A snapshot of Allianz Australia Insurance Limited v Uniting Church in Australia Property Trust (NSW) [2025] FCAFC 8
The Full Federal Court (Court) recently ruled in Allianz Australia Insurance Limited v Uniting Church in Australia Property Trust (NSW) that Allianz Australia Insurance Limited (Allianz) could decline indemnity to the Uniting Church in Australia Property Trust (NSW) (UC) for claims of historical sexual abuse at a UC school. The key factor driving the court’s decision was the fact that school had, in 2004, commissioned a report known as LKA2 which not only identified, but could demonstrate a systemic issue of abuse at the school which was more expansive than the historical matters notified to Allianz regarding a specific teacher.
Additionally, it was only in 2009, when a ‘bulk notification’ was made to Allianz by the UC school, that it became clear that the potential abuse claims at the school were vaster than those involving a single teacher. Commentary on such “bulk notifications” was the subject of our August 2023 article here.
Ultimately, in this case, the Federal Court held that a reasonable insured in a senior position at the school would have first become aware of facts or circumstances that could give rise to the expansive or systemic issues of sexual abuse in 2004, when the school received the LKA2 report.
As noted in our article Claims made insurance- a snapshot, policies written on a “claims made” basis require an insured to notify its insurer at the time it first becomes aware of (a) facts and circumstances giving rise to a claim (“circumstances”); or (b) receives a written demand for compensation alleging a wrongful act against it (“claim”). Indemnity will then be assessed under that same policy.
In our article What is a Circumstance giving rise to a Claim? we confirmed a “circumstance” is ordinarily a situation which, when objectively evaluated, creates a reasonable and appreciable belief that certain matters would give rise to or potentially result in a financial loss or claim made against the insured.
Thus, the finding of the Court that the bulk notification made by the school in 2009 was invalid as a ‘timely notification’ as the notification of claim ought to have been made in 2004 following receipt of the LKA2 report is not altogether unsurprising. It follows that as no notice was provided under the 2004 policy before its expiration, Allianz was no longer on risk and could not be bound to indemnify the school for the systemic abuse issues identified in the LKA2 report. Importantly, the Court also reaffirmed that Section 54 of the Insurance Contracts Act 1984 (ICA) does not cure a failure to promptly notify circumstances that may give rise to a claim in the absence of a deeming provision in the policy of insurance[1] which is consistent with existing precedent.
Whilst the Court’s findings were not revolutionary, the Court further ruled on whether Allianz was entitled to rely on a “Prior Known Circumstances Exclusion” a topic which was explored in our Article What’s your claims made continuity plan?
In short, Prior Known Circumstances Exclusions allow insurers to decline claims owing to any “circumstances” or “claims” that a policyholder knew about prior to the inception of a “claims made” policy.
Here, for the first time in Australian law, the majority of the Court held that Allianz’s Prior Known Circumstances Exclusion was void by reason of Section 52 of the ICA which states:
Where a provision of a contract of insurance (including a provision that is not set out in the contract but is incorporated in the contract by another provision of the contract) purports to exclude, restrict or modify, or would, but for this subsection, have the effect of excluding, restricting or modifying, to the prejudice of a person other than the insurer, the operation of this Act, the provision is void.
Thus, the Court held that in circumstances where a policyholder fails to disclose known facts or circumstances prior to the inception of a policy, insurers rights are limited to the breach of disclosure remedy as set out in Section 28 of the ICA, namely that the insurer must establish prejudice as a result of the policyholder’s actions.
Whilst Allianz did not raise the issue of prejudice as a result of the non-disclosure, Allianz was, nonetheless saved from indemnifying the UC in this case due to the Court ruling that the bulk notification made by the school in 2009 was invalid for the reasons set out above.
It should be noted that a special leave application to appeal to the High Court was lodged on 7 March 2025. Many insurance experts and professionals will continue to debate the implications of the Court’s ruling in the meantime.
Implications for policyholders and insurers
- Pursuant to Section 40(3) of the ICA, policyholders should always notify claims made insurers of circumstances that could give rise to a claim as soon as reasonably practicable after the insured becomes aware of those facts.
- If in doubt about the material nature of any fact or circumstance, contact your Bellrock Advisor.
- Insurers will need to strongly consider the efficacy of prior known circumstances exclusions in their claims made policies including the validity/viability of prior, current, and future claims denials based on these exclusions.
- Insurers will need to be prepared to provide underwriting evidence to support a valid claim of prejudice under Section 28 of the ICA owing to non-disclosure of a prior known circumstance or claim given the Court’s voiding of prior known circumstances exclusions under Section 52 of the ICA.
[1] Deeming provisions in insurance policies typically have language stating that a claim is considered to have been first made during the policy period if the insured notifies circumstances giving rise to the claim during the pendency of the policy.
