AAI Limited trading as Vero Insurance v Technology Swiss Pty Ltd [2021] FCAFC 168

AAI Limited trading as Vero Insurance v Technology Swiss Pty Ltd [2021] FCAFC 168

Where an insurer has paid a global sum to an insured in settlement of claims under a policy and other claims, the insurer is entitled to recoupment/subrogation only to the extent the settlement sum can be objectively attributed to indemnity for insured loss. Apportionment may be made using mutually known maximum values of non-indemnity claims, with only the remaining sum referable to indemnity, absent clearer allocation. In this case, the insurer is entitled to recoup $316,770.06—the sum of the undisputed indemnity payment ($200,000) and the minimum amount of the settlement payment ($116,770.06) that can be inferred to be for loss indemnification under the policy.

Parties
Appellant/cross Respondent: AAI Limited trading as Vero Insurance; Respondent/cross Appellant: Technology Swiss Pty Ltd
Jurisdiction
Australia
Judgment Date
17 September 2021
Procedural Posture
Appeal / Judgment on Appeal and Cross Appeal
Outcome
Appeal and cross-appeal dismissed
Legal Topics
Subrogation, Recoupment, Indemnity, Settlement Deeds, Apportionment of Settlement Proceeds
Insurance Law Equity Commercial Law Subrogation Recoupment Indemnity Settlement Deeds Apportionment of Settlement Proceeds

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Parties

AAI Limited trading as Vero Insurance

Appellant/cross Respondent

Technology Swiss Pty Ltd

Respondent/cross Appellant

Procedural Posture

Appeal / Judgment on Appeal and Cross Appeal

Legal Issues

  1. 1 Whether and to what extent the insurer is entitled to recoup from proceeds of a third party claim after a settlement deed with the insured
  2. 2 How much of a global settlement sum paid to the insured is referable to indemnity for the insured loss under the policy
  3. 3 Whether payment under a settlement deed may give rise to rights of recoupment/subrogation under the insurance policy

Ratio Decidendi

Where an insurer has paid a global sum to an insured in settlement of claims under a policy and other claims, the insurer is entitled to recoupment/subrogation only to the extent the settlement sum can be objectively attributed to indemnity for insured loss. Apportionment may be made using mutually known maximum values of non-indemnity claims, with only the remaining sum referable to indemnity, absent clearer allocation. In this case, the insurer is entitled to recoup $316,770.06—the sum of the undisputed indemnity payment ($200,000) and the minimum amount of the settlement payment ($116,770.06) that can be inferred to be for loss indemnification under the policy.

Court Disposition

Appeal and cross-appeal dismissed

Orders

  • The appeal and cross-appeal are dismissed
  • The parties are to file and serve written submissions on the question of costs by 1 October 2021