THIRD PARTIES & GOOD FAITH
Thalia Kalaboukas
The plaintiff was a factory worker employed by Kelloggs. As a result of his employment, he was also a member of the company’s superannuation fund. The trustee of the fund took out insurance to cover the benefits payable to members in the event of total and permanent disablement (TPD).
The plaintiff sustained lower back injuries and made a claim for TPD benefits from the trustee. The trustee referred the claim to the insurer. Neither the trustee nor the insurer was satisfied that the plaintiff’s injuries rendered him totally and permanently disabled and his claim was denied.
The plaintiff commenced proceedings against the insurer, seeking a declaration that the insurer had breached its duty of good faith and fair dealing to him, even though he was not a party to the contract of insurance. Specifically, the plaintiff argued that the insurer had failed to seek his response to material which was adverse to his claim.
The trial judge allowed the claim. He decided the insurer owed the trustee and the plaintiff, as a member of the fund, a duty of good faith and fair dealing. The insurer appealed to the New South Wales Court of Appeal who unanimously dismissed the appeal.
The Court departed from the strict “privity of contract” principle and noted that although the plaintiff was not entitled directly to the actual proceeds of the policy because he was not a party to the policy, the insurer was nonetheless obliged to deal with his claim in good faith in the same way that the insurer owed the trustee a duty of good faith.
The Court considered that the insurer was therefore required to act with due regard to the interests of both the members of the fund and the trustee, given that the members were dependent on the insurer for payment to the trustee: Hanover Life Re of Australia Ltd v Sayseng. |
