In this practice area
Disputes about whether a claim or circumstance falls within a claims-made policy period, including late notification, prior known circumstances and section 40(3) notifications.
What claims-made cover is
Most professional indemnity, directors and officers, management liability and financial institutions policies are written on a claims-made basis, or a claims-made and notified basis. Cover responds to claims first made against the insured during the policy period, rather than to events occurring during that period. The date a claim is made, the date it is notified, and what the insured knew before the policy incepted therefore decide whether there is cover at all.
Disputes arise when a claim arrives after a policy has expired, when the insurer says the insured knew of the circumstances before inception and should have notified the previous insurer, when notification was late, or when the insurer argues that a later claim is not connected to a circumstance notified earlier.
The legal framework
Section 40(3) of the Insurance Contracts Act 1984 (Cth) protects insureds under policies that limit cover by reference to claims made during the policy period. If the insured gave the insurer written notice of facts that might give rise to a claim, as soon as reasonably practicable after becoming aware of them and before the policy expired, the insurer is not relieved of liability only because the claim is made after expiry. Whether a notification was specific enough to attach a later claim is a frequent point of contest.
Section 54 prevents an insurer from refusing a claim because of an act or omission of the insured after the contract was entered into, and limits the insurer to a reduction reflecting the prejudice it suffered. The High Court held in FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641 that a failure to notify circumstances during the policy period can be an omission to which section 54 applies. Section 54 does not, however, create cover for a claim that the policy was never designed to respond to. Prior circumstances exclusions and continuous cover clauses are also frequently contested.
How these matters run
The first task is to build a timeline: when the insured first became aware of the relevant facts, what was said in each proposal and renewal, what was notified and to which insurer, and when the claim was first made.
The documents that matter are the notification letters, the proposal forms and any correspondence with the broker. Where coverage cannot be agreed, the insured may seek declarations against one or both insurers in the same proceedings, so that the court decides which policy responds.
How GopherWood Lawyers acts
We advise on notification before a claim arrives, including how to draft a circumstances notification so that it will capture later claims. When cover is disputed, we reconstruct the timeline from the documents, identify which policy should respond, and put the Act's protections to the insurer directly.