ARTICLE · 15 SEPTEMBER 2012

Professional Indemnity: No cover for defence costs for director

Norton Rose Fulbright Australia

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The former director sought a declaration that the insurer was liable to indemnify him in respect of his defence costs.

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David Guthrie

Steven Donley

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Kyriackou v ACE Insurance Limited (2012) 17 ANZ Insurance Cases 61-935

Facts

The plaintiff, Kyriakou, was a former director of various companies within the Australvic group (Australvic). The plaintiff sued Australvic's professional indemnity insurers, ACE Insurance Limited (ACE), seeking a declaration that ACE was liable to indemnify him in respect of legal costs he incurred defending a proceeding brought against him by ASIC.

Australvic carried on business "bailing out" land owners and builders who were in financial difficulty. Under Australvic's scheme, distressed developers would transfer their land to Australvic to hold upon trust. Australvic would develop the property using the original developer's existing finance, supplemented as required with additional finance it obtained. Australvic would then market and sell the trust property, thereafter distributing the net proceeds to the beneficiaries after deducting its own costs and remuneration.

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