Reinsurance: coverage and the running of time

Commonwealth of Australia v Vero Insurance Ltd [2012] FCA 826, a decision of the Federal Court of Australia, was by the common consent of the parties not a reinsurance dispute but rather a claim under a direct policy. However, given that the policyholder was itself an insurer, the parties’ classification of the nature of the cover provided to the policyholder is unconvincing.

The main interest of the decision is the implication that, under an excess of loss treaty, the limitation period for a claim against the reinsurers cannot start to run until at the very earliest the liability of the reinsured for any one claim in excess of the retention level has been established and quantified. The case also raises an interesting coverage question as to whether “land” constitutes “property” .