FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd

The High Court of Australia considered a dispute between FAI General Insurance Company Limited (the insurer) and Australian Hospital Care Pty Ltd (the insured) concerning a professional indemnity insurance policy. The insured became aware of an occurrence that could lead to a claim during the policy period but failed to notify the insurer in writing as required by the policy's condition 3. A claim was subsequently made by a third party after the policy period expired. The insurer sought to refuse indemnity based on the insured's failure to provide timely written notice.

The central legal issue before the High Court was whether section 54 of the *Insurance Contracts Act 1984* (Cth) applied to afford relief to the insured despite its failure to notify the insurer of a potential claim during the currency of a "claims made" policy. Specifically, the court had to determine if the insured's omission to give written notice constituted an act or omission to which section 54 could apply, thereby preventing the insurer from refusing indemnity in whole or in part due to that omission.

The High Court reasoned that section 54 of the *Insurance Contracts Act 1984* (Cth) is intended to have broad remedial application and should be construed to provide relief from the harsh consequences of an insured's failure to comply with policy terms, particularly where the insurer suffers no prejudice. The court affirmed its consistent approach to section 54, rejecting arguments that its application would undermine the integrity of "claims made" policies. The insured's failure to notify was characterised as an "omission" to which section 54 applied, as no relevant prejudice was suffered by the insurer. Consequently, the insured was entitled to indemnity.

The appeal was dismissed with costs.