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Joining insurer may not produce ‘mountain of gold’ (Perpetual Trustees Victoria Ltd v Malouf [2012] NSWSC 1119)

A recent NSW Supreme Court decision has again highlighted the difficulties in joining insurers to proceedings under section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the Act), particularly in relation to ‘claims made’ policies (for another recent example of a court rejecting a section 6 application see our update on Energize Fitness Pty Ltd v Vero Insurance Limited [2012] NSWCA 213).

In Perpetual Trustees Victoria Ltd v Malouf [2012] NSWSC 1119, Davies J held that, in the context of professionals, breach of professional duty is also likely to constitute a breach of contract (eg a lawyer’s retainer).  In such circumstances, his honour held that the ‘event’ giving rise to a claim for compensation for the purposes of section 6 is the breach of contract (ie negligent performance of the services) rather than the occurrence of loss (usually required to complete a cause of action in negligence).  Accordingly, unless the relevant policy was in effect at the time of the initial negligent conduct – unlikely in respect of claims made policies – joining an insurer under section 6 of the Act is precluded.  More…