In this recent NSW Supreme Court case, the court refused an application by the plaintiff to join the insurer as a defendant to proceedings. The court considered the proposed amended statement of claim to be defective, as it did not plead material facts relevant to the insurer’s liability pursuant to the insurance policy and Section 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017.
- Whether a statement of claim pleaded material facts relevant to an insurer’s liability pursuant to the policy and to the Civil Liability (Third Party Claims Against Insurers) Act 2017, in circumstances where the plaintiff seeks to join the insurer as a defendant to the proceedings
- Whether “remittance shortfalls” fall within the definition of “insured property” under the policy
- Whether the loss claimed occurred whilst “in or upon” the “premises” as defined by the policy
The plaintiff, Tushita Technologies Limited (Tushita), was an operator of ATMs in Australia, used to exchange Australian currency into cryptocurrency and vice versa.
The first defendant, MJ Protective Services Pty Limited (MJ), entered a contract with Tushita to provide security services for the ATMs in question, including the collection and remittance of money. MJ subcontracted the security services for 2 ATMs located in Melbourne to the second defendant, Cobra, and the security services for 4 ATMs located in Sydney to the fourth defendant, Vixon. The third defendant was the sole director and shareholder of Cobra.
In December 2017, Tushita’s accountant identified shortfalls in the amounts collected and remitted by MJ or its contractors of approximately $2.3M and commenced proceedings to recover the losses.
When it commenced proceedings in 2019, MJ was in liquidation. Accordingly, Tushita sought leave to join MJ’s insurer as a defendant pursuant to the Civil Liability (Third Party Claims Against Insurers) Act 2017 (the Act). This application was opposed by Underwriters.
Section 4(1) of the Act requires that if a claimant wishes to recover from an insurer, it must establish that (1) the relevant insurer exists; (2) the insurer issued a policy of insurance to an insured person; (3) the insured person has a liability to the claimant; and (4) the policy covers that liability.
The court stated that Tushita must plead its claim against Underwriters under the policy on MJ’s behalf in such a way to show that MJ’s liability for the remittance shortfalls is an “insured liability” under the Act.
The proposed statement of claim did not explain how each of the shortfalls was a loss of property within the meaning of the policy. There must have been an event, unintended by the insured, which took the property away from the insured, or otherwise deprived the insured of the property1. There was no such allegation in this case.
The insuring clause required that the loss has been suffered “in or upon” the “premises”, at a location covered by the policy. Tushita had not alleged where the property was when the loss occurred.
On this basis, the court found Tushita’s pleadings to be defective, as material facts required to sustain a claim under the policy had not been pleaded. As a result Tushita’s application to join Underwriters as a defendant was refused.
Implications for you
This case demonstrates the importance of ensuring that all material facts have been properly pleaded when considering a client’s position in respect of an application to make a claim directly against an insurer under the Civil Liability (Third Party Claims Against Insurers) Act 2017. It is important to plead all material facts to demonstrate not only that the defendant insured is liable, but also to demonstrate that the liability is one in respect of which indemnity is afforded under the relevant insurance policy (in other words that the insuring clause is triggered).
1David St L Kelly and Justice Michael Ball, LexisNexis Butterworths, Principles of Insurance Law, vol 1 (at Service 63) at [12.0050]