In Amlin Corporate Member Ltd v Austcorp Project No 20 Pty Limited  FCAFC 78, the Full Court of the Federal Court rejected the insurers’ argument that certain policies did not respond because the claim was made before the policies incepted.
This was a determination of a separate question concerning the interpretation of policies.
At the risk of over-simplifying the facts, the key facts were as follows: LM Investment Management (LM) was the Insured under policies taken out in July 2012. It lent money to Bellpac. The loan was guaranteed by Mr Wong. Bellpac went into liquidation. LM commenced Supreme Court proceedings seeking to enforce the guarantee against Mr Wong. In December 2011 (before the policies incepted) Mr Wong filed his Commercial List Response (CLR), which pleaded that LM had breached its duties to Bellpac.
The question for determination was, in effect, whether the CLR constituted a ‘Claim’ under the policies. The insurers contended that the CLR was a ‘Claim’, any liability found will arise from that “Claim” and the policies accordingly do not respond because such ‘Claim’ arose prior to inception of the policies.
The Full Court closely analysed the wording of the policies (in particular the insuring clause and the definitions of ‘Claim’, ‘Wrongful Act’ and ‘Loss’) and carefully considered the nature of the CLR and the allegations and claims (if any) made in it. It concluded that:
The CLR contained Mr Wong’s defences to an action on a guarantee;
The CLR did not claim any relief against LM;
Therefore the CLR did not satisfy the criteria required for it to constitute a ‘Claim.’
In the absence of a causal link between the CLR and the losses claimed in these proceedings, the claims in the proceedings are not claims ‘arising from’ the CLR.
The insurers have foreshadowed raising other defences to the claim for indemnity under the policies, including LM’s failure to disclose the CLR prior to the policies incepting.
It is important to note that the result in this matter, naturally, depended on the wording of the particular policies.