Insurance and Reinsurance Update December 2011

Warranty & indemnity insurance is a form of transactional risk insurance used predominantly in M&A transactions. It transfers to an insurer the risk of breach of the warranties given by a seller under a sale and purchase agreement and the risk that indemnities (where insured) will be called upon.

This year the High Court in HIH Claims Support Limited v Insurance Australia Limited highlighted that coordinate liabilities are essential for the operation of the doctrine of equitable contribution and that whilst equity looks to substance rather than form, the basic requirement that the obligors share a common burden remains.

The Advisory Panel on the Economic Potential of Senior Australians has released a report which makes the recommendation (among others) that the federal government should convene a roundtable with senior Australians and insurance industry stakeholders to address various issues relating to the ability of workers over the age of 60 to access adequate insurance.

In October 2011, the Australian Securities and Investments Commission (ASIC) released a report outlining the key issues identified in ASIC’s review of sales practices by authorised deposit-taking institutions (ADIs) which sell consumer credit insurance (CCI).

The NSW Supreme Court has confirmed that standard obligations in syndicated facility agreements may trump confidentiality clauses in directors and officers (D&O) insurance policies.

The statutory charge created by s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (Act) has been described as “unsatisfactory” (see Strata Plan No 50530 v Walter Construction Group Ltd (In Liq) [2007] NSWCA 124 at [7] per Giles JA), and similarly by more than a few lawyers struggling with the various conceptual difficulties it presents.

Draft regulations were released on 9 December 2011 outlining the proposed standard definition of flood and the list of ‘prescribed contracts of insurance’ products to which the definition applies.