Should insurers be identified as “interested non-parties” in litigation?
Ask any insurer and most will say no. Technically, the identity of an insurer and the existence of insurance cover should not have any bearing on a court’s determination of a dispute nor on its decision with respect to a party’s liability. It would seem, therefore, that there should be no need to identify insurers as interested non-parties. The issue, however, is not so straightforward and there has been conflicting comment from the courts and commentators on the subject.
In the case of Kirby v Centro Properties Ltd (ACN 078 590 682)  FCA 695, the Federal Court confirmed that the existence of policies of insurance held by a party or the details of such policies, will not normally be relevant to the proof of any cause of action pleaded against that party.
However, this decision appears at odds with the views expressed by Justice Kirby, in Imbree v McNeilly (2008) 236 CLR 510. In that case, Justice Kirby indicated that the existence of insurance, especially statutory cover, was a relevant factor to consider when reaching his decision with respect to the parties’ liabilities. He recently repeated these views at the 2012 Barry.Nilsson. Insurance Law Review.
The Western Australian legislature has recently brought the issue a little more into the open but at this stage, their purpose in doing so is still unclear.
With effect from 26 June 2012, Western Australia has introduced a new court rule that forces a person to inform the court and the other parties to the litigation of the identity of “interested non-parties”. This would include the identity of insurers defending a claim or pursuing a subrogated recovery claim.
Order 9A of the Rules of the Supreme Court 1971 (WA) imposes the obligation on parties to notify the Principal Registrar of the court and the other parties about the identity of the person (defined as the ‘interested non-party’) who:
(a) Provides funding or other financial assistance to the party for the purposes of conducting the case; and
(b) Exercises direct or indirect control or influence over the way in which the party conducts the case.
The court is to be notified in writing as soon as is reasonably practicable of the identity of the interested non-party.
The rule appears to impose an obligation on parties to disclose to the court who their insurer is, as generally, insurers will satisfy both elements of the rule i.e. they provide funding in order to conduct the case and exercise direct control over the way the case is conducted. However, it does not appear to go as far as requiring a party to disclose the extent of their insurance cover.
At the moment, it is unclear whether the identity of an insurer needs to be disclosed if an insured’s costs inclusive deductible has not yet been fully eroded. In that instance, an insurer is not yet technically providing funding to conduct the case. When an insurer actually becomes an interested non-party is, therefore, unclear at this stage.
While the effect of the rule will be to require the identification of litigation funders, insurers and others with an interest in a case, it does not appear to change the general position that insurance cover should not influence a court’s findings on liability.