Mutual insurance: liability claims

Mutual insurers, notably P&I Clubs, provide in their rules that there is no entitlement to payment if a member has a claim, Instead, there is a discretion, but that discretion must not be exercised in an arbitrary, capricious or irrational fashion. In Wellington City Council v Local Government Mutual Funds Trustee Ltd [2017] NZHC 2901 Collins J discussed the exercise of such a discretion in the unusual circumstances where the mutual had given up valuable rights under its reinsurance in the absence of knowledge that a member faced a claim.

Wellington City Council : the scheme