The Victorian Building Authority fires up for further audits

natasha_stojanovichFollowing the Lacrosse fire in Melbourne’s Docklands in late 2014, the Victorian Building Authority (VBA) conducted an audit of non-compliant wall cladding systems of high rise buildings in inner city Melbourne. By way of background, the Lacrosse building was clad in aluminium composite panelling, and it is alleged that the panelling (with a combustible core) contributed to the fire’s dramatic spread up the exterior façade of the building, causing significant property damage.

The VBA’s audit found a 51% rate of non-compliance, albeit only two buildings were required to carry out rectification work. The findings, which were fairly controversial, left building owners with ‘non-compliant’ buildings which were safe to occupy, in legal limbo.

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A bird set loose

Clancy ODonovanIn Wayland v Bird [2017] NSWCA 26, the NSW Court of Appeal (NSWCA) held a professional indemnity insurer should not be joined under section 6(4) of the Law Reform (Miscellaneous Provision) Act 1946 (NSW) (Act), to a proceeding in which its insured was the defendant, in circumstances where it was entitled to refuse indemnity due to prejudice caused by the insured – notwithstanding there was an arguable case the insurance policy responded to the Claim (as defined below).

In July 2013, Mr and Mrs Wayland (Waylands) sued Mr Bird in the District Court of NSW alleging they had suffered loss and damage as a result of Mr Bird’s breach of contract and negligent provision of pest inspection and control services (claim). Mr Bird consistently failed to cooperate with his professional indemnity insurer, Pacific International Insurance Limited (Pacific), particularly, by failing to provide its lawyers with necessary information and instructions to enable them to file a defence on his behalf. In May 2015, the Waylands filed a motion seeking leave to join Pacific to the proceeding pursuant to section 6(4) of the Act, however, the primary judge dismissed the application, finding Pacific was entitled to refuse indemnity to Mr Bird and section 6(4) of the Act was not enlivened.

On appeal, the NSWCA affirmed the primary decision, finding it was clearly open to the primary judge to conclude Pacific might withhold indemnity if its ability to defend the proceedings had been prejudiced by Mr Bird’s lack of cooperation and this, while not necessarily determinative, was an appropriate matter to inform the court’s discretion as to the grant of, or refusal to grant, leave.

Bill on conflicted remuneration for life insurance passed

Sophie DevittThe Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 (Bill) has passed both Houses and will take effect from 1 January 2018. After originally lapsing in April 2016, the Bill was reintroduced late last year with minor changes.

The Bill will have a significant impact on life insurance brokers and represents the government’s response to a number of investigations into the life insurance industry.

Change to exemption against conflicted remuneration ban

The Bill amends the Corporations Act to remove the exemption against the ban on conflicted remuneration for benefits paid in relation to certain life insurance products. Conflicted remuneration is a benefit which could reasonably be expected to influence the choice of financial product recommended, or the financial product advice given, to retail clients.

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The world catches up to securities class actions

Belinda_RandallMany (especially European) jurisdictions eschew the term ‘class actions’, preferring the more genteel descriptors ‘collective investor action’ or ‘collective redress’. Despite the different terminology, the statistics show that the globalisation of securities class actions is taking hold and the trend is set to increase. This trend will have wide ranging implications on the future of D&O claims internationally, according to leading US commentator Kevin LaCroix (of the D&O Diary fame), who spoke at DLA Piper’s third annual Insurance Symposium in Sydney last week.

The rise of collective investor actions outside of the US is most prominent in the UK, Netherlands and Denmark. There is also increasing activity in France, Germany and Sweden. Not to forget the introduction of class action procedures in Thailand from December 2015 (which is significant, given that most legal systems in Asia have historically not supported class actions against companies – where D&O insurance premiums have remained low as a result). Why is the world catching up to the longstanding US dominance in the class actions space? According to LaCroix, there are a few key factors driving this.

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Senate Signs off on Financial Adviser Reforms – Changes to Claim Volume/Risk Profile Ahead?

Belinda_RandallLast Week the Senate passed the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 and paved the way for wide ranging reforms (and increased compliance obligations) in the financial advisory industry. The new regime starts on 1 January 2019 and includes the following reforms:

– Compulsory education requirements for both new and existing financial advisers.
– Supervision requirements for new advisers.
– A code of ethics for the industry to apply from 1 January 2020.
– An exam that will represent a common benchmark across the industry.
– An ongoing professional development component.

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ASIC reveals ‘hot spots’ for the insurance industry in 2017

Benjamin HineLast week Greg Medcraft, the chairperson of the Australian Securities and Investments Commission (ASIC), delivered a speech to the Insurance Council of Australia Annual Forum on the current insurance environment and ASIC’s priorities for the coming year.

Current environment

The speech commenced by noting that 2016 was an eventful year for the insurance industry.

In particular, Medcraft noted the impact of technology and social media and the impact that technology is having on consumer empowerment. Consumer expectations are changing and the impact of social media means that consumers are able to express themselves regardless of media interest.

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To cap or not to cap? Tassie finally joins the party

natasha_stojanovichLate last year Tasmania passed changes to its capped liability legislation, finally bringing it into line with the mainland, more than 10 years after the legislation was first introduced in the apple isle. The legislation allows professional groups to register schemes, by which their members can, by statute ‘cap’ or limit their professional liability, to be consistent with their level of professional indemnity insurance. Such schemes are designed to promote the availability and affordability of professional indemnity insurance, particularly for higher risk professional groups.

Prior to the change, the Tasmanian legislation contained a singularly unhelpful provision ’27(c)’, which was not in the legislation for all other states and territories. Effectively, ’27(c)’, meant that consumers could demand professionals opted out of schemes, and undermined their effectiveness. In practice, the clause, which was unique to the Tasmanian legislation, rendered the legislation a toothless tiger, and ‘out of step’ with otherwise uniform capping legislation nationally. As a result, only one scheme was ever registered in Tasmania.

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Litigation funders and contingency fees under the spotlight in Victoria

0sarah_fountainOn Monday, it was announced that the Victorian Attorney-General, the Hon Martin Pakula MP, has asked the Victorian Law Reform Commission (VLRC) to review the rules covering litigation funders to prevent unfair conduct in civil proceedings, such as class actions.

The review by the VLRC will consider issues such as:

  • circumstances where a successful outcome is eroded by fees, leaving plaintiffs with nothing (or next to nothing), despite winning;
  • whether some third parties are unfairly profiting from successful actions;
  • the existing prohibition on law firms charging contingency fees and whether that prohibition should be retained.

In announcing the review, the Attorney-General commented, ‘It is incredibly frustrating when a person wins a case, only to walk away almost empty-handed because the money has been soaked up by unfair legal fees. …. The days of some litigation funders charging such excessive fees need to come to an end.

The VLRC is required to provide its report to the Government by 30 March 2018. As part of its review, the VLRC will consider submissions from interested parties. Actions funded by litigation funders can have a significant impact on many parties, particularly insurers, and insurers are therefore encouraged to have their voice heard by making submissions to the VLRC.  If you would like assistance in preparing submissions, please contact David Leggatt on +61 3 9274 5473.

Finding dirt in the cloud?

natasha_stojanovichA recent Supreme Court decision has ‘opened the door’ to litigants seeking discovery of supposedly ‘deleted’ electronic material in the Cloud.

The decision concerned a dispute about discovery in a defamation proceeding. It all turned on seeking access to text messages which had been deleted from the plaintiff’s i-Phone. The plaintiff said his i-Phone had been damaged, back-ups deleted, and was therefore unable to discover relevant text messages. As no backed up copies of the text messages were available – on his personal computer or Apple iCloud account – the plaintiff said he could do no more to provide the text messages. Read the rest of this entry »

Section 6 – destined for change?

0chris_LisicaThe NSW Law Reform Commission has just released Report 143, which recommends a replacement provision for section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

Section 6 provides an avenue for a plaintiff to recover damages or compensation directly from the defendant’s insurer, in certain circumstances. The section also provides for a plaintiff to assert a ‘statutory charge’ over all insurance moneys which may become payable under the insurance contract as a result of the defendant’s liability to the plaintiff. This arrangement has caused headaches in the past, which are well known in the industry. Read the rest of this entry »

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