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​Report 143 - Third party claims on insurance money

We transmitted Report 143 - Third Party Claims on Insurance Money: Review of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 to the Attorney General on 22 November 2016.

The Attorney General released the report on 19 December 2016.

The Civil Liability (Third Party Claims Against Insurers) Bill 2017 (NSW) will implement our recommendations.

Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) allows a plaintiff in civil litigation to access proceeds of insurance where proceedings against an insured defendant are not possible or would be pointless because, for example, the defendant is missing or insolvent. It achieves this by a special “charge” that attaches to the money that the insurer would be required to pay under the insurance contract. The charge has caused many conceptual problems, for example, in cases where the insurance contract also allows for money to be paid to fund the defence of directors and officers of defendant companies.

We recommend a new provision that clarifies areas of uncertainty and makes reforms where necessary. The new provision does not rely on the "charge" but rather provides a plaintiff with direct access to the insurer, in appropriate cases.

Our recommendations do not increase the liability of insurers. Like the current s 6, the new provision should ensure that an insurer is not liable for more than the insurer would have been liable to pay under the insurance contract. It should also ensure that the insurer can rely on the same defences that the insured defendant could have relied on in an action brought by the plaintiff.