An appeal to the High Court of Australia has now been filed with a view to challenging the decision of the NSW Court of Appeal in Chubb Insurance Company v Moore.

In 2013, the Court of Appeal was asked to consider whether the directors of Great Southern Limited and its subsidiaries (Great Southern Group) were entitled to payment of their defence costs under their D&O policy in erosion of the policy limit that, as in the Bridgecorp case, may otherwise have been subject to a charge under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946(NSW).

In complete contrast to the NZ Supreme Court’s decision in Bridgecorp, the Court of Appeal found that:

  • section 6 creates a charge on insurance money payable in respect ofthe liability of the insured to pay damages or compensation to the claimant, but the charge is not expressed to catch all moneys that might be payable under the contract of insurance;
  • section 6 does not operate to deprive an insured of a vital benefit under the policies to have defence costs paid, as they are incurred in order to defend a claim;
  • if section 6 were construed as catching all moneys available at the time when the charge arises, that would alter the contractual rights between insurer and insured; and
  • a claimant should not be in a more favourable position than an insured is in respect of the insured’s contractual right of indemnity under its contract of insurance, where the obvious intention of the parties to the contract of insurance is that the insured be indemnified for defence costs as and when they are incurred.

The special leave application, and if leave is granted, the appeal to the High Court in this matter will again put the spotlight on the issue of whether insureds are able to access insurance moneys to fund defence costs ahead of judgment or settlement. No hearing date has been set at this point in time.