The background
Between 2012 and 2016 Mr Blackstock performed breast augmentation surgeries on the Applicants.
Mr Blackstock held medical indemnity insurance with Avant until his policy was terminated by Avant with effect from 24 April 2018 for non-payment of deductibles. On 16 May 2019, Mr Blackstock was declared permanently incapacitated to work as a medical practitioner and Avant were required to issue him with run off insurance (the ROCS policy).
In this interlocutory hearing, the applicants sought leave to bring proceedings against Avant as second defendant pursuant to Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), s 5.
On 7 March 2019 the applicants’ solicitor wrote to Mr Blackstock advising that their clients intended to make a claim for damages against him for the injury, loss and damages suffered. A copy of the letter was also sent to Avant. At the time these letters were sent, Dr Blackstock did not have a current professional indemnity policy with Avant. on 27 August 202, the applicants’ solicitor wrote to Avant, referring to their earlier letters and confirming their clients’ intention to make a claim against Dr Blackstock arising from the breast augmentations performed by him.
The schedule to the ROCS policy described the “Run-off period” as “14 September 2006 to 24 April 2018”. Thus the run-off insurance provided by the ROCS policy only covered claims made in relation to healthcare provided by Dr Blackstock during that period.
Under the ROCS policy any relevant claim had to be a “demand for compensation or damages in relation to healthcare” which was “first made” and communicated by Mr Blackstock to Avant on or after 16 May 2019 and accordingly during the period of that policy. The claim also had to be one which arose out of healthcare provided by him during the run-off period.
The outcome
The appeal was dismissed with costs.
Reasoning
To obtain leave to bring proceedings against Avant, the applicants had to establish three elements.
- an arguable case that the insured is liable to the plaintiff;
- an arguable case that the insurer’s policy responds to that liability; and
- a real possibility that the insured will be unable to satisfy any judgment against them in full.
However, even if these 3 requirements were met there remained a residual discretion to refuse leave.
Avant contended that there was no arguable case that Dr Blackstock was entitled to an indemnity under the ROCS policy because there was no demand for compensation or damages which was first made during the period of that cover. Those demands had been first made by the letters of 7 March 2019 and pre-dated the ROCS policy.
The applicants made 3 responses to that contention, as follows:
- the letters of 7 March 2019 did not contain a demand for compensation, but rather a notification of an intention to make such a demand by the bringing of proceedings in the District Court.
- there was no evidence that Mr Blackstock had received the letters of 7 March 2019. Accordingly, any demand made by the letters had not been made to and “against” Mr Blackstock.
- the language “first made against you during the policy period” addressed attention to the first claim which was made against Mr Blackstock during a period when he had insurance. Any claims made by the letters of 7 March 2019 did not answer that description, whereas those made by the commencement of proceedings did.
Primary judge’s findings
His Honour held that the letters of 7 March 2019 constituted a demand for compensation, in circumstances where they asserted an existing and unsatisfied right of each of the applicants to damages for Dr Blackstock’s negligence in the procedures he had carried out. As to the second response, his Honour held that the letters had been received at Mr Blackstock’s residential address in March 2019. He rejected the applicant’s argument.
Court of Appeal findings
The applicants appealed the primary judge’s decision, arguing that the commencement of the District Court proceedings constituted a claim which was first made and notified during the run off policy ie. after 16 May 2019.
The Court of Appeal agreed with the primary judge that the letters of 7 March 2019 constituted a demand for damages in respect of the negligence and injuries which were to be the subject of the court proceedings. In communicating that their clients were entitled to damages and requesting that the letter be provided to Dr Blackstock’s “indemnity insurer”, the applicants’ solicitors were implicitly making a demand for compensation on behalf of their clients.
The absence of any claim “first made” during the policy period was fatal to the applicants’ contention that Dr Blackstock’s liability to them is the subject of an indemnity under the ROCS policy. The non-satisfaction of that requirement could not be cured by the application of s 54 of the Insurance Contracts Act.
To read the decision in Clark v Avant Insurance Ltd; Stevens v Avant Insurance Ltd [2022] NSWCA 175, click here.
