Two court decisions considering whether insurers should pay the court costs of executives facing criminal charges if they have acted dishonestly drew public attention last week – but the cases themselves are quite different.

Former One.Tel directors Jodee Rich and Mark Silbermann – who face charges over the company’s 2001 collapse – were rebuffed by the High Court when it declined to hear their appeal to have their court costs paid upfront by their directors’ and officers’ (D&O) insurer, CGU.

Mr Rich and Mr Silbermann are fighting a case brought by the Australian Securities and Investments Commission (ASIC) for $92 million in compensation for alleged breaches of their duties as directors. But the decision had more to do with the complexity of their cases – not the law itself.

The High Court rescinded the right of leave to appeal a NSW Appeal Court ruling that CGU was within its rights to deny their claims. CGU said the policies were void on the grounds of fraudulent non-disclosure and misrepresentation – a claim the two men have the right to fight in court.

But the High Court said if it ordered CGU to pay Mr Rich’s and Mr Silbermann’s costs, the insurer would be denied the opportunity to have its case heard in court. It also ordered Mr Rich and Mr Silbermann to pay the insurer’s costs – adding as much as $100,000 to their legal bills.

CGU spokesman Chris Jackson told Sunrise Exchange News the insurer has “always maintained that there was no valid policy with CGU at the time of the claims. This was because it had been cancelled due to non-disclosure of material information when the policy was taken out, and at renewal.”

He says the One.Tel case is “one of these rare instances where there was no entitlement to up-front funding of defence costs”.

So why has the High Court on the same day told the D&O insurer for former FAI executive Daniel Wilkie to pay his legal fees before his case is heard in court? Legal sources say the Rich-Silbermann defence strategy over the ASIC charges is complex and CGU has a right to have its case heard, if the two men wish to pursue it.

In Mr Wilkie’s case, his insurer, GIO – in the guise of Gordian Run-off – has no proof that he has acted dishonestly, and the insurer can claim the costs back if Mr Wilkie is found guilty of fraud or dishonesty.

The Rich-Silbermann case is an aberration, the legal experts say. The High Court won’t allow insurers to rule out paying a claim on the basis of wrongful conduct alone. It wants courts to find whether the wrongful conduct has occurred before the claim is denied.

A paper by law firm Phillips Fox says D&O policies “commonly contain a dishonesty exclusion which is triggered by the relevant conduct being established in fact, or a ‘final adjudication’ of it”.

“In these two matters, the dishonesty exclusions incorporated the need for the wrongful conduct to have ‘in fact’ occurred – which meant that the conduct had to have been established by an adjudication of a court or tribunal.”