Boardroom Briefing December 2019
Plaintiffs in a class action were not entitled to access the defendant’s insurance documents, despite previous case law bolstering the argument for disclosure.
The class action was by brought by purchasers of allegedly contaminated seed which it was claimed had caused loss. The purchaser plaintiffs also believed that the supplier of the seed was not insured because the defendant’s managing director had sworn an affidavit setting out that the company was not entitled to indemnity from its insurer. The plaintiffs brought an application for the production of the defendant’s insurance policy to find out the extent of funds available to meet any damages award and the possibility of pursuing the insurer for indemnification under the defendant’s insurance policy. Essentially the plaintiffs feared that their ‘conservative’ estimate of their loss exceeded the defendant’s assets. The defendant argued that the plaintiffs’ application was a vexatious fishing expedition.
The Court was not persuaded by the plaintiffs’ arguments. When considering whether or not to make an order for disclosure, the Court will take into account the defendant’s financial capacity. It was relevant in this case that the defendant had substantial assets and was continuing to operate a profitable business, so there was no reason to go behind the defendant’s stated position about its lack of cover.
Another recent case weighed up factors regarding disclosure and found in favour of the insurance documents being produced. Relevant factors might be: a real possibility that the defendant will not be able to meet any judgment obtained against it; the reduction in the prospects of a settlement if the plaintiff cannot assess the insurance position; and the need for court approval of any settlement to assess factors such as the ability of the defendant to withstand a greater judgment.
In brief: a defendant’s financial position is a persuasive factor when a court is weighing up whether to order disclosure of insurance documents. The facts behind each application are crucial, as is the motivation for the making of the application. The problem for the plaintiffs, in this case, was that they were going behind the defendant’s stated position about its lack of insurance. Certainly, as any good broker will tell you, an insured should never hand over insurance details or documents to those on the other side of a dispute. Disclosure generally is a big challenging topic – your Lockton broker can help you with the strategy around all types of disclosure, including disclosure to your insurer and the opposition.
Mallonland Pty & Anors v Advanta Seeds Pty Ltd  QSC 250
(Simpson v Thorn Australia Pty Ltd t/a Radio Rentals (No.4)  FCA1229)