Where an insured cannot pay the policy excess. Will this permit the insurer to avoid liability for amounts beyond the excess?

In Brief

Where an insured is in liquidation and its insurer is sued direct, the insurer will generally be unable to rely on the insured's inability to pay the policy excess as grounds to avoid its liability for amounts above the policy excess.

Background

The plaintiff, Chisolm, was inured in the course of his employment in March 2007. He alleged that his injuries were caused by the negligence of an employee of a company called Employ (No 14) Pty Limited (Employ 14).

Employ 14 held a broad form liability insurance policy issued by the insurer which was in force for the relevant period. Liquidators were appointed to Employ 14 on 29 August 2007.

On 22 April 2009, the plaintiff sought leave under s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 to commence proceedings against the insurer claiming damages for personal injury allegedly suffered by reason of Employ 14's negligence.