Further guidance on when a plaintiff can sue an insurer under section 6

Background

For some time section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 gave plaintiffs "direct access" to insurance funds, usually in cases of an insolvent defendant. The effect of the section, as explained in Bailey v New South Wales Medical Defence Union Ltd (1995) 183 CLR 399, is to create:

... on the happening of the event giving rise to the claim for damages or compensation, a charge on all insurance moneys which are then payable in respect of the liability against which the insured is indemnified and on all such insurance moneys that may become payable in respect of that liability." In Owners-Strata Plan 50530 v Walter Construction [2007] NSWCA 124, the NSW Court of Appeal held that the section is ineffective if the subject cause of action was complete before the relevant contract of insurance was made or engaged. The popular perception since Walter Construction has been that section 6 usually has little application to "claims made" policies.

The decision of Sciacca v ACE Insurance Limited [2011] NSWSC 798 discloses a tendency by the courts to provide assistance to plaintiffs to avoid the restrictive effects of Walter Construction.

Facts

In 2005, the plaintiffs invested money through Primrose on security of a second registered mortgage over a property...