Liability insurance: defence costs

The decision of the New South Wales Court of Appeal in Chubb Insurance Co of Australia Ltd v Moore [2013] NSWCA 212 has given clear answers to a conundrum which has vexed the courts of Australia and New Zealand for some years. The court has ruled that legislation designed to protect third parties in the event of the assured’s insolvency does not have the effect of removing the ability of the assured to recover defence costs.

The New Zealand Court of Appeal in Steigrad v BFSL 2007 Ltd [2012] NZCA 604, a case previously discussed in Insurance Law Monthly ((2013) 25 STL 97), had reached the same conclusion. The question does not arise in the UK under the Third Parties (Rights Against Insurers) Acts 1930 and 2010, although the court in this case grappled with other issues which do arise under the UK legislation, namely the problem of competing claims and that of territorial jurisdiction.