Time for insurers to review claims handling and management processes: ASIC v Hollard – $2M penalty and breach of the duty of utmost good faith

On Friday 9 October 2026 the Federal Court held that Hollard Insurance Partners Limited (formerly CommInsure) (Hollard) had breached its duty of utmost good faith to an insured arising from significant delays, poor communication and other defaults in handling a home insurance claim.

Hollard had acquired the CommInsure brand and business from CBA on 30 September 2022.

Significantly, Hollard was ordered to pay a $2 million penalty.

In imposing the penalty, Justice Button emphasised that:

‘It is incumbent on insurers to ensure that their claims handling accords with the duty of utmost good faith. Hollard’s contravening conduct here fell well short of that standard.”

Duty of utmost good faith in context of claims management

Under current established law, the duty of utmost good faith in s 13 of the Insurance Contracts Act (Act) is implied into every contract of consumer insurance and requires an insurer to act fairly, honestly, and reasonably towards insureds.

This means that, when handling claims, an insurer must not act capriciously or unreasonably nor disregard the interests of the insured. In practice, a failure to comply with this duty this may manifest as undue delay, failure to provide timely decisions on liability, inadequate communication or withholding information, or unreasonable refusal of a claim or to cooperate concerning claim handling.

Nature of Claims Handling Delays and Failures

In the context of the Hollard Case, the breach consisted of the following multiple delays and failures in claim handling and communication (which contraventions were admitted by Hollard):

1. Hollard failed promptly to engage a structural engineer for expert opinion in assessing the damage caused by storm to the roof of the Insureds’ home (between 15 November 2021 and 26 July 2022).
2. Hollard failed to assess correctly the extent of the boundary fence which needed to be repaired, and delayed in rectifying its mistake (between 25 February 2022 and 12 October 2022),
3. Hollard delayed in arranging further emergency works to the Insureds’ home to protect the building against further loss or damage after Hollard had been notified that the original make-safe works had failed to stop water ingress (between 31 May 2022 and 27 June 2022)
4. Hollard delayed in providing temporary accommodation to the Insureds (between 8 September 2022 and 31 March 2023).
5. Hollard failed to sufficiently consider two written expert reports and an inspection report prepared by Hollard’s appointed claim manager that were relevant to the decision to offer a cash settlement for the damage to the external roof caused by the storm (between 5 October 2022 and 28 April 2023).
6. Hollard failed to communicate in a sufficiently clear manner in writing with the Insureds about the reasoning and basis for its decision to offer a cash settlement for the damage to the external roof caused by the storm, and the value of the cash settlement that was offered in relation to that damage5 October 2022 and 28 April 2023.
7. Hollard delayed in providing repairs to address the growth of mould on the Property (between 4 November 2022 and 31 March 2023).

The chain of contravention, which was admitted by Hollard, occurred over a protracted period of approximately 17 months from 15 November 2021 and 28 April 2023.

Notably:

• the contravention did not arise from a one-off bad decision, oversight or error but it “arose from conduct over an overall long period of time, and arose from multiple instances of lack of attention, delay and a lack of alacrity in progressing claims handling“.
• the chain of contravention was protracted for substantially more than a year.
• Button J held that Hollard failed to meet industry standards such as the General Insurance Industry Code of Practice (Code).
• the penalty imposed arose from a single contravention relating to a single policy so the penalty is substantial in this context.
• Hollard admitted that its serious claim-handling failures which resulted in a Victorian family living in appalling conditions, with their home ultimately deemed a total loss.

The Court reinforced earlier judicial decisions [1]that:

• the duty of utmost good faith operates as an implied condition, requiring each party to “have regard to more than its own interests when exercising its rights and powers under the contract of insurance”:[2]
• the condition is not fiduciary and does not require one party to exercise its rights or powers, or perform its obligations, only in the interests of the other.[3]

The Penalty

In the Court’s view, the prolonged period of the default and the multiple failures to manage the insured’s claim for indemnity under the Policy required a penalty that factored in a message of deterrence.

However, specific deterrence of the defendant (Hollard) was balanced by the Court’s acknowledgement of the remedial steps Hollard had undertaken by subsequent to the breach of duty such as:

• Hollard’s remediation and improvements in practices, processes and governance relating to claims processing, including reducing staff-to-claims ratios and implementing integrated claims systems to prevent reoccurrence of a breach.
• Hollard’s full cooperation with ASIC during the proceedings.

Hollard admitted that it failed to comply with the duty implied into the Policy by s 13(1) ICA. Therefore, it contravened s 13(2A) ICA.

The calculation of the civil penalty specified under s 13(2A) ICA, involved the following methodology:

• the civil penalty specified under s 13(2A) ICA is 5,000 penalty units.
• this was equivalent to $1.11 million in the relevant period.
• however, s 75D ICA provides for higher pecuniary penalties for bodies corporate.
• section 75D is a penalty calculation provision which provides that the maximum penalty is to be worked out by determining which calculation method delivers the highest result.
• on the facts of this case, it is the 10% of the annual turnover formula specified by s 75D(2)(c)(i).
• the parties agreed that the maximum penalty is $81.6 million, being the figure that is 10% of Hollard’s annual turnover for the 12-month period beginning November 2021, being the month when the contravention began.

On this basis, Dutton J decided that that penalties must deter future contraventions, both specifically against the defendant (Hollard) and generally across the insurance industry, while being proportionate and non-oppressive and therefore:

“a penalty of $2 million will send a message to insurers that the duty of utmost good faith is real; it is not an empty verbal formula. Rather, it is a substantive, and reciprocal, obligation between insurers and insureds. It is one that attaches to claims handling as much as other matters relating to the contract of insurance.”

Importance of the Code

Button J emphasised that:

“Hollard was a signatory to the General Insurance Industry Code of Practice (the Code), the relevant paragraphs of which (as applicable during the relevant period) included obligations to correct mistakes promptly, to progress and communicate about claims within defined timeframes, to engage suitably qualified external experts, and to make a decision within four months (or, in defined circumstances, 12 months).”

In our previous Insight on the Draft 2026 General Insurance Code of Practice (Draft Code) we highlighted a new insurer risk emerging from revised Code provisions which will form part of the insurance policy itself and thus a breach of the Code will directly equate to a breach of contract.

Against the background of the Hollard decision, we note that the Draft Code provides:

1. a proposed uplift in protections for consumers including enhanced expectations for trauma-informed claims handling and strengthened requirements for primary points of contact and cash settlements.

2. industry principles which include:

“We will support customers in their time of need by: 

• managing claims in line with our obligations under the Code and the law;
• having resources to respond to natural disasters;
• taking reasonable steps to scale our response in line with the size and impact of the event; and
• providing accessible support to customers who need it.”

Therefore, enforceability of these Draft Code provisions will elevate the associated insurer obligations, from an industry expectation or extra-contractual standard to become a binding contractual obligation.

This means that, in addition to the broader remedies already available under the ICA for breach of the duty of utmost good faith:

• policyholders (and potentially ASIC as regulator) may have recourse to contractual remedies including damages arising from an insurer’s failure to meet Code obligations relating to claims handling and settlement.
• Courts may in the future set additional benchmarks for assessing conduct against both the Code and statutory standards.

In addition to regulatory action by ASIC, failure to satisfy the duty of utmost good faith, might simultaneously constitute a contractual and statutory breach with exposure to damages or civil penalties and potentially heightened exposure to class actions, particularly where systemic breaches are alleged.

This is an apparent risk given ASIC enforcement priorities for 2026 include claims and complaints handling failures by insurers – see here.

Expanded Risk – third-party claims providers and legal action

The decision reinforces that the duty of utmost good faith in implicit in claims handling and management, and that claims handling non-compliance by an insurer or its agents, could attract both contractual and statutory liability, amplify available remedies, and create heightened litigation risk arising from a coincident escalation of its relevance under the revised Code and statutory standards.

Even though Hollard had engaged an external service provider to provide claims assessment, management and residential repair services, Hollard did not dispute that the acts and omissions of the service provider are to be attributed to it (even so, s 75V ICA attributes liability to the insurer for acts and omissions of an employee, agent, or officer within the insurer’s actual or apparent authority).

It follows that:

• if a case similar to Hollard were to occur in the future, the Court could award compensatory damages for breach of contract alongside civil penalties for statutory breaches
• the presence of contractually binding Code provisions would have underscored the seriousness of Hollard’s failures and further justified both compensatory and deterrent remedies.

The judgment highlights that industry code standards (including timeframes, communication, and prompt correction of mistakes) may inform the assessment of “utmost good faith” in claims handling, increasing regulatory and litigation risk where claims processes are not demonstrably compliant.

Insurers must:

• prepare for heightened regulatory scrutiny and ensure compliance with the enhanced consumer protections and claims handling requirements in the revised Code
• act “consistently with commercial standards of decency and fairness, with due regard to the interests of the insured”.[4]
• ensure that compliance strategies also align with risk management framework requirements under APRA prudential standards including board‑level reporting on claims handling

In circumstances involving a body corporate s75D ICA may be applied to substantially escalate a penalty by factoring in an annual turnover formula.

Action Items

Some risk management and governance steps insurers might consider in response to the evolving legal risks are:

• Audit claims timeframes and communications against section 13 ICA expectations (timeliness, clarity of reasons, documented decision-making and updates).
• Strengthen governance over third-party claims providers, ensuring accountability and escalation protocols (including for make-safe failures and accommodation).
• Implement controls for expert engagement and evidence review, with checklists to ensure reports are considered in the context of relevant facts, policy terms the law and the scope of settlement offers.
• Stress-test surge capacity and staffing ratios to reduce delay risk, particularly for weather/disaster events.
• Review Code compliance exposure (including potential future contractual enforceability) and update training and templates for communications including cash settlement.
• Immediately act to correct claims handling mistakes and system failures including proactive remediation to address deficiencies identified in AFCA determinations and early engagement with ASIC.

Footnotes

[1] Australian Securities and Investments Commission v Hollard Insurance Partners Limited [2026] FCA 1487 at [139]

[2] Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 [2022] HCA 38 (Delor Vue) at [95] 

[3] Delor Vue at [95].

[4] CGU Insurance Ltd v AMP Financial Planning Pty Ltd (2007) 235 CLR 1; [2007] HCA 36 (CGU) at [15]