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Insurers urged to pause before pursuing court action

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Insurers should consider industry implications before “rolling the dice” and pursuing legal cases to determine particular points.

That’s the view of HDI Global Regional Claims Manager David Lloyd, who told an Australian Insurance Law Association (AILA) livestreaming event that “when a case law bulletin hits my inbox, all too often I wonder why that case was run to hearing”.

“We don’t always look at the downside of industry ramifications with the cases we choose to run, but perhaps we should,” he said.

The Sydney seminar, held via webcast last week due to social distancing requirements, was part of AILA’s annual insurance law review series, where lawyers from various firms reflect on important cases from the past year and the likely implications.

Mr Lloyd says insurers may decide to run a case to prove a matter of principle, but could be guilty of “backing the wrong horse” if the final result was counterproductive for the industry.

Litigation can also take a long time to resolve, with a decision on the NSW Lloyd v Thornbury liability case, which he says created “questionable law”, was decided by the Appeal Court seven years after the incident.

Mr Lloyd says insurers should also consider their responsibility to act in line with the Insurance Contracts Act.

“I’m not saying there are persistent breaches of utmost good faith, but remind insurers the greater onus for compliance with the duty of utmost good faith is on them, and to avoid using indemnity as a form of defence with insureds,” he said.

The seminar also highlighted the Bank of Queensland Ltd v AIG case, which lawyers say was beneficial for the wider industry as it clarified circumstances in which class action claims can be aggregated.