Courts Nail Down Some Vexing Issues - who defends an insolvent insured?

Insurers face procedural difficulties when, having denied indemnity to an insolvent insured, it is joined to proceedings by a third party. Who defends the insured? In particular, who raises crucial defences such as proportionate liability? Can the insurer be subrogated to the insured's rights when it has denied indemnity?

In The Owners-Strata Plan 62658 v Mestrez Pty Limited & Ors [2012] NSWSC 1259 (Mestrez), the plaintiff sued numerous defendants in connection with the failure of fire control and drainage systems in an apartment complex. Two of the defendants (insureds) had previously had indemnity denied by their insurer, AXIS. They were also insolvent and did not participate in the proceedings. The plaintiff therefore joined AXIS direct.