Proactive Not Reactive: What ICA Case Law Teaches Brokers About Risk & Responsibility 3rd September 2025 PROBITAS PACIFIC Legal Milestones & Industry Wake-Up Call Some recent decisions under the Insurance Contracts Act 1984 (Cth) are redefining the landscape of insurance law in Australia. These cases are not just about legal interpretation—they are about all stakeholders’ accountability and the shared responsibility between brokers, insureds and insurers. To achieve good outcomes, collaboration is essential. Brokers must go beyond form-filling and act as strategic advisors; Insureds must take ownership of their obligations under the policy and Insurers must ensure their policies and processes align with statutory protections. Together, we must build insurance programs that are transparent, compliant, and resilient. Maya Lazarus, Claims Manager for Probitas Pacific, focuses on how Australian brokers can be more interventionist in the process. Recent Milestone Cases Uniting Church v Allianz [2025] FCAFC 8 This case concerned historic sexual abuse allegations at Knox Grammar School, operated by the Uniting Church in Australia Property Trust (UCPT). Allianz had issued claims-made liability policies to UCPT between 1999 and 2011. In 2004, UCPT received a report (Report) identifying multiple staff members as potential abusers. Despite this, UCPT did not notify Allianz until 2009, via a blanket notification seeking coverage for any future claims. Relevant ICA Clauses Section 40(3): Allows insureds to notify facts that might give rise to a claim “as soon as reasonably practicable,” even if the claim is made after the policy period. Section 52: Prohibits insurers from contracting out of the ICA to the prejudice of the insured. Judgment The Full Federal Court emphasized that the 2004 report contained specific and actionable facts that should have prompted a notification under Section 40(3) of the ICA. Allianz’s attempt to rely on Prior Known Facts Exclusion which the court determined, was invalidated under Section 52. This judgment reinforces that insurers cannot contract out of statutory protections and that insureds must act promptly and transparently. Lessons for Brokers Educate clients on the importance of timely notification of Circumstances and use real-world examples so they are clear of on what Circumstances actually means Continue to reiterate to clients the ongoing need to disclose Circumstances. Collaborate with insurers to ensure exclusions are ICA-compliant. J & J Richards Super Pty Ltd v Nielsen [2024] FCA 1472 Investors in managed investment schemes brought claims against directors and related entities for misleading conduct and breaches of statutory duties. The schemes had made improvident loans and failed to disclose material risks. AIG, the D & O insurer, denied indemnity based on non-disclosure in the proposal form. Relevant ICA Clauses Section 21(1): Duty of disclosure—insured must disclose relevant matters known to them. Section 21(3): If the insurer fails to follow up on incomplete disclosure, they may waive their right to rely on it. Judgment The Court’s finding that AIG waived its right to rely on non-disclosure under Section 21(3) highlights insurer’s duty to follow up on incomplete information. The judgment reaffirms that inaction by insurers can be interpreted as acceptance and the burden rests with insurers when proposal forms are ambiguous or incomplete. Lessons for Brokers Ensure clients provide full and clear answers. Don’t rely on insurers to chase missing information, step up. Be proactive in clarifying and documenting disclosures. Carter v Chubb Insurance John Carter, CEO of Orix Australia, was charged with bribery and dealing with proceeds of crime. Chubb was the D & O insurer and when the Policy was renewing, Carter denied knowledge of any facts that might give rise to a claim, despite being aware of his misconduct. Relevant ICA Clauses Section 21: Duty of disclosure. Section 28(3): Allows insurers to deny indemnity if non-disclosure was fraudulent. Judgment The Court’s ruling under Section 28(3) allowed Chubb to deny indemnity and recover defence costs, reinforcing that dishonesty in proposal forms—especially by senior executives—can have severe financial and reputational consequences. It also affirms the insurer’s right to recover costs when fraud is proven. Lessons for Brokers Stress the importance of truthful disclosure and the ramifications of non-disclosure. Probe for potential exposures, especially in executive roles If brokers become aware of information that may impact insurers decision making, they should and must disclose. Maintain records of advice and client responses. DTZ Worldwide v AIG Australia [2025] NSWSC 12 DTZ made a claim under a warranty and indemnity policy for misrepresented contract costs in a corporate transaction. Although the breach was proven, the damages assessed were below the policy excess. Judgment Although DTZ proved a breach under the warranty and indemnity policy, the damages fell below the excess threshold, resulting in no payout. This judgment illustrates the critical importance of understanding how policy excesses operate and ensuring that clients are aware of the practicalities. Lessons for Brokers Help clients understand how excess impacts recoverability, use examples. Ensure accurate loss quantification during claims preparation. Zurich v CIMIC [2024] NSWCA This case involved a coverage dispute over notification obligations and continuous cover across multiple insurers. It raised issues of misrepresentation and equitable contribution between insurers in a tower structure. Judgment The Court clarified the mechanics of continuous cover and equitable contribution across layered insurance programs. It highlighted the need for consistent notification practices and accurate representation to all layers of the insurance tower. Lessons for Brokers: Explain what continuous cover and the practical impact is depending on different applicable terms for each insurer in the tower. Ensure coordination across the insurance tower to avoid gaps. Broker Best Practices: ICA-Aligned & Client-Focused Timely Notification Is a Must Brokers must educate clients on what constitutes a “notifiable circumstance” and ensure they understand that delays can invalidate coverage. Use real-world examples relevant types of policies and sections within one policy so clients can grasp the concept. Disclosure Is a Considered Process Go beyond ticking boxes. Help clients articulate full and honest answers, especially in executive-level disclosures. If a broker becomes aware of material facts, they must disclose them—even if the client does not. Policy Interpretation Requires Integrity Brokers should not shy away from telling clients when a claim is unlikely to be covered. Early, honest conversations can effectively manage expectations, prevent disputes and build trust. Excess and Recoverability Must Be Understood Help clients quantify potential losses accurately and understand how excess thresholds affect payouts. This is especially critical in warranty and indemnity policies. Tower Coordination Is Crucial In complex programs with multiple insurers, brokers must ensure consistent disclosures and notifications across all layers and that the client is aware if terms between insurers very. Misalignment can lead to coverage gaps and disputes. Training Regular ICA training for brokers and clients is essential using examples to apply the principles. Back to Basics – Brokers and Insurers should talk to each other. Work with insurers to ensure clarity of endorsements and exclusion. In Summary: Collaboration Is the Cornerstone We will not be able to eliminate coverage disputes; it is part and parcel of our insurance reality. However, collaboration, communication, and clarity can certainly mitigate conflict. To leave you with one futuristic tool to reduce these exposures, is utilising AI to scrape proposal forms and submissions from insureds so gaps can be identified and addressed.