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QLD Fraud to Non Disclose Possible Defamation Case with Insurance?

Discussion in 'Defamation Law Forum' started by 7and3, 21 March 2015.

  1. 7and3

    7and3 Active Member

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    Committee members applied for liability cover and didn't disclose a possible defamation case. The committee were advised in writing that legal action was more than likely to occur and become very messy prior completing the professional indemnity insurance documents. Is this fraud. Any suggested actions.
     
  2. Tim W

    Tim W Lawyer

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    It's a well established principle of law that
    the insured owes a duty of complete good faith to their insurer
    in respect of an insurance contract.

    Apart from being law, it also quite likely to be (read: "is almost always")
    in the T&Cs of an insurance policy that an insured disclose all information material to the issuing of that policy.

    The language varies, but that normally includes disclosing to the insurer,
    at the time of entering into the insurance contract,
    existing risk that is either (or any of)
    • already known to the insured; and/or
    • should reasonably be known to the insured; and/or
    • was (should be) reasonably forseeable to the insured; and or
    • was (or would be) reasonably suspected by the insured
      as having a real risk of eventuating;
    (The "risk" in this case is the risk of having a judgement entered against you in a proceeding,
    and having to pay damages (money) as a result. A defamation action is a proceeding of this kind)

    Once you disclose, they may or may not insure you at all.
    An insurer can choose whom they insure, just as you can choose who insures you.
    Sometimes, they will charge you a higher premium, that is proportional to the risk.
    Sometimes, they will just decline to insure you at all.

    But if they do insure you, then the seemingly little lie (of omission)
    that you refer to can be grounds for them to refuse a claim.
    That would be because you have not dealt with them in complete good faith,
    as you are obliged to do.
    Not only could they refuse to pay the immediately present claim,
    but the entire policy itself can be voidable.
     
    Tracy B likes this.
  3. Tracy B

    Tracy B Well-Known Member

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    Hi 7and3,

    I agree with Tim above.

    There is usually a term in their policy that:
    1. Provides the insurer only needs to pay if all representations have been complied with; or that all information provided is complete and accurate
    2. A representations (or warranties) section where the insured is to disclose all material matters that will likely affect their position under the insurance; and a term that states all representations are complete and accurate
    3. Breach of the representations means a breach of the policy which means: (i) insurer does not need to pay; and (ii) insurer may terminate policy
     
    Tim W likes this.
  4. 7and3

    7and3 Active Member

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    Thank you Tim and Tracy,

    Members of our association are at a loss as what action should be taken. There is proof of a conversation held between the committee member that signed off the insurance proposal and a third party surrounding the extreme likelihood of a defamation claim and also there are emails to the same person stating very clearly that a lawsuit is imminent. This committee member ticked NO in the section asking if they had any knowledge regarding any claims founded or unfounded. The policy is very specific regarding non-disclosure. It is the committee that published these defamatory statements. It was after this incident that the committee went out and set up indemnity insurance for themselves at the expense of the association.

    Can something like this be put into a claim and then the committee is issued a subpoena requesting they step down and relinquish their membership given that they are in a position of trust for a large membership base. We have not advised the insurance company yet but intend on doing so.

    Legal intervention is our best option, we just don't know how to go about it.

    Thanks again and in advance for any additional advice.
     
  5. Tim W

    Tim W Lawyer

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    Let's start with the very obvious...
    1. You must disclose this stuff to the insurer. Immediately.
      This will cause pain and angst among your committee members.
      But it has to be done.
      If you don't, then at the very, very, least, the insurer will refuse to pay
      any claim you make that arises out of a judgement debt.
      In any event, defamation action or not, you still have to make the disclosure.

    2. The duty to disclose to your insurer and the (possible) defamation action are two separate problems.
      Try not to get all tangled up just because the facts and circumstances of one splash over into the other.

    3. It's a really bad idea to make big decisions based on what some guy says on the internet.
      You're going to need a lawyer to defend the defamation action anyway.
      Go get one now, and get them to help you with the insurance question as well.
      This is too big for a web forum.
    First things first.
    I suggest contacting the Queensland Law Society for a referral.
     
    Tracy B likes this.
  6. Tracy B

    Tracy B Well-Known Member

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    Hi 7and3,

    I again agree with Tim.

    1. The Association needs to immediately disclose the lawsuit to the insurer. It may be that the insurer merely increases premiums or they ask the Association to sign onto another plan. If there is no current loss to the insurer, they will likely (i) be grateful to the Association for volunteering this information to them; and (ii) alter calculations to account for this new information; or (iii) keep the policy as is but prevent the Association from claiming insurance in relation to this particular law suit.

    2. What the Association should do with the Committee (and the particular Member) is an internal matter. What does the Association's rules say about (i) re-establishing the Committee, (ii) forcing someone to step down from a position, and (iii) indemnity to the Association from a particular member or from the Committee as a whole?

    3. Point two is very similar to point 3. Will the Association bear the responsibility (and costs) for the defamatory action (if successful)? If so, will the Association be able to seek indemnity from the Committee members or the particular individual who made the defamatory statement? Is the Association incorporated? If so, does this limit members' personal liability toward defamation liability should the Association not have enough money to cover the costs from defending litigation and from potential order payout?
     
  7. 7and3

    7and3 Active Member

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    Hi Tim and Tracy,

    You guys are great and your input is deeply appreciated, challenging for you when you are giving input from only what I post. I know the whole event and have not presented it to you as I should have to give you a clear understanding.
    Very briefly and as best I can:
    I was originally on the committee as secretary. A committee of five. This new committee is a HUGE change in our entire community, after generations of others operating the assn., all of a sudden there was new blood. This created a very large community split. This took place twelve months ago at the last AGM.

    Things were all good as committee to begin with as it appeared we all had the same common goals and we got on with business.
    Myself as secretary of the assn. with cash funds of $400k and a large amount of assets took the position extremely seriously with much care and caution as we were under the scrutiny of the community and council. The assn. leases and manages council facilities.

    Over a short time it started to become evident that the president did not like to follow process, constitutionally and legally. The president would also not allow members that voted against him to assist as volunteers, he refused to hold general meetings for the members and so on. I pointed this out and fought tooth and nail to restore things but was out numbered on an executive level. Two of the executive became inactive, but the president had them on call for any resolutions to vote in his favour. Things got messy and a smear campaign was set up against me and I was voted out.
    (Please be informed that the above claims are all documented, on recordings and there are witnesses, it is not a case of me having sour grapes) Which is the very reason they had to get me out, because I could prove everything to the members.

    After I was removed a front page article was published that contained lies and was very defamatory towards me. All lies can be proven without question. The president also conducted an interview with the editor to rub more salt in the wounds and stated more defamatory remarks. (The president has privileges with the editor, when I requested an interview it was declined.)

    It was very common discussions with the community that legal action would be imminent. My role as secretary was replaced.

    The new secretary contacted someone for advice surrounding meeting processes for the upcoming AGM and the person declined to assist. They advised the secretary that they had read the write ups about me and they told the secretary that they would not be involved as things were about to become very messy and legal actions would be taking place. I have the copies of the emails surrounding this from the person, they will also write an affidavit.

    This put fear into the secretary because the defamatory remarks could be proven to be untrue, he relays this to the committee and they go out and get insurance cover. A decision that should have been done with member consultation.

    The proposal was completed by the secretary and the entire committee would be a party to it as it would need to be passed at a committee meeting. Non-disclosure of the question surrounding knowledge of possible claims. Not good when they are a committee for 300 members with a huge asset and are in positions of trust.

    I sought legal advice and issued the president with a concerns notice. He has ignored this on all accounts. It is assumed that they have comfort in the knowledge of their indemnity insurance. I am now drafting a claim to subpoena the president. Doing this part on my own to save a little $$$ and if it goes to court I will re-engage my lawyer.

    So now, I have this knowledge with the insurance and have spoken with a couple of members, we just don't know where to from here.

    This committee have created a huge rift in our community, they have caused bad relations with our council who will no longer have anything to do with them, they have ruined all relations with education Qld (the assn. needs this relationship as it uses their facilities also), they have lied to members (proof available), it is an absolute mess. To make things worse, genuine members are out numbered three to one, so we cannot vote or do a thing that will make a difference. An AGM is being held this Wednesday and the committee have set it up so utterly unconstitutionally it is hideous, but it is to ensure that they get all the not so genuine members to cast their votes ensuring they remain in power. This is very common community knowledge. You should see the community facebook at present.
    Fair trades are of little help and the committee know that our only option with an incorporated not for profit assn. is through the supreme court, so we are buggered.

    Bringing us back to the insurance, I thought it may be a big deal that we could do something with to assist us in the removal of the committee. Our constitution does not allow any behaviour that is not in its best interest, such as lies with an insurance document, but a vote will do no good, so we thought perhaps something legal of sorts.

    Hoping the above assist in a clearer picture. I have probably scared you both off. I thought media and a current affair as this is a very big deal with an entire community, council, EQ. Some are worried that calling the big media may back fire. There must be some way to restore honesty. I thought the insurance lie was the jackpot that could sort it out.

    That's it for today. Thank you both again, and also in advance if you are brave enough to respond to this mess.

    Warmest.
     
  8. Tim W

    Tim W Lawyer

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    OK, so (as I suspected), you are the prospective plaintiff in any defamation action.
    There seem to be two possible defendants - the newspaper, and/or the association
    (if it was me, I'd probably look at naming each executive member as a co-defendant).
    Take formal legal advice about your position and your prospects of success.

    You said:
    Does this mean that you are no longer on the committee?
    If that's the case, then you may have rather less to worry about.
     
  9. 7and3

    7and3 Active Member

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    Hi Tim,

    Yes this is correct, I am no longer secretary. The defamation claims from myself are separate and my own concerns, and yes the newspaper will probably be getting a request for retraction. Not a nice path to have to go so this is why I am doing one thing at a time.

    Defamation aside, I am still a member and have great relations with a number of our genuine members who are stuck on what to do. As secretary I am privy to many illegal and unconstitutional goings on by the president, which lead to my removal. I have spoken with the other members about this and they too are aware of wrong doings. We are all just stuck without the genuine numbers. It is very common knowledge that this current committee relies on uninterested members just for the vote, some term them as stooges.
    We have discussed to just continue to case build, but for what, I am not sure. It is hard to get intervention. The only reason the insurance saga came about is from what I have initiated regards my claim. Finding these inappropriate actions alerted me to the other members in the hope that we could use this as leverage to have the committee removed.

    It seems logical to step away and just continue with my own claim, I am just not quite there yet and will continue to assist the genuine membership in their quest for an honest and accountable committee.

    Do you think the insurance information holds good grounds and what would you do in our situation re-contacting the insurer and so on.

    Many thanks.
     
  10. 7and3

    7and3 Active Member

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    Hi Tim,

    I spoke with you some months ago regards a defamation case and am seeking an opinion if I may.

    Unfortunately I have been let down a bit with my legal team. The big one being that they did not alert me of the time limits with defamation and this caused one of the publishing's to go over the 12 month claim period (only by 5 days). The effect from this mean's that the defendant is now covered by insurance which was put in place between the first and second publishing. Therefore he now has no concerns with regard to funding his legal team as it does not come out of his pocket.
    My legal team also received a settlement very early in the claim that would have been acceptable, but it apparently went to their junk mail and I was not made aware of this until I had initiated more works. There are a few other things that have taken place such as delays with tasks and so on. This was pointed out to them and they offered to compensate by writing two other concerns notices free of charge.

    My claim involves two separate individuals and a newspaper. I am now at the negotiating stage for a settlement with one of the individuals. The newspaper and other individual have only been issued concerns notices.

    My advice requested is with regard to my current claim and settlement. The defendants lawyer has offered a ridiculous amount that does not even cover my legal costs, he will make a private apology (which serves no good as the publishing's were very public) and he has requested indemnity for all other potential claims.

    The newspaper wrote a great deal of publishing's that are contrary to the truth and was informed of all the information by the above mentioned defendant, so the newspaper will therefore drag the defendant in to their claim. I am understanding that if I give the defendant indemnity then he is "off the hook" with any blame the newspaper has.
    I have advised my legal team of this and provided some very solid proof, it was my thought that this would serve as great negotiating with my settlement. Meaning if the defendant wants total indemnity then he must settle realistically.

    In your opinion, do you feel that this is good negotiating leverage. If I proceed with serving the newspaper then the defendant is to blame for most of the newspapers publishing's. But if I give indemnity he will not be involved.
    Am I not understanding something, as I thought this would be great leverage.

    I hope you understand where I am at and I appreciate your input.

    Many thanks.
     

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