Drayton, William John & Ors v Martin, John Leslie & Ors [1996] FCA 389

Drayton, William John & Ors v Martin, John Leslie & Ors [1996] FCA 389

The accounting underwriters are liable to contribute to the settlement sum paid by FAI, as the insured's liability to the Draytons was incurred in connection with his practice as an accountant, a claim was made during the policy period and section 54 of the Insurance Contracts Act precludes refusal for late notification. Settlement without insurer's consent does not preclude indemnity since the accounting underwriters wrongfully repudiated liability. The 'independent liabilities test' is appropriate, requiring contribution in proportion to the respective maximum liabilities.

Parties
Applicant: William John Drayton, Nancy Mae Drayton, Bruce William Drayton, Ross Drayton; First Respondent: John Leslie Martin; Second Respondent: The National Mutual Life Association of Australasia Limited; Third Respondent: Roger Budd Agencies Pty Limited; Cross Claimant: FAI General Insurance Company Limited; Cross Respondents: HIH Casualty and General Insurance Limited (formerly C E Heath Casualty and General Insurance Limited), AMP General Insurance Limited, Switzerland General Insurance Co Limited, Sun Alliance and Royal Insurance Australia Holdings Limited (formerly Sun Alliance Australia Limited)
Jurisdiction
Australia
Judgment Date
24 May 1996
Procedural Posture
Claim for Contribution Between Insurers / Judgment on Cross Claim
Outcome
judgment for FAI on cross-claim for contribution
Legal Topics
Liability Policy, Professional Indemnity Policy, Contribution, Claims Made and Reported Policy, Insurance Contracts Act S.54, Settlement Without Insurer Consent
Insurance Law Liability Policy Professional Indemnity Policy Contribution Claims Made and Reported Policy Insurance Contracts Act S.54 Settlement Without Insurer Consent

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Parties

William John Drayton, Nancy Mae Drayton, Bruce William Drayton, Ross Drayton

Applicant

John Leslie Martin

First Respondent

The National Mutual Life Association of Australasia Limited

Second Respondent

Roger Budd Agencies Pty Limited

Third Respondent

FAI General Insurance Company Limited

Cross Claimant

HIH Casualty and General Insurance Limited (formerly C E Heath Casualty and General Insurance Limited), AMP General Insurance Limited, Switzerland General Insurance Co Limited, Sun Alliance and Royal Insurance Australia Holdings Limited (formerly Sun Alliance Australia Limited)

Cross Respondents

Procedural Posture

Claim for Contribution Between Insurers / Judgment on Cross Claim

Legal Issues

  1. 1 Whether accounting underwriters are liable to indemnify insured under Accountant's policy for Draytons' claim
  2. 2 Whether evidence establishes insured breached professional duty and settlement was reasonable
  3. 3 Effect of 'claims made and reported' terms and s.54 Insurance Contracts Act 1984 (Cth)

Ratio Decidendi

The accounting underwriters are liable to contribute to the settlement sum paid by FAI, as the insured's liability to the Draytons was incurred in connection with his practice as an accountant, a claim was made during the policy period and section 54 of the Insurance Contracts Act precludes refusal for late notification. Settlement without insurer's consent does not preclude indemnity since the accounting underwriters wrongfully repudiated liability. The 'independent liabilities test' is appropriate, requiring contribution in proportion to the respective maximum liabilities.

Court Disposition

judgment for FAI on cross-claim for contribution

Orders

  • The cross respondents pay to the cross claimant the sum of $134,686.34.
  • The cross respondents pay the costs of the cross claimant.