When alleged non-disclosure trumps an obligation to advance defence costs

In brief - Onley v Catlin highlights some important considerations for insurers where an insured seeks indemnity in respect of potentially criminal or fraudulent conduct

In Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd's Syndicate 2003 [2018] FCAFC 119, the Full Court of the Federal Court of Australia recently considered the interaction between section 28 of the Insurance Contracts Act 1984 (Act) and policy extensions advancing defence costs to insureds.

The decision confirms the fundamental principle at law of an insurer's ability to rely on the fraudulent non-disclosure of material information for the purposes of avoiding an insurance contract from inception. The decision further highlights that a policy could be avoided against all named insureds, where the primary insured entered into the policy and purported to make full non-fraudulent disclosure as agent for the other named insureds.