The NSW Law Reform Commission has just released Report 143, which recommends a replacement provision for section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

Section 6 provides an avenue for a plaintiff to recover damages or compensation directly from the defendant’s insurer, in certain circumstances. The section also provides for a plaintiff to assert a ‘statutory charge’ over all insurance moneys which may become payable under the insurance contract as a result of the defendant’s liability to the plaintiff. This arrangement has caused headaches in the past, which are well known in the industry.

The replacement provision aims to clarify areas of uncertainty and make reforms where necessary. For starters, it abandons the ‘statutory charge’ mechanism and instead provides for a method of direct recovery against the insurer, by way of court proceedings. It also provides the insurer will only be liable for the money payable in respect of the defendant’s liability to pay damages to the plaintiff, which will not impact on the insurer’s liability to meet the cost of defending the claim. Most importantly, the provisions will not increase the liability of insurers beyond the insurance contract, and will allow insurers to rely on the same defences the defendant could have relied on in an action brought by the plaintiff.

Whilst its practical implications will not be known until (or, if) it is enacted, it will go a long way towards achieving the objects for which it was recommended.

To read the entire NSWLRC Report 143, please click here.