Notification of cladding claims under s 40(3) of the Insurance Contracts Act

MS Amlin Corporate Member Limited v LU Simon Builders Pty Ltd [2023] FCA 581

Recently, in proceedings in the Federal Court of Australia, Jackman J published reasons in a dispute between L.U. Simon Builders Pty Ltd and its insurers regarding the effect of notifications made by L.U. Simon of facts that might give rise to a claim for the purpose of s 40(3) of the Insurance Contracts Act 1984 (Cth) (ICA) following the Lacrosse Towers fire in November 2014.

Jackman J found that, in the 2014/15 Policy Year, L.U. Simon had notified a problem concerning the non-compliant use of aluminium composite panels (ACPs) that was far wider in scope than the Lacrosse fire that precipitated the notification. In so doing, Justice Jackman found that:

1.      the material notified to the insurers concerned a problem that was not confined to the fire at the Lacrosse building or to the specific brand of ACP that had been used as the cladding at that building;

2.      it did not matter that the potential claimants were not identified;

3.      there was sufficient correspondence between the notifications and new claims made against L.U. Simon (known as the Atlantis Claims), because the focus of the Atlantis Claims was the non-compliant and unsafe nature of the ACP cladding affixed to the Atlantis Towers, with its attendant risk of fire spread and threat to the safety of the public and occupants of the building; and

4.      in addition, there was a clear causal connection between the investigation conducted by the VBA that was reported upon in the notifications and the progression to the Atlantis Claims.

Accordingly, Jackman J found that L.U. Simon gave notice to its insurers in the 2014/15 Policy Year of facts that gave rise to the Atlantis Claims within the meaning of s 40(3) of the ICA.

Interestingly, in his findings, Jackman J held that an expert opinion can be considered a “fact” that might give rise to a claim for the purpose of s 40(3) of the ICA. In so doing, His Honour departed from the findings of Justice Meagher in P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd’s Ltd [2021] NSWCA 136, where His Honour held that an expert opinion was not a “fact” for the purpose of s. 40(3) of the ICA, but rather “facts” were matters of an objective nature and matter, as opposed to a matter of belief or opinion. Jackman J explained his reasoning, stating at [48] that, “where that opinion is given by a person in a position of public authority, such as the MFB or the MBS, the publication of that opinion may well be a most important fact that might itself give rise to a claim.

While each case will be determined by reference to the material that is notified by an insured to its insurers, this case demonstrates a broader approach by the court to the operation of s 40(3) of the ICA and may provide useful guidance for those insureds and insurers grappling with the effect of notifications about the use of combustible cladding.

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