While specific statutory provisions, which are dealt with below, may affect the issue, the joinder of an insurer is governed by the rules and principles discussed above at [2-2050] “Cross-claims generally” and [2-3400] “Joinder of causes of action and parties”.

The joinder of an insurer as a cross-defendant is commonplace, however, it is less usual for an insurer to be validly joined as a defendant on the basis of these rules and principles alone.

Generally, at least, there must be an issue between the insured and the insurer as to liability to indemnify, and the denial of liability must be on grounds that substantially duplicate the factual and legal issues between the plaintiff and the defendant.

Such joinder was allowed in JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432, a decision of the South Australian Full Court. However, joinder, or entitlement to join, was subsequently denied by the South Australian Full Court, differently constituted, in Beneficial Finance Co Ltd v Price Waterhouse (1996) 68 SASR 19. The Court of Appeal of Victoria (CE Heath Casualty and General Insurance Ltd v Pyramid Building Society (in liq) [1997] 2 VR 256) and the Court of Appeal of Queensland (Interchase Corporation (in liq) v FAI General Insurance Co Ltd [2000] 2 Qd R 301) also disallowed joinder.

Pt 4 of the Law Reform (Miscellaneous Provisions) Act 1946 provided a mechanism enabling a plaintiff to access proceeds of insurance by means of a statutory charge where proceedings against an insured defendant were not possible or would be pointless because, for example, the defendant was missing or insolvent. The 70-year old legislation caused conceptual problems and has been criticised for its obscure drafting. Further its effect was unclear following changes to the insurance market since it was enacted.

Following recommendations of the NSW Law Reform Commission contained in Third party claims on insurance money, Report 143, 2016, the Civil Liability (Third Party Claims against Insurers) Act 2017 (the “CL Act”) replaced Pt 4 of the Law Reform Miscellaneous Provisions) Act 1946 and the statutory charge mechanism. The CL Act provides a process whereby if an insured person has an insured liability to a claimant, the claimant may, subject to the CL Act, recover the amount of the insured liability from the insurer in proceedings before a court.

Proceedings may not be bought under s 4 of the Act except by leave of the court in which the proceedings are to be commenced: s 5(1). An application for leave may be made before or after the commencement of proceedings under s 4: s 5(2). The court’s power to refuse or grant leave is discretionary (s 5(3)). However leave must be refused under s 5(4) if the insurer can establish that it is entitled to disclaim liability under the contract of insurance: see Chubb Insurance Australia Ltd v Giabal Pty Ltd; Catlin Australia Pty Ltd v Giabal Pty Ltd [2020] NSWCA 309 at [11] where the insurers had failed to establish “beyond argument” an entitlement to disclaim.

The requirement for leave under s 5(4) is imposed “to insulate insurers from exposure to untenable claims: Count Financial Limited v Pillay [2021] NSWSC 99 at [7]–[8]. The discretion to give leave to bring such a claim is to be exercised with this in mind”: Murphy, McCarthy & Associates Pty Ltd v Zurich Australian Insurance Ltd [2018] NSWSC 627 at [16]; Wigge v Allianz Australia Insurance Ltd [2020] NSWSC 150 at [18].

An entitlement to disclaim liability may also relate to a limitations point. Section 6(1) of the CL Act does not alter the general law and the onus lies upon the insurer to prove that a claimant’s claim against an insured person is out of time under the Limitation Act 1969: Zaki v Better Building Constructions Pty Ltd [2017] NSWSC 1522.

Under s 6(1), proceedings to recover an amount from an insurer under s 4 must be commenced within the same limitation period that applies under the Limitation Act 1969 or other Act to the claimant’s cause of action against the insured period in respect of the insured liability: see also Kinzett v McCourt (1999) 46 NSWLR 32 at [107]–[110] which held that the Limitation Act applied to proceedings under Pt 4 of the Law Reform Miscellaneous Provisions) Act (rep).

Section 7 provides that in proceedings brought under s 4, an insurer is entitled to rely on any defence or any other matter in answer to the claim or in reduction of its liability to the claimant:

The NSWLRC stated in Report 143 at p ix that this should ensure that the insurer can rely on the same defences that the insured defendant could have relied on in an action brought by the plaintiff.

Section 8 allows a plaintiff to proceed against an insurer even after a successful judgment or order for damages, compensation or costs has been obtained if the defendant is unable to pay all or part of the liability, except to the extent that the judgment or order has been satisfied. This is to avoid double recovery.

Section 10 of the CL Act provides:

An insurer’s liability to a claimant under this Act is not reduced, discharged or otherwise affected by:

The NSWLRC in Report 143 said this is directed to preventing collusion between the insurer and the defendant due to the abolition of the statutory charge (p 40). It provides that any payment the insurer makes to the defendant, or any compromise agreed between them in respect of the insured liability, does not discharge the insurer’s liability to the plaintiff unless and to the extent that the defendant pays the money to the plaintiff.

Section 11 of the CL Act provides that “the rights conferred on claimants under this Act do not affect, and are in addition to, the rights conferred under the Workers Compensation Act 1987 or any other law on a person who is not a party to a contract of insurance to make a claim against an insurer in respect of an insured liability”.

Section 51 of the Insurance Contracts Act 1984 (Cth) provides that where an insured under a contract of liability which provides relevant cover is liable in damages to a third party and the insured has died or cannot, after reasonable enquiry, be found, the third party may recover from the insurer an amount equal to the insurer’s liability under the contract in respect of the insured’s liability in damages. See Morris v Betcke [2005] NSWCA 308; Tatterson v Wirtanen [1998] VSC 88 and C McCarthy, “Third Party Access to Insurance Policies and Joinder of Insurers” (1999) 11 Insurance Law Journal 46.

Section 117 of the Bankruptcy Act 1966 (Cth) provides that where a bankrupt is or was insured against liabilities to third parties and a liability against which he or she was so insured has been incurred (whether before or after he or she became a bankrupt), the “right of the bankrupt to indemnity under the policy vests in the trustee and any amount received by the trustee from the insurer under the policy in respect of the liability shall, if the liability has not been satisfied, be paid in full forthwith to the third party to whom it was incurred”.

Section 562 of the Corporations Act 2001 (Cth) provides that, where a company is insured against liability to third parties, under a contract of insurance, entered into before it is wound up, then, if such a liability is incurred by the company (whether before or after the winding up) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount shall, after deducting any expenses of and incidental to getting that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred in priority to all payments in respect of debts mentioned in s 556. Expenses are to be deducted. Payment is to made to the extent necessary to discharge the liability.

Separate provision is made for contracts of reinsurance (s 562A), in relation to injury compensation: s 563 and claims against insurers of deregistered companies (s 601AG).