QBE Insurance must pay $10 million plus interest on a claim made against a professional indemnity policy taken out by a company that was deregistered in November 2016.

WA Supreme Court Chief Justice Peter Quinlan delivered his judgment yesterday, noting the insurer is still obligated to honour the contract with Australian Stockbroking & Advisory Services (ASANDAS), even if the client is no longer a registered entity.

Section 601AG of the Corporations Act allows a person to recover from the insurer of a company that is deregistered an amount that was payable under the insurance contract if the company had a liability to the person and if the insurance contract covered that liability immediately before deregistration.

Chief Justice Quinlan rejected QBE’s defence that two exclusions contained in the financial institutions civil liability professional indemnity policy applied to the liability owed by ASANDAS to other parties.

Three investment companies controlled by Perth businesswoman Beverley Margetts had taken court action against QBE to recover money owed to them by ASANDAS and its related entities.

They had prevailed in a separate case against ASANDAS and its authorised representative Stripe Capital, winning $12.2 million in damages when the Federal Court ruled in their favor that they had suffered losses because of a number of breaches by the defendants.

But they did not receive the money before ASANDAS was deregistered in 2016 and Stripe Capital was liquidated.

The companies then attempted to recover the money owed to them by making a claim against the QBE policy, which had a limit of indemnity of $10 million for each claim and an aggregate limit of $10 million for all claims.

QBE raised the conflict exclusion and unauthorised transactions exclusion included in the policy as its main defence in the case.

The insurer has not yet responded to a query from insuranceNEWS.com.au as to whether it intends to appeal the decision.