Part 2: Sienkiewicz v Salisbury Group Ltd – Insurers denial of indemnity upheld
In October 2013, James Baird posted an article following the Federal Court’s decision to join insurers to a proceeding issued by the applicants (trustees Mr and Mrs Sienkiewicz and AT Melville Pty Ltd) against their former financial advisors The Salisbury Group (and its authorised representatives Mr Todd and Mr Martin), pursuant to Federal Court Rule 9.05.
The disputes between the applicants and the respondents all settled prior to hearing, except for the indemnity dispute between Mr Todd and his Insurers, which proceeded to hearing.
On 6 March 2015, Robertson J delivered his decision in the remaining indemnity dispute, in favour of the Insurers.
The dispute arose under a Financial Services Errors and Omissions Policy issued in 2012. Robertson J found in favour of the Insurers arguments on all but one of the key issues, those being:
- The meaning and application of the Insuring Clause
- Whether Mr Todd was an Insured
- The meaning and application of 2 endorsements
- The meaning and application of 2 exclusions
- Whether s54 of the Insurance Contracts Act 1985 (Cth) operated to prevent the Insurer from refusing to pay the claim.
The central finding by Robertson J was in relation to a policy endorsement about the definition of Professional Services and in particular, the relevance of approved investment products in circumstances where that term was not defined in the Policy. It was held that approved investment products were those products on the Approved Product List at the time that the professional service was provided. Only one of the 6 products for which Mr Todd provided advice (subject of the primary claim), was on an Approved Product List.
Although not critical to the outcome, an argument was also raised on behalf of Mr Todd about section 54 of the Insurance Contracts Act applying to the agreement between him and the Insurers to the adopt the endorsement to the policy. The Insurers successfully argued that section 54 does not preclude an insurer from relying on an insured’s agreement to or variation of the terms of the insurance contract itself ie. by virtue of agreeing an endorsement.
Mr Todd was unsuccessful against the Insurers, with the result being an exposure to the full $1 million plus costs settlement entered into with the applicants.
Please click here to read a copy of the decision.