CGU Insurance Ltd v AMP Financial Planning Pty Ltd

The High Court of Australia considered an appeal by CGU Insurance Ltd against AMP Financial Planning Pty Ltd concerning an indemnity under a professional risks insurance policy. AMP had notified CGU of potential liability to investors arising from the misconduct of financial advisers who were representatives of AMP. CGU had initially represented that it would not rely on policy clauses prohibiting AMP from admitting liability or settling claims, and instead advised AMP to act as a "prudent uninsured." AMP subsequently proposed a protocol to recompense investors without legal proceedings, to which CGU agreed in principle. AMP paid settlement amounts to investors without CGU having accepted liability, and AMP sought confirmation of indemnity for these settlements.

The central legal issues before the High Court were whether CGU's liability to indemnify AMP extended to reasonable settlement amounts paid by AMP, whether those settlement amounts were indeed reasonable, and the relevance of the duty of utmost good faith under section 13 of the *Insurance Contracts Act 1984* (Cth). The Court also considered whether CGU's conduct, including its delay in accepting or rejecting liability and its actions taken for its own commercial interests, constituted a lack of utmost good faith, and whether AMP could invoke CGU's alleged lack of utmost good faith if AMP itself had failed to act with utmost good faith. Furthermore, the Court examined issues of estoppel by convention, specifically whether CGU had represented that AMP would not be required to prove its liability to investors, whether AMP relied on this representation, and whether detriment was established.

The High Court, in a majority decision, allowed CGU's appeal. The reasoning focused on the interpretation of the insurance policy and the conduct of the parties in light of the *Insurance Contracts Act 1984* (Cth). The majority found that CGU was not liable to indemnify AMP for the settlement amounts. The Court's decision overturned the orders of the Full Court of the Federal Court, effectively dismissing AMP's appeal to that court.

The High Court allowed CGU's appeal with costs, setting aside the orders of the Full Court of the Federal Court and ordering that the appeal to that Court be dismissed with costs. An application for special leave to cross-appeal by AMP was refused. A separate order was made to set aside certain orders of the Full Court concerning a cross-appeal and remit that matter for further consideration in light of the High Court's decision.