This week brought two interesting cases I thought I share with you:
1. Steigrad and others v Bridgecorp and QBE Insurance – High Court Auckland, CIV 2011-404-611
In that case the HC ruled that the former directors of Bridgecorp can not rely on their insurance policy for funding their defence cost against the criminal charges brought against them by the Financial Markets Authority. The interesting aspect is that the insurance contract is valid and in fact designed to cover exactly this scenario.
What happened is that the Court found that, pursuant to section 9 of the Law Reform Act 1936, the defence costs have to paid separately, and not out of the insurance policy. The idea is that the successful plaintiffs are still able to receive compensation even if the defendant is insolvent (and the insurance funds are spent on the litigation). What this means is that insurers may not agree to pay the defence costs as they remain liable for the full policy sum (i.e. could end up paying litigation costs + sum insured).
So, in future these director policies will either be split in a litigation and cover component. Or the litigation costs will be capped or excluded. And thats only because of a statute from 1936. We will see what the lobbyist will do now.
2. 20:20 Hindsight
An optical technician was sexually assaulted by a 70 year old (!) customer, who had followed her into a back room where she was adjusting his spectacles. The technician sued her employer, claiming that the employer had been negligent by not installing a self-locking door and an alarm for the workshop.
The Court of first instance agreed, but the Court of Appeal (Queensland) reversed the decision. The judges held, and quite correctly, that the respective risk (and liability) assessment has to be taken from a the point of view of a reasonable employer before the incident. In other words, its always easy to establish in hindsight which precautions would have prevented the incident in the first place. However, here it was not even clear that any of the suggested precautions would have worked, let alone that their lack caused the assault. The Court noted that the technician would have probably not even bothered locking the door with a seeming harmless 70 year old granddad in the shop.
Good case, even better title.