iscover 
In a judgment handed down on 9 October, Justice Jonathan Beach found the settlement payments and associated defence costs did not qualify as covered losses under three excess insurance policies held by Australia and New Zealand Banking Group (ANZ) for the period from 30 September 2017 to 30 September 2018.
The case centred around ANZ’s attempts to recover the costs of settling two previous proceedings: one involving consumer credit insurance products and another concerning motor vehicle asset finance.
2 previous class actions focused on personal and asset finance
The first proceeding, known as the Reilly class action, was commenced in the Federal Court in February 2020 against ANZ, its subsidiaries OnePath Life and OnePath General, and QBE.
The case concerned consumer credit insurance products offered to ANZ customers. The applicants sought, among other things, repayment of premiums paid for the products and orders setting aside the relevant policies.
The applicants, Tracey Reilly and Catherine Galli, alleged the policies provided little or no real value, were unsuitable for some customers, and were sold in circumstances where borrowers did not properly understand what they were buying.
Reilly said she did not know she had been sold insurance when she took out two ANZ credit cards. Galli alleged an ANZ employee told her a personal loan would not be approved without insurance, despite her concerns that the cover duplicated insurance she already held.
The proceeding settled before trial, with the Federal Court approving a settlement in June 2023 under which ANZ agreed to pay $31.92 million, but did not accept liability.
The second proceeding, known as the O’Brien class action, was commenced in the Supreme Court of Victoria in August 2020 against ANZ and Macquarie Bank. It concerned motor vehicle asset finance products and the interest rates charged on car loans.
The applicants alleged customers had been unaware that dealers, rather than ANZ, set the interest rates on their loans. Dealers could set rates above a base rate to increase their commissions, while the higher rates generated additional interest for ANZ.
The judgment gave the example of representative plaintiff Daniel O’Brien, who allegedly did not know his dealer had set his car loan’s interest rate at 12.38 per cent, compared with ANZ’s base rate of 8.35 per cent.
The difference was 4.03 percentage points. According to the claim’s calculations, the dealer was due a flex commission of $2,765, excluding GST, while O’Brien would pay $3,459.92 more over the life of the loan than if he had paid interest at the base rate.
The claim sought compensation or restitution for the difference between the interest customers paid at their contractual rates and the amounts they would have paid at lower rates.
That proceeding also settled, this time for $85 million; approved by the court in July 2025.
Together, the settlements totalled $116.92 million. The underlying allegations were resolved through settlements rather than findings at trial.
ANZ seeks insurance cover
ANZ notified its insurers of the claims in 2021 and sought indemnity for the settlement payments and defence costs. The insurers declined to provide cover or denied liability.
The dispute turned on the wording of three excess insurance policies and, in particular, the definition of “Loss” and an exclusion relating to fees, commissions and other charges.
The definition of “Loss” excluded “fees, commissions, or other charges paid or due to the Insured”.
Exclusion 11 also excluded claims “based on, arising out of, relating to or involving, directly or indirectly, the actual or alleged charging of excessive, undisclosed or otherwise improper fees, profits, commissions, costs or other charges by the Insured”.
ANZ sought to recover the amounts paid to settle the proceedings, as well as its costs of defending them. The insurers argued the payments fell outside the policies’ coverage and, therefore, were caught by exclusion 11.
Judge rejects arguments
Justice Beach found none of the four categories of payments – the Reilly settlement, the O’Brien settlement and the defence costs for each proceeding – constituted a covered “Loss”.
In considering the Reilly proceeding, the judge found the premiums and commissions at the centre of the claims fell within the policy wording excluding fees, commissions or other charges.
He said there was “no good commercial reason” to interpret the exclusion as applying to fees and commissions while allowing cover for premiums paid or due to the insured.
“If the Insured has received amounts in payment of premiums which it is legally liable to repay, including by way of damages, the Insured does not suffer any net loss by the repayment,” Justice Beach said.
He added: “An Insured does not suffer a loss in the relevant sense when it repays something that it should never have received.”
The judge reached a similar conclusion on the O’Brien settlement, finding the interest payments at issue constituted “other charges” under the policy.
The claims concerned the difference between the contractual interest rates charged to customers and the lower base rates they alleged should have applied. Justice Beach found the settlement related to charges ANZ had received from customers in connection with their loans.
He also found exclusion 11 applied to the O’Brien settlement, given the proceeding’s focus on the alleged non-disclosure of base rates and the difference between those rates and the contractual rates.
“The entirety of the O’Brien proceeding settlement sum falls within exclusion 11,” he said.
ANZ’s claim for defence costs was also unsuccessful.
[Related: RAMS loses Federal Court battle over franchise termination]
Want to see more stories from trusted news sources?Make Broker Daily a preferred news source on Google.
