The recent Victorian Supreme Court (“Court”) decision in UDP Holdings Pty Ltd (subject to a deed of company arrangement) (rec and mgr apptd) v Ironshore Corporate Capital (No 2)  VSC 645, provides useful insight into policy interpretation and the scope of coverage offered under a Warranty & Indemnity insurance (“W&I”) policy.
Ultimately, the Court determined that the plaintiff, UDP Holdings Pty Ltd (“Insured”) suffered a loss under a buyer’s Warranty and Indemnity insurance policy (“Policy”) underwritten by the defendants, Ironshore Corporate Capital Ltd (No 2) and International Insurance Company of Hannover SE (“Insurer”). It was held that the Insured was entitled to judgment in the sum of $25 million, being the full Policy limit, plus interest.
One of the key takeaways, is that the court is inclined to hold W&I insurers to a reasonable response, consistent with the commercial interpretation of a W&I policy. Once the Policy was triggered and the quantum of loss ascertained, the Insurer was obligated to pay. We expect this decision to influence the early assessment and settlement of W&I claims. As Marsh expects W&I claims activity to increase in coming years, the decision bodes well for Insureds’ rights under the policy.
There are a number of other key insights to be gained from the decision:
Our Private Equity, Mergers & Acquisitions team explore the judgement including the quantification of loss, policy triggers and the Court’s findings on the claims assessment process.
This page and the referenced article contain general information and do not take into account your individual objectives, financial situation or needs. For full details of the terms, conditions and limitations of any insurance covers, refer to the specific policy wordings and/or Product Disclosure Statements. Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) arranges the insurance and is not the insurer. LCPA 19/238
 UDP Holdings Pty Ltd v Ironshore Corporate Capital Ltd (No 2)  VSC 645, para 1
 Ibid, para 441