Rich v CGU Insurance Ltd

The case involved a dispute between directors and officers of One.Tel Limited (in liquidation), the appellants, and their professional indemnity insurer, CGU Insurance Limited, the respondent. The appellants sought advance payment of their legal defence costs incurred in defending proceedings initiated against them by the Australian Securities and Investments Commission (ASIC). CGU Insurance denied liability, relying on an exclusion clause in the policy and also seeking to avoid the policy under the *Insurance Contracts Act 1984* (Cth). The High Court granted special leave to appeal.

The central legal issue before the High Court was the proper construction of the exclusion clause in the directors and officers liability insurance policy. Specifically, the court had to determine whether the insurer could rely on an exclusion for dishonest, fraudulent, or malicious conduct when such conduct had not yet been established by a final judgment or other adjudication adverse to the insured directors. A further issue concerned the utility of considering the correctness of the answered questions in light of other undisturbed answers, and whether special leave to appeal should be revoked.

The High Court rescinded the special leave to appeal granted to the appellants. While the primary judge had found in favour of the insurer, holding that the exclusion clause could be relied upon even in the absence of a prior adverse adjudication, the High Court's decision to rescind special leave meant that the correctness of this finding was not ultimately determined by the High Court. The court ordered that the appellants pay the respondent's costs of the proceedings in the High Court.