INTRODUCTION

As discussed in our recent Client Alert, the Auckland High Court in Steigrad v BFSL 2007 Ltd 2 (the Bridgecorp case) ruled that the statutory charge imposed by section 9 of the Law Reform Act 1936 (NZ) prevented an insurer from advancing defence costs to certain Bridgecorp directors, under the company’s directors’ and officers’ liability (D&O) policy. This was a result of a threatened civil claim by the receivers against those directors for an amount greater than the combined defence costs and civil liability cover provided by their policy.

There are equivalent provisions to section 9 of the NZ Act in New South Wales, the Australian Capital Territory and the Northern Territory (the Australian statutory charge provisions).

We are not aware of any Australian case that has considered whether the Australian statutory charge provisions prevent defence costs being advanced. However, as the Australian statutory charge provisions are almost identical to those in the NZ Act, we understand that an Australian court would give careful consideration to the High Court’s reasoning in the Bridgecorp case.

This Client Briefing identifies the main categories of policies that may be affected, and highlights market developments and potential solutions that have emerged since the judgment was released.