Green v CGU Insurance Ltd is a case about directors’ liability during insolvency and losing insurance cover because of false information.
| Case Name: Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd |
| Citation: [2008] NSWSC 825; [2008] NSWCA 148 |
| Court: Supreme Court of New South Wales |
| Legal Focus: Insurance law, Insolvency law, Directors’ duties |
What’s the Case About?
Arimco, a mining company, renewed its directors & officers (D&O) insurance with CGU in December 1998, stating it was in good financial health (e.g., positive cash flow). In reality, it was in financial trouble, with negative cash and a looming A$15 million claim.
The company soon entered liquidation. The liquidator (Mr Green) sued the directors for insolvent trading. They settled, agreeing to pay A$15 million, and sought coverage under the D&O policy. CGU refused, claiming material misrepresentation under section 21 of the Insurance Contracts Act—the directors had concealed serious financial problems.
Court’s Decision (Green v CGU Insurance Ltd)
The NSW Supreme Court found the directors had indeed lied or failed to disclose crucial financial information that CGU would have considered vital.
Based on section 28 of the Insurance Contracts Act, the insurer was allowed to reduce its liability to zero because, had it known the truth, CGU would have added an “insolvency exclusion” or refused cover altogether.
Significance
Directors must be truthful when applying for insurance, especially regarding financial health. Misrepresenting or hiding facts can lead to a total loss of coverage.
List of references:
- https://www.mondaq.com/australia/corporate-governance/74260/directors-denied-indemnity-under-their-do-policy
- https://www.austlii.edu.au/au/journals/NSWBarAssocNews/2011/34.pdf
YOU MIGHT ALSO LIKE:
MORE FROM CORPORATE LAW:
- Charterbridge v Lloyds Bank [1970]: In the Company’s Interest?
- Re Smith & Fawcett Ltd [1942]: Directors’ Duties & Discretion
- Regal (Hastings) Ltd v Gulliver [1942]: Director Profits Case
Ruchi is a legal research writer with an academic background in CA, MBA (Finance), and M.Com. She specializes in digesting and summarizing complex judicial decisions into clear and structured case notes for students and legal professionals.