A judge finds for the broker in a long-running battle over a mutual scheme for NSW councils. But that might not be the end of it

By Wendy Pugh

Competition among brokerages for local government insurance business was swirling in the background in 2018 when a group of New South Wales councils joined a class action against mutual scheme broker JLT Risk Solutions.

Richmond Valley Council joined the Statewide mutual for local governments in 2000, but in 2017 left the scheme in search of cheaper cover. The following year it took the lead in a class action filed on behalf of itself and 19 other councils in the NSW Supreme Court.

The group argued JLT had acted as a broker to individual councils, and asserted that in recommending the Statewide scheme while failing to point out cheaper insurance alternatives available in the market JLT breached its duties around acting in their best interests.

But just before Christmas – some 11 months after originally reserving her judgment – Justice Kate Williams found in favour of JLT. The hearings had lasted more than a month, and were marked by hard-fought arguments over the scope of the case.

She found JLT was providing broking services for the mutual scheme overall, and giving advice to the Statewide board under arrangements set out in a deed. But it was not acting as a broker for the individual councils in relation to Statewide cover, and had therefore not breached its fiduciary duties.

Justice Williams decided Richmond Valley Council “had made the choice to take itself out of the market as an individual insured and to have its property and liability risks pooled with other group members on the express basis that JLT would place insurance for those pooled risks on the instructions of the board”.

“[Richmond Valley Council] was aware of the terms of the deed that it had acceded to when it made that choice, and by which it remained bound unless and until it gave the requisite period of notice.”

The mutual scheme was established in 1994 after local councils in the late 1980s and early 1990s encountered increasing difficulties in placing insurance in the commercial insurance market. 

Similar JLT-managed mutuals also operate in other Australian states, involving more than 500 councils in total, smoothing market volatility for participants.

JLT did provide individual broking services to Richmond Valley Council for non-Statewide lines of cover as part of the council’s overall insurances, but Justice Williams found it was not making recommendations to them on the placement of the property and liability classes at the centre of the dispute.

The council pointed to insurance declarations, renewal reports, financial services guides, a summary of insurance documents and invoices for Statewide liability and property scheme contributions in arguing that JLT – which is now part of Marsh McLennan – held itself out as a broker to individual councils.

Justice Williams says the arguments rely on short extracts from declarations and renewal reports isolated from the context of the relevant documents as a whole, and “read without regard to the reality of the circumstances” in which they were issued.

“In some instances, the extract relied on was carved out of one paragraph or section of a document, excluding words within the same paragraph or section that did not support the RVC’s submission,” she says.

The decision notes use of different language, such as “the member” in the mutual context and “the insured” or “the policyholder” for non-Statewide lines, and says it’s clear that declaration documents for Statewide were part of information collection processes for the pooled cover.

Hypothetical scenarios used during the court hearing were given no weight due to the unreality of assumptions. Council general managers were asked about their likely response if they had been presented during the Statewide renewals process with information about cheaper premiums in the market.

In one case a manager was asked to assume an alternative property premium of $149,000. The scheme contribution that year was $317,461.73, later reduced to $297,734 after adjustments and rebates. The property scheme accumulated surplus funds after distribution of rebates to members.


Justice Williams says the council would have known at that point it was too late to switch for the coming year, given the notice periods for leaving the pool. Separate evidence pointing to cheaper premiums available in the market compared with the JLT mutual’s premiums was also found unconvincing.

In the years leading up to Richmond Valley’s departure from the mutual and the class action, other broking firms made themselves known to local governments. Willis Australia contacted the Northern Rivers Regional Organisation of Councils before the 2014/15 renewals, while in February 2015 Aon Risk Solutions approached Richmond Valley Council flagging “significant potential savings” and later providing indicative prices.

“JLT has always stated that it would vigorously defend its position in the class action as we strongly believed that the allegations were misconceived.”

Richmond Valley Council gave 12 months’ notice to Statewide in June 2016, then joined with nine other councils to form a group that conducted a tender to test the commercial insurance market. 

JLT, Aon, Marsh and Willis participated, with Richmond Valley awarding the business to Aon the following year.

The council argued that the aggregate 40% difference between contributions it paid to the mutual property and liability funds in 2016-2017 and JLT’s indicative pricing in an insurance procurement group tender response was “strong evidence” that it had overpaid, and that “JLT had failed to obtain the lowest price it reasonably could have from Statewide”.

Justice Williams says the tender was conducted retrospectively, based on fictitious data for anonymised councils and was “plainly not designed” to elicit any binding insurance quote. Among the differences was the exclusion of flooding – a risk particularly significant to Northern Rivers councils which have seen extensive flooding in their areas over the past year.

“I accept JLT’s submission that the [insurance procurement group] tender was conducted in such a manner that it provides no meaningful guidance as to whether or on what terms commercial market insurance was available to Richmond Valley Council in 2016-2017, let alone in any other year,” Justice Williams says. 

Richmond Valley Council held another tender in 2019 and became a member of the Civic Risk Mutual from 2020, the judgment says.

Justice Williams ruled that each of the council’s three causes of action had failed, and ordered that the council’s claims for relief be dismissed, with the question of costs to be decided later.

The council’s lawyers, Quinn Emanuel Urquhart & Sullivan, have filed a notice of intention to appeal as they continue to work through the court judgment. An appeal must be submitted by March 20. The firm has filed a similar class action in Victoria, but it is currently stayed pending the outcome in NSW. The Victorian case raises some different issues.

JLT, meanwhile, has welcomed the NSW judgment, as it also reviews the decision. “JLT has always stated that it would vigorously defend its position in the class action as we strongly believed that the allegations were misconceived,” a spokesperson said.