When is a ‘claim’ not a ‘claim – when it is a defence?

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In the recent case of Austcorp Project No 20 Pty Ltd v LM Investment Management Ltd, in the matter of Bellpac Pty Ltd (receivers and managers appointed) (in liq) (No 2) [2014] FCA 44, the Federal Court was called upon to consider whether the “Claim” asserted by the Plaintiffs was first made in a Commercial List Response (similar to a Defence) filed prior to the inception of certain policies of claims made insurance. If that was the case, as the insurers contended, then the “Claim” was not first made during the Period of Insurance and the policies would not respond. So, can a “Defence” be a “Claim”? 

The definition of “Claim” within the policies included, relevantly, “any suit, civil or third party proceedings, counter-claim or arbitration proceeding brought against You alleging a Wrongful Act”. The primary focus was therefore on whether the Commercial List Response was a “counter-claim” for the purposes of that definition, particularly given that the Commercial List Response alleged breaches of duty that gave rise to a set off. However, in the end, the Court found that the Commercial List Response was not a “Claim”, including because it:

  1. did not make a claim for “Loss” as defined in the policies (including damages or compensation) – a set off was insufficient; and
  2. was not “brought against” the Insured in the ordinary sense – again, a set off was insufficient.

The Court also found that, even if the Commercial List Response was a “Claim”, the Claim made in the subject proceedings was not first made in the Commercial List Response. This is because, notwithstanding similarity in the factual matrix which gave rise to the allegations, the “Claims” themselves had a different nature and asserted different “Loss”.