A recent Full Court decision is a win for directors who hold D&O insurance policies, as well as those seeking to bring proceedings against directors of an insolvent company – probably to the dismay of insurers.

Key Points:

Section 562A of the Corporations Act does not apply where liquidator realises a sum of money by assigning the proceeds of the reinsurance claim to a third party.

Liquidators of insurance companies face a major quandary when assessing reinsurance recoveries.

A new Court decision may undercut the legislative policy that reinsurance proceeds should be quarantined from the normal rules for paying out creditors of insolvent companies.