In certain circumstances in NSW & ACT proceedings can be taken against the third party insurer.
This tab sets out relevant tests and judicial comments which may be helpful to plaintiffs in applications in the Local Court.
Commonly, in credit hire proceedings a statement of claim has proceeded to default judgement before proceedings against the third party insurer are considered. In this situation unless the judgement is to be set aside the application for leave to proceed against an insurer should be made by summons – Krishell P/L –v– Nilant [2006] WASCA 233. Wang –v– Warden [2014] NSWLC (unreported) 17/12/2014.
The Orders usually sought are:-
- Pursuant to Section 6 of the Law Reform (Miscellaneous Provisions Act) 1946, the Plaintiff has leave to commence proceedings against the Defendant.
- The Statement of Claim in the form attached may be filed.
- Costs.
- Further or other orders.
The proceedings will be given a new number so an affidavit in support should set out all that has happened in the initial proceedings against the at fault party.
Other sections which may have relevance are:-
- Insurance Contracts Act 1984 – Sec/s 48, 51 & 54.
- Section 2 of the Law Reform (Miscellaneous Provisions Act) 1946.
- Bankruptcy Act 1966 – Sec 117.
There are also sections of the Corporations Act which may be relevant but as most credit hire litigation is against individuals those sections are not featured here. The Secs are 562, 562A, 563, 601AG.
Tzaidas v Child [2004] NSWCA 252 (27/04/2004)
Insurer must take proceedings to disclaim liability and not just rap it into the leave application. [18].
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18 For the prohibition to apply the court must be satisfied of two things: first, entitlement to disclaim liability, and secondly, taking necessary proceedings. Satisfaction as to taking necessary proceedings cannot be passed over. The application for leave pursuant to s 6(4) cannot amount to taking necessary proceedings, since the necessary proceedings must be something outside the application. CGU submitted that proceedings were necessary only if the insurer’s entitlement to disclaim liability was not obvious. I do not think that is right. The proceedings are those “necessary to establish” the insurer’s entitlement to disclaim liability (emphasis added). “Establish means what it says. The court does not decide, additionally to its satisfaction that the insurer is entitled to disclaim liability, whether or not the entitlement is obvious, and even if it did that would not establish the entitlement to disclaim liability. So long as the insurer’s entitlement to disclaim liability is in issue, other proceedings are necessary to establish it.
Sciacca v Ace Insurance [2011] NSWSC 798 (28/07/2011)
Sec 6 applies where insured ‘does not or cannot pursue the claim ‘[¶3].
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The purpose of the provision is to enable a person to pursue a claim against an insured person, where the insured has a valid claim on a policy, but does not, or cannot pursue the claim. It was common ground that there were valid insurance policies in existence at the relevant times … It was not in issue that the plaintiffs had an arguable claim against the insured.
Yarng v Shannons [2014] NSWLC (9 Apr 2014).
Draws together the principles from the superior courts.
3 step test to joinder 1. Arguable case, 2. Policy covers, 3. Deft will not be able to pay judgment.
Leave will be granted even if claim not lodged or XS not paid.
Inability of service satisfies point 3 ie no service means no judgement therefore no recovery.
The Insurer must be active on learning of claim. Can’t just ignore notice of claim and not do anything.
Reasonable inquiries are question of fact. In the small claims division the requirement for potentially expensive inquiries must reasonable in the circumstances.
Christian & Missionary Alliance v Alameddine [2014] NSWLC 17 O’Brien LCM (02/10/2014).
A detailed judgement covering the policy and legislative intent of Sec 6. Joinder depends on ‘viable deft’ test. Defendant could not be found. Searches of databases and field visit to addresses & RTA searches unfruitful. Real possibility judgement, if obtained, would remain unsatisfied. The possibility of frustration is sufficient.
[NB in Greeves –v– Fu [2015] NSWLC (reserved) unreported (25/09/2015) Magistrate Keogh noted that the viable defendant test required consideration of whether the defendant was 1) available and 2) solvent.
Lee v IAG T/as NRMA [2014] NSWLC (14 Oct 2014)
Sheriff’s notice of non-levy evid sufficient for 3rd part of test.
Reasonable inquires necessitates that costs and delay are considered. Amt of claim and costs of inquiries are factors. Inference can be drawn that there would be some further costs attached to additional inquires.
Payment of XS demanded even tho’ no claim made and that entitles the third party insurer to disclaim part of the claim pursuant to Sec 54. Omission to pay contributes to loss and so the insurer can take that into account as an offset.