High Court ruling makes it harder for insurers to say “no”.

Insurers can no longer rely on section 54 of the Insurance Contracts Act to reject a claim due to an insured’s act or omission if that act or omission did not cause the loss, thanks to a High Court ruling in the case of Maxwell v Highway Hauliers Ltd.

Guardian’s Managing Director Evan Jackson said, “This is good news for brokers and their clients as it means insurers are more restricted as to what they can exclude. It also means insurers will have to prove that an insured’s act or omission is the reason behind the claim rather than simply reject a claim due to a failure to disclose something or an unrelated action.”

In the case cited Maxwell v Highway Hauliers Ltd (Maxwell), the insurers sought to exclude the loss arising from two separate truck crashes because the two drivers failed to obtain a required PAQS test score (a psychological test about safety) so cover was excluded by way of an endorsement, although that failure was accepted as not being causative of the accidents.

The WA Court of Appeal held that s54 (insurer may not refuse to pay under certain circumstances) applied to the insured’s omission and so the insurers could not deny cover on that basis.

Contact your Guardian account manager for more information.

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