This Court of Appeal judgment considers how Section 54 of the Insurance Contracts Act (ICA) may assist in obtaining leave to join an insurer as a party to proceedings.

Ms Hepburn alleged that she suffered injury as a result of treatment provided by her dentist, Dr White. Ms Hepburn sought leave to join Dr White’s insurer, Guild, as a party to the proceedings (per s6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW)), as she was concerned that Dr White would not be able to satisfy a judgment entered in Ms Hepburn’s favour. Dr White had retired from dental practice at the time of the proceedings.

In order to join Guild, Ms Hepburn had to establish (among other things) that Guild had issued a policy in which Dr White would be entitled to indemnity in respect of her alleged liability.

Dr White was not insured at the time the proceedings were filed. The Court was able to infer (based on a letter from the insurer and noting that the policy documents were not placed in evidence) that the relevant Guild policy at the time of Ms Hepburn’s treatment was a “discovery” policy. This meant that Dr White’s awareness of the potential liability to Ms Hepburn at the time of treatment, could trigger the operation of the policy.

Further, the fact that Dr White had not informed Guild of the potential liability during the currency of the policy could be remedied by Section 54 of the ICA. Section 54 provides, inter alia, that an insurer cannot refuse to pay a claim by virtue of an act or omission of the insured after the insurance contract is entered into. Instead, the insurer’s liability is reduced by an amount that fairly reflects any prejudice suffered by the insurer as a result of the insured’s act or omission.

With no evidence suggesting it suffered any prejudice due to Dr White’s failure to notify, Guild was arguably required to indemnify. As such, Ms Hepburn was successful in obtaining leave to join the insurer.

The full text of this decision can be found at: http://www.caselaw.nsw.gov.au/decision/54a63ffc3004de94513dc91b