Insurance Law

On 2 July 2021 the NSW Court of Appeal (Meagher JA, Bathurst CJ and Bell P) handed down judgment in P & S Kauter Investments Pty Ltd v Arch Underwriting at Lloyds Ltd [2021] NSWCA 136; BC202105739.

In upholding the primary judge’s decision that Underwriters had no liability to the appellants under a professional indemnity policy, the Court of Appeal discussed the operation of s 40(3), s 28(2) and s 28(3) of the Insurance Contracts Act 1984 (Cth) (ICA), including that:

1. section 40(3) of the ICA requires notification of objective ‘facts that might give rise to a claim’ rather than mere possibilities; and
2. although Underwriters bear the burden of proof, s 28(2) and s 28(3) can operate to reduce Underwriters’ liability to nil (for innocent misrepresentation or non-disclosure) or to entitle Underwriters to avoid a policy (for fraudulent misrepresentation or non-disclosure).

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