A recent Federal Court judgment in which a denial of
indemnity was upheld, provides valuable insight on the importance
of correctly framing definitions to capture underwriters' and
the insureds' intentions to avoid challenges to policy
construction. The decision also demonstrates that section 54 of the
Insurance Contracts Act 1984 will only go so far to assist an
insured.
Indemnity denied
The primary proceedings underpinning the indemnity challenge
were commenced against two financial advisers and the relevant
corporate Australian Financial Services Licence (AFSL) holder in
respect of financial product advice. The critical allegations in
the proceedings were that the advice was inappropriate for the
applicants' financial situation and risk profile. A claim for
cover on a professional indemnity policy held in the AFSL's
name was subsequently made by all three respondents but was denied
at the threshold insuring clause level. This was primarily on the
basis that the
