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lawNEWS ments are now in place for some financial services products, but still exclude general insurance. The disclosure statements are now intended to run to around eight pages – a significant downsizing from some statements which read more like novels at 100-plus pages. But the need for them isn’t in question, Ms O’Brien says. “I think everyone would like them to be shorter and I think things are starting to change there. The statements are bound by what the law says they must contain. It’s a balancing act in terms of how the law looks at it. I personally think the majority of insurers’ product disclosure statements are pretty good documents, although consumer groups would probably disagree.” Consumer groups and Ms O’Brien are also likely to clash over insurers’ pursuit of the uninsured for damages. Consumer advocate Lawyer Denis Nelthorpe recently called on insurers to take a “sensible” approach to third-party property damage caused by uninsured drivers who have little income and few assets. He argues that driving individuals with no assets and no real income into bankruptcy is a waste of taxpayers’ money and gains insurers nothing. But Ms O’Brien says this is a deceptive argument. “Insurers won’t spend money if they don’t believe they will win the case,” she says. “They will always apply commercial judgement before pursuing damages. I just say, why not? “If insurers choose not to pursue, that means recoveries go down and premiums go up,” she says. “It’s not a clear line, but conceptually that is the result. It’s unfair to the people who do insure.” Insurers are also coming under increasing pressure from their customers in the form of class actions, culminating in recent proceedings launched by residents of the Queensland town of Roma. Slater & Gordon Practice Group Leader Peter Long has accused insurers of incorrectly classifying a genuine storm event as flood after record rainfall pelted southwest Queensland in March and flooded about 200 homes in Roma. Some insurers declined claims by citing flood exclusion clauses. Ms O’Brien says the climate for class actions is only going to worsen as litigation funders join the party. “At the end of the day, you have to give the right advice,” she says. Litigation funders are prepared to bankroll more than just battles with insurers. Shareholders are also restive. “We’ve certainly seen increased activity in claims against directors,” Ms O’Brien says. “This is where the litigation funders are coming in. If the share price tanks, people are looking for a reason or someone to sue. “You wouldn’t want to be a director on a company about to list, and you wouldn’t want to be their directors’ and officers’ insurer either,” she says. Which is why taking the advice of someone like Ms O’Brien is becoming all the more important. Even if it does take you weeks to meet her. 42
Harmed by horror
Two rescuers at a crash scene pursue a case for pure mental harm to the High Court By Katherine Bland, a lawyer, and Berren Hamilton, a senior associate at Moray & Agnew Lawyers IN JANUARY 2003 A FOUR-CARRIAGE passenger train left the tracks at high speed near Waterfall station, south of Sydney. Seven of the 50 passengers died and many others were injured, some very seriously. Two police officers, Wicks and Sheehan, were among the first to arrive at the scene. They were confronted with dead and injured people in the wreckage of the train. They forced their way into the damaged carriages and did their best to help the survivors and get them to safety. The State Rail Authority (SRA) admitted the accident happened as a result of its negligence. Wicks and Sheehan sued the SRA, alleging that as a result of being present at the crash site and witnessing the aftermath, insuranceNEWS
August/September 2010
each suffered psychiatric injuries. “Pure mental harm” is the expression used to describe a psychiatric illness which is not caused or related to a physical injury. Under common law reasonable care must have been taken to avoid the plaintiff suffering pure mental harm when it is reasonably foreseeable that a person of normal fortitude might suffer it in the circumstances. In New South Wales, the Civil Liability Act 2002 limits the circumstances in which a plaintiff may recover damages for pure mental harm. Section 30(2) limits recovery for pure mental harm arising from shock “unless the plaintiff witnessed, at the scene, the victim being killed, injured or put in peril; or the plaintiff is a close member of the family of the victim”. At trial in the NSW Supreme Court and on appeal it was held that the requirements of section 30(2) were not satisfied, and the police officers were not entitled to recover damages, because “while they witnessed the aftermath, they did not witness any victim of the derailment being killed, injured or put in peril”. Nor was either officer a family member of any of the victims. The High Court held that before consideration can be given to section 30(2) it must first be determined whether the SRA