Written by Janelle Pabst
Scenario: You are a claims officer and a claim is allocated to you where the insured is not liable for the collision. The insured says to you that after the collision occurred, they obtained the insurance details of the third party and you are able to confirm that the third party held a valid insurance policy at the time the collision occurred.
You decide to refer the matter for litigation, and legal proceedings are issued for the matter. A process server is engaged but all the attempts to serve the third party are unsuccessful. They aren’t living at the address they provided, their mobile number doesn’t ring, an investigator hasn’t been able to produce new leads on the third party, the third party can’t be found and the matter appears to be at a roadblock. What steps can be taken next?
This is where pursuing recovery under section 51 of the Insurance Contracts Act should be considered.
What is Section 51 of the Insurance Contracts Act?
(1) If:
(a) the insured or any third party beneficiary under a contract of liability insurance is liable in damages to another person; and
(b) the contract provides insurance cover in respect of the liability; and
(c) the insured or third party beneficiary has died or cannot, after reasonable inquiry, be found; then the other person may recover from the insurer an amount equal to the insurer’s liability under the contract in respect of the liability of the insured or third party beneficiary.
(2) A payment under subsection (1) is a discharge, to the extent of the payment in respect of:
(a) the insurer’s liability under the contract; and
(b) the liability of the insured or third party beneficiary, or the legal personal representative of the insured or third party beneficiary, to the other person.
(3) This section does not affect any right that the other person has in respect of the liability of the insured or third party beneficiary, being a right under some other law of the Commonwealth or under a law of a State or Territory.
Simply put, there needs to be a third party insurer involved and there needs to be a valid insurance policy which applied between the third party insurer and the third party at the time the collision occurred. If the third party is responsible for the collision and they have died or cannot be found after ‘reasonable inquiries’, then legal proceedings can be issued directly against the third party insurer under section 51. It is important to highlight that the third party insurer’s liability under section 51 will be reliant upon the insurance policy which applied between the third party driver and the insurance company at the time of the collision.
What Constitutes ‘Reasonable Inquiries’ Under Section 51?
What may constitute reasonable inquiries is subjective and will depend on the individual circumstances of each case. Some examples of reasonable inquiries may include an electoral roll search, engaging an investigator, attendance at the third party’s likely residence, internet searches and calls to the third party’s provided mobile number.
Is There Any Similar Legislation to Consider?
If a company has been deregistered, recovery may be pursued against the third party insurer under section 601AG of the Corporations Act 2001 (Cth).
NSW is the only state with similar legislation to consider which is found in section 4 of Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) which allows claims directly against third party insurers in certain circumstances but leave, or ‘permission’, of the Court to do so is required.
Are There Circumstances Where the Third Party Insurer Might Not Need to Raise Payment?
If there is an outstanding excess owing on the claim, insurers can reduce their liability by this amount.
As also mentioned, the insured’s claim is subject to the terms of the third party’s contract of insurance.1 We have seen circumstances where the other insurance company may seek to rely on exclusion clauses contained within the policy held such as in Cleanaway Waste Management Ltd v Insurance Australia Ltd t/as Swann Insurance.2 To avoid raising payment, the insurer will need to prove on the balance of probabilities that an exclusion to the policy has been met and they are not required to indemnify their insured.
Takeaways
If you are confident the third party had insurance, and you have hit a dead end in locating the third party directly, there is legislation in place to protect your client’s interests. Please contact us to discuss if we can assist you in that pursuit.
Should you wish to discuss any of the above, please contact Doran Yacobi on 03 9947 4504 or any member of the Ligeti Partners team on 03 9947 4500.
