findings, it usually will not do so where there is any significant degree of overlap between the facts to be found in relation to the proposed separate question and the broader dispute.];
- whether its resolution would contribute to the saving of time and cost by substantially narrowing the issues for trial, or even lead to disposal of the proceeding (or part of it).
DECLARATION OF ISSUES OF BROADER RELEVANCE
An insurer may apply to the Federal Court for a declaration that it is entitled to decline indemnity under a policy.
The Federal Court will not make a declaration where the matter is purely hypothetical or advisory in nature - such as where an insurer seeks a determination as to the operation of its policy wording based on some hypothetical set of facts which have not yet arisen. However the Court will make a determination as to an issue of policy construction or statutory interpretation where, in the context of a particular claim, an insurer seeks a determination that an actual (or intended) declinature does (or would) not constitute a breach of the contract of insurance.
In circumstances where the insurer and the insured are in agreement as to the facts relevant to the proposed question of construction, the insurance list will provide a fast and cost-effective means of obtaining a determination of this nature. This may be an appropriate means of approaching a coverage issue where it is important to avoid an adversarial dispute (thereby maintaining the insurer's relationship with an insured or broker) or where the claim provides a convenient means to provide clarity as to an matter which is more broadly relevant to the insurer's policy/business.
The Federal Court's decision to introduce a separate Insurance List to provide a forum for the timely and cost-effective resolution of issues of the above type is welcome.
While, the establishment of the List does not alter the substantive powers or Rules of the Court in respect of the hearing of separate questions or the making of declarations (which limit the circumstances in which such orders can be sought), the availability of the List may increase the attractiveness of these procedures and the efficiency with which they are administered. It remains to be seen whether, in practice, the proposed two-hour time limit represents an appropriate restriction on entry into the list or may reduce its utility.
Click here for a copy of the Federal Court's letter to the Australian Insurance Law Association containing additional details of the new Insurance List.