CGU Insurance Limited v AMP Financial Planning Pty Ltd

Insurance – Appellant agreed to provide insurance to the respondent in respect of claims for civil liability - Respondent notified the appellant of potential liability to investors arising out of misconduct of financial advisers who were representatives of the respondent for the purposes of the Corporations Law - Appellant represented to the respondent that it would not rely on clause prohibiting the respondent from admitting liability or settling claims or clause requiring formal claims against the respondent - Appellant told the respondent to act as a prudent uninsured - Respondent, for sound commercial reasons including preservation of its relations with the Australian Securities and Investments Commission, proposed a protocol for responding to the investors' claims designed to recompense investors without the need for legal proceedings - Appellant agreed in principle to the protocol - No legal proceedings were commenced - Respondent sought confirmation that the appellant would indemnify it for settlement amounts - Respondent paid settlement amounts to the investors at a time when the appellant had not accepted liability - Whether the appellant's liability to indemnify the respondent extended to payment of reasonable settlement amounts - Whether the settlement amounts were reasonable - Relevance of the requirement to act with utmost good faith in s 13 of the Insurance Contracts Act 1984 (Cth).

Insurance – Requirement to act with utmost good faith in s 13 of the Insurance Contracts Act 1984 (Cth) - Meaning of utmost good faith - Whether lack of utmost good faith means only dishonesty - Whether utmost good faith may require an insurer to act with due regard to the legitimate interests of the insured as well as to its own interests - Whether the appellant's delay in accepting or rejecting liability amounted to a lack of utmost good faith - Relevance of reciprocity - Whether the respondent could invoke the appellant's lack of utmost good faith if the respondent had failed to act with utmost good faith - Whether the respondent's lack of diligence and acting for its own interests amounted to a lack of utmost good faith.

Estoppel – Estoppel by convention - Appellant represented to the respondent that it would not rely on clause prohibiting the respondent from admitting liability or settling claims or clause requiring formal claims against the respondent - Appellant told the respondent to act as a prudent uninsured - Respondent, for sound commercial reasons including preservation of its relations with the Australian Securities and Investments Commission, proposed a protocol for responding to the investors' claims designed to recompense investors without the need for legal proceedings - Appellant agreed in principle to the protocol - No legal proceedings were commenced - Respondent sought confirmation that the appellant would indemnify it for settlement amounts - Respondent paid settlement amounts to the investors at a time when the appellant had not accepted liability - Whether the appellant represented that the respondent would not subsequently be required to prove its liability to the investors - Whether the respondent relied on the representation - Whether detriment established.

Words and phrases – "prudent uninsured", "utmost good faith".

Insurance Contracts Act 1984 (Cth) – ss 13, 14.

Corporations Law – s 819.