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Court decision denies access to insurance documents

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A decision made in the Federal Court to deny access to all relevant insurance policies held by a respondent in a motor warranty class action has been described as an “important” outcome for the insurance industry.

Clyde & Co Partner Gareth Horne says the court, in striking down the application made by lead plaintiff Brett Evans, “recognised the powerful commercial advantage that can be obtained by a complainant if they are granted access to insurance documents”.

“It is an important decision because the court has effectively drawn a line in the sand, making it clear that such access should not be granted merely because it would assist the complainant in formulating its litigation strategy or determining the viability of pursing a claim or entering into a settlement,” Mr Horne told insuranceNEWS.com.au.

“The decision levels the playing field somewhat, by limiting the ability of complainants to obtain an undue forensic advantage in litigation simply because the defendant has an insurance policy in place.”

The lead plaintiff, in his application seeking access to the insurance documents, had argued he needed details of the policies that Davantage and its holding company McMillan Shakespeare had in order to make informed decisions about the class action going forward.

One of the decisions was whether it was commercially viable to prosecute the respondent - which had sold extended warranties to him and up to 28,000 other class action members between July 2013 and May 2015 - proceeding to judgment. Davantage had less than $1 million in net assets in the 2018/19 financial year, raising worries whether it could meet the class action’s claims of more than $47.6 million plus interest.

Another was whether it was appropriate to settle the matter and if so for what quantum and additionally, the plaintiff wanted to determine if it was necessary to take action against any of the insurers that had provided indemnity covers to the respondent and its holding company.

Suncorp-owned AAI, the primary insurer, provided professional indemnity cover to Davantage during the period, while Insurance Australia Limited, Dual Australia and Berkley Insurance were the first excess layer insurers to McMillan Shakespeare.

They have in their separate submissions opposed the application by the plaintiff to gain access to the insurance documents.

The insurers have all denied indemnity, a position that has been rejected by Davantage, and the parties are in discussions about it.

Justice Beach, in his decision in April, says the insurance documents are “not relevant to the determination of any fact in issue in the group proceeding” and called the plaintiff “a stranger to the policies”.

“And as I have said, in circumstances where production or disclosure of the relevant insurance details will confer a tactical advantage on the applicant, and a corresponding disadvantage upon the respondent, thereby creating an asymmetry in the parties’ positions at mediation, facilitating such a course would not usually be appropriate to ensure that justice is done in the proceeding,” he said.

“The interests of the applicant and group members do not trump those of the respondent to that extent.”

Click here for the full ruling.