Overseas liability insurers defend statutory charge claims by plaintiffs

Livingstone v CBL Corporation Limited (in liq) & Ors [2021] NZHC 755

The High Court has recently reconfirmed that overseas insurers are immune from statutory charges under the Law Reform Act 1936 (LRA).  However, overseas insurers looking to strike out claims by New Zealand claimants will need to be careful to be armed with clear evidence showing that they do not operate a business in New Zealand.

Background

The plaintiff made various claims against failed insurer CBL.  One of those claims was that CBL held insurance policies (a Public Offering of Securities Insurance policy (POSI Policy) and a Directors and Officers Liability Policy (D&O Policy)) indemnifying CBL and its directors against the plaintiff’s other claims.  The plaintiff sought a declaration under section 9 of the LRA that any money payable to CBL under those policies was subject to a statutory charge in the plaintiff’s favour.

As the Court said, section 9 of the LRA was enacted to overcome the unfairness of insurance proceeds being paid to the pool of creditors of an insolvent insured rather than to the party who suffers the loss insured by the policy.  The LRA avoids this by creating a charge over the money payable by the insurer in favour of third party claimants, such as Mr Livingstone, on the happening of the insured event.

A bar on claims against overseas insurers

CBL relied on the Supreme Court’s decision in Ludgater Holdings Ltd v Gerling Australia Insurance Co Pty Ltd as authority for the proposition that s 9 of the LRA does not have extraterritorial application.

Because the facts pleaded in strike out applications are presumed to be true, only indisputable evidence is admissible to prove the incorrectness of the pleadings.  Affidavit evidence by Mr Dennett, a partner of the law firm that acts for the underwriters of the POSI and D&O Policies, being Dual Corporate Risks Limited (DCRL) and Liberty Specialty Markets (Liberty), showed that DCRL is registered in England and Wales and that both DCRL and Liberty’s head offices were based in London.

However, the plaintiff filed evidence in response that DCRL is the principal legal entity for the DUAL Group which has an office in New Zealand as well as a New Zealand website.  In addition, the plaintiff’s contained evidence showed that Liberty’s contained claims that it has teams across multiple countries including New Zealand.

Outcome

The Court indicated that it had no reason to doubt Mr Dennett’s evidence and that CBL’s argument appeared to be unassailable as both policies were underwritten and administered by entities having their place of business outside of New Zealand.  However, the plaintiff’s claim included allegations that both DCRL and Liberty were resident in multiple places including New Zealand, when they underwrote the policies for the relevant periods.  As is fundamental in strike out applications, the Court proceeded on the basis that allegations made in the statement of claim were correct.  The Court did not consider Mr Dennett’s evidence to be sufficiently indisputable to overcome the allegations.

While the Court refused to strike out the plaintiff’s claim, it found that the plaintiff should not be permitted to proceed unless CBL’s underwriters were afforded the opportunity to be heard.  The Court directed that the plaintiff either apply to join the underwriters as parties to the proceeding or apply for leave to commence an action against them under the LRA which by 11 June 2021, or the claim would be struck out.

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