Liability insurance: utmost good faith and defending the claim

It has been recognised for nearly a century that where an insurer under a liability policy has the duty or right to defend claims against an assured, the insurer must take into account the interests of the assured as well as its own interests in deciding how the claim should be defended.

The issue in Muriniti and Newell v Lawcover Insurance Pty Ltd (No 2) [2018] NSWCA 311 was the scope of the insurers’ duty where they had a right to deny the assured an appeal against a judgment in favour of a third party. The case again illustrates the potential scope of the duty of utmost good faith in this context.