Allianz Australia Insurance Ltd v BlueScope Steel Ltd

Allianz Australia Insurance Ltd appealed to the Court of Appeal of New South Wales against a decision of the Dust Diseases Tribunal concerning an insurance policy. The dispute arose from BlueScope Steel Ltd's settlement of a claim made against it, which Allianz, as the insurer, had declined to take over or indemnify. BlueScope subsequently sought to recover the settlement amount from Allianz, alleging breaches of the insurance policy and the duty of utmost good faith.

The Court of Appeal was required to determine whether the primary judge erred in finding that Allianz suffered no prejudice for the purposes of section 18(1) of the *Insurance Act 1902* (NSW) due to BlueScope's late notification of the claim and its failure to consult Allianz before settling. Specifically, the court considered whether the loss of the chance to cross-examine the plaintiff and the loss of the opportunity to seek contribution from a co-defendant constituted prejudice. Further issues included whether Allianz's refusal to take over conduct of the proceedings or indemnify BlueScope dispensed BlueScope from its obligation not to make a settlement without prior consultation, and whether Allianz's refusal to indemnify amounted to a breach of contract.

The Court of Appeal reasoned that the primary judge may have misconstrued the test for prejudice under section 18(1) of the *Insurance Act 1902* (NSW) by requiring "irretrievable prejudice." The court found that the factual findings necessary to determine whether BlueScope was dispensed from compliance with policy conditions, whether BlueScope should be excused under section 18(1) for any breach, and whether BlueScope was entitled to damages for breach of the duty of utmost good faith were not sufficiently made. Consequently, the appeal was allowed in part, the orders of the Dust Diseases Tribunal were set aside, and the cross-claim was remitted to the Tribunal for further determination on these specific issues.