Insurance: Ludgater Hldgs v. Gerling

New Zealand rules allowing insurance claims directly against the policy when the insured is insolvent cannot be used where the insolvent company and its insurer are in Australia.

Auckland property company, Ludgater Holdings Ltd claims it has suffered losses of some $267,000 after a fire in February 2006, alleging a defective fitting in a fluorescent light manufactured by Australian company Atco Controls was to blame. Atco is in liquidation.

Atco has product liability insurance with Australian company Gerling Australia Insurance.

Ludgater sued Gerling direct, claiming on the insurance policy by using section 9 of the Law Reform Act 1936. This gives claimants a charge on the proceeds of any insurance payout. The section is designed to allow direct access to insurance moneys where the insured has subsequently become insolvent.

The Supreme Court ruled that section nine does not have extra-territorial effect. Courts are hesitant to impose local laws in a foreign jurisdiction. It is not for New Zealand to impose its laws on litigants in Australia, and vice versa.

It is still open for Ludgater to take the more expensive step of taking legal action across the Tasman. Australia does have rules allowing direct claims against insurance policies when the insured is insolvent.

Ludgater Holdings v. Gerling Insurance – Supreme Court (11.5.10)

05.10.002