What happened: A financial planner's bid to kill off his insurer's misrepresentation defence has been dismissed by the Federal Court, with the insurer now alleging the planner ran a near-identical business under a different company and failed to disclose regulatory scrutiny on his proposal form.
Who's involved: SURA Professional Risks (Lloyd's-backed underwriting agency) and the insured financial planning firm.
What's at stake: A $250,000 indemnity claim under a professional indemnity policy.
Why it matters: The ruling sets up a trial on how far back an insurer can look when a new company's principal has a regulatory history under a prior entity - and what "circumstances that may give rise to a claim" really means on a proposal form.
Where it stands: Procedural ruling delivered October 9, 2026; trial on the merits yet to be scheduled.
A proposal form asked whether there were any circumstances that might give rise to a claim. The answer was no.
The insurer says otherwise. According to SURA Professional Risks, the sole director behind the insured financial planning firm had already attracted the attention of ASIC and a major superannuation trustee - through a different company that the insurer alleges was running a near-identical business model.
Now the Federal Court has refused to throw out that defence, and the insurer has been given the green light to add even more allegations of misrepresentation. A $250,000 professional indemnity fight is heading to trial.
The policy in question is a SURA Professional Risks Financial Planners Professional Indemnity Policy issued to a financial planning company for the period December 4, 2023 to February 4, 2025. The company held an Australian Financial Services Licence. Its sole director is the person now claiming indemnity, specifically for the costs of legal representation at an inquiry he was compelled to attend.
On November 30, 2023, the sole director completed the proposal form. One question asked whether there were "any circumstances not already notified to insurers which may give rise to a claim" against the company, any prior corporate practice, or any present or former principals. The company's answer was "No."
The insurer's defence, filed in the Federal Court in July 2026, paints a different picture. It alleges that before the policy started, ASIC had raised concerns with a separate licensee about what the defence describes as "poor quality and potentially conflicted advice" provided by the sole director. A superannuation trustee, Equity Trustees Superannuation Limited, had separately investigated the director and another entity he controlled - one the insurer says "conducted financial services on a similar or identical basis" to the insured company. That investigation resulted in the trustee filing a breach report with ASIC, raising what the trustee considered to be "serious concerns" about the director's conduct.
The trustee also suspended rollovers connected to the director's entities.
The insurer has now been granted leave to add a fourth allegation to its defence: that the director, or entities connected to him, received advice fees from certain managed funds while representing to clients that they had no vested interest in the products they recommended.
The director's position is clear-cut. He says the earlier entities operated under a different licensee, were never authorised representatives of the insured company, and the two operations were completely separate. None of the regulatory concerns, he argues, could give rise to a claim against the insured company or against him in his role as its director.
The court acknowledged the divide but was not prepared to resolve it at this stage. The parties, the judge said, are "clearly divided on a factual issue" about whether the insured company's business was genuinely separate from the director's earlier ventures. That question - how similar the business models really were, and what role the director played in each - can only be answered at trial.
The court was not persuaded by the argument that the director's status as a non-authorised representative of the insured company settled the matter, noting that as sole director he "presumably played a prominent role in the conduct of its affairs."
On document production, the director argued that categories should be limited to the period before the policy started. The court rejected that too, finding that later documents "may well refer to, or otherwise shed light on, the facts in existence before it incepted."
The director was ordered to pay the insurer's costs of the failed applications. The insurer was ordered to pay costs arising from its amended defence.
The ruling clears the path for a trial on whether the proposal answer triggered the misrepresentation and non-disclosure provisions of the Insurance Contracts Act - the mechanism that allows insurers to reduce or refuse liability when a policyholder's pre-inception representations turn out to have been false and material to the decision to write the risk.
For underwriters and brokers placing financial planners PI, the case raises a pointed question: when a principal's regulatory past follows them across corporate structures, how specific does a proposal form need to be to smoke it out?
The court's ruling addressed procedural applications only. No findings have been made on the merits of the misrepresentation defence or the indemnity claim. The matter proceeds to trial.
