The NSW Court of Appeal has reserved its decision on access to directors’ and officers’ (D&O) insurance when a third party seeks priority to the funds over directors and executives.

The action stems from a shareholder class action in the Supreme Court of Victoria against failed agribusiness investment company Great Southern.

Entitlement to D&O policy proceeds has become an issue following New Zealand’s Bridgecorp decision, in which that country’s High Court ruled a company receiver could access the funds before directors and officers who want to pay defence costs.

The Bridgecorp decision was overturned by the New Zealand Court of Appeal in December and the parties are currently lodging documents seeking leave to appeal to the Supreme Court, New Zealand’s highest court.

NSW has laws similar to the New Zealand legislation on which Bridgecorp was based, prompting six insurers to test the matter here.

Chubb, Axis, Allianz, QBE, Chartis (AIG) and Liberty Mutual have asked the Court of Appeal for a determination on whether section six of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) applies to claims-made policies or only to occurrence-based policies.

They also seek a declaration on the territorial reach of section six – whether it applies outside NSW.

The insurers want to know whether any charge includes amounts paid as defence costs and amounts paid on other claims before the liability that gives rise to it.

A panel of five judges, including NSW Chief Justice Tom Bathurst and Court of Appeal President Margaret Beazley, have reserved the decision after a hearing last month.

Their ruling is awaited on both sides of the Tasman.