Warranty And Indemnity Policies Do Not Include Share Sale Agreements

The Federal Court of Australia has provided a rare insight into the interaction between warranty and indemnity policies and share sale agreements in a decision of the Honourable Chief Justice Allsop in Aftermarket Network Australia Pty Ltd v Certain Underwriters at Lloyd's [2016] FCA 1402.

The decision focused primarily on the correct interpretation of specific terms of the relevant Share Sale Agreement (SSA) which determined liability under the SSA and in turn, whether cover was available under the warranty & indemnity insurance policy (W&I policy).

Importantly, it was also determined that, in the context of this W&I policy, the provisions of the SSA were not incorporated as terms of the W&I policy itself for the purpose of the application and the Insurance Contracts Act 1984 (ICA).  As a result, the decision did not directly consider the application of the provisions of the ICA to the W&I policy.