​NSW making third party insurance claims law clear

​Issued: 19 December 2016

[PDF 112KB]

A new report by the NSW Law Reform Commission (LRC) recommends replacing a 70-year-old insurance law to reduce uncertainty for insurers, the business community and consumers, Attorney General Gabrielle Upton announced today.

“Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 was designed to protect people from parties trying to escape their financial obligations, but changes to the insurance industry have made its application unclear,” Ms Upton said.

“Businesses are concerned the old law could prevent their directors and officers from having their legal costs covered by their insurer when they are defending civil actions.”

“It’s important we have laws that are easy to understand and provide maximum protection for consumers.

“The LRC recommends replacing Section 6 with a simple law that allows directors and officers to have their legal costs covered under an insurance policy.”

The proposed law would continue to enable civil action to be taken against a person or company’s insurer if they could not be sued directly, even if the company is insolvent or a person is deceased or can’t be found.

Under the LRC’s proposal, insurance companies would be no more liable than if the legal action was taken directly against the person or company.

The LRC report says the new law could provide a model for other states and territories or the Commonwealth to adopt.

The NSW Government will consider the report, which was developed in consultation with key stakeholders including the insurance industry, company directors and plaintiff and defence lawyers.