media release (20-302MR)

Youi breached duty of utmost good faith – Royal Commission case study


The Federal Court has declared Youi Pty Ltd (Youi) breached its duty of utmost good faith under the Insurance Contracts Act in its handling of a building and contents insurance claim lodged by a policyholder.

Following a severe hailstorm in Broken Hill in November 2016, the policyholder made a claim to Youi in January 2017 for damage to their property. Youi took close to two years to settle the claim and repairs were not completed until November 2018.

ASIC commenced proceedings against Youi on 16 April 2020 (20-091MR).

At the time the conduct occurred, the Insurance Contracts Act did not impose pecuniary penalties for a breach of the duty of utmost good faith. ASIC therefore sought only declarations that Youi breached the duty. Breaches of the duty of utmost good faith occurring from 13 March 2019 may now also carry pecuniary penalties. 

In his decision, Chief Justice Allsop found that:

  • Youi breached the requirements of s13 of the Insurance Contract Act on five (5) occasions;
  • declaratory relief is appropriate, and ASIC is the appropriate party to seek declarations as the statutory regulator;
  • the form of declaratory relief should identify, for the purposes of both the defendant and others in the industry, that conduct of this character is a breach of the important duty of good faith. 

Chief Justice Allsop found that decency and fairness were not exhibited by Youi in its handling of the insured’s claim. This case has important warnings for insurers about conduct that breaches the key duty of good faith, and about the rights of insureds in relation to how their insurance claims are handled.

ASIC Commissioner Sean Hughes said ‘ASIC expects those involved in handling insurance claims to act consistently with the commercial standards of decency and fairness, ensuring claims are handled in a fair, transparent and timely manner.

‘The value of an insurance policy is in the promise—so that a consumer can feel confident and secure that they will be looked after when something goes wrong. The community expects their insurer to be there when something does go wrong, to be treated fairly and with dignity and respect.’




On 12 November 2020 the Government introduced the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 (‘the Bill’) into Parliament. On passage of the Bill, persons providing claims handling and settling services will need to be covered by an Australian Financial Services (AFS) licence, and the general conduct obligations under section 912A of the Corporations Act 2001 (Cth) will apply.

Youi was an Insurance Case Study detailed in the Financial Services Royal Commission Volume 2 Final Report (page 415) and was referred to ASIC by Commissioner Hayne.

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