The Federal Court of Australia's decision in Nuix Ltd v Berkshire Hathaway Specialty Insurance Co [2025] FCA 1002 has delivered one of the more consequential D&O rulings of recent years in its implications for insurers.

In Nuix Ltd v Berkshire Hathaway Specialty Insurance Co [2025] FCA 1002, Derrington J considered the operation of deductibles under a liability policy where different deductibles were applicable to different claims but all of the claims were to be aggregated as a single claim. Derrington J held that the higher of the deductibles was to be applied to the aggregate claim. That outcome, is a straightforward statement of principle but its practical significance for insurers is considerable. 

What the case was really about: One aggregated 'claim', two different retentions

The case concerned Public Offering of Securities insurance and Directors' and Officers' insurance, specifically the level of deductible and the different deductibles applicable to Side B and Side C coverage, and the application of the deductible where both Side B and Side C coverage was engaged.

For context, a standard D&O programme distinguishes between Side B cover under which the insurer reimburses the company for indemnifying its directors and officers and Side C cover, which protects the corporate entity itself against securities claims. The two sides typically carry different deductibles, with Side C (entity cover) commonly attracting a higher retention, reflecting the greater and more direct exposure of the company itself in securities litigation. 

Where a single piece of litigation simultaneously generates Side B and Side C coverage, as securities class actions routinely do, both coverage strands are engaged at once. Aggregation clauses usually then operate to treat those multiple claims as a single claim for the purposes of policy limits and deductibles. The question before the court was: where aggregated claims attract two different deductibles, which one applies?

The dispute proceeded on the basis that multiple matters were to be treated as a single aggregated claim.

Why the court held that the higher deductible governs an aggregated claim

The court held that the higher deductible applies. The court did not permit the insured to benefit from the lower retention applicable to the Side B coverage simply because the Side B claim had been aggregated alongside a Side C claim. The aggregate claim took on the character of the more onerous deductible.

What was the rationale for this decision?

1. It protects the Side C pricing architecture in securities claims

If insureds could aggregate a Side C securities claim with lower-deductible Side B matters and then pay only the lower deductible, the Side C deductible would become optional in many real-world scenarios. The Court’s approach prevents that 'retention leakage' and preserves the underwriting intent. 

2. It reduces incentives for tactical notification sequencing

If the deductible is dependant on the chance of which related matter is notified first (or characterised first), insureds and brokers would have a built-in incentive to front-load lower- deductible elements of a claim. By favouring an interpretation that avoids timing-based uncertainty, the decision supports administrable claims handling and reduces frictional disputes. 

What is the impact for insurers?

The significance of this ruling for insurers is threefold.

First, the Nuix decision confirms a material financial protection. In large-scale securities litigation, between Side B and Side C deductibles can be substantial. A ruling that the higher deductible governs the entirety of an aggregated claim preserves that deductible in full, rather than allowing it to be diluted by the lower deductible of a component strand.

Second, it strengthens the hand of insurers in claims disputes. Claimants in D&O disputes will often argue for the interpretation most favourable to coverage and to the lowest applicable retention. Nuix provides clear judicial authority that, where aggregation applies, the insurer is entitled to apply the highest deductible across the consolidated claim.

Third, it rewards careful policy drafting. The decision reinforces the value of clear, deliberate deductible structures. Insurers who distinguish meaningfully between Side B and Side C retentions and who ensure that their aggregation clauses are tightly drafted now have judicial confirmation that those structures will be upheld. 

Does this decision apply outside Australia?

Nuix is an Australian decision and is not binding in other jurisdictions. However, because it turns on principles of contractual interpretation and risk allocation that are common across major common-law markets, it is likely to be cited as persuasive authority by insurer-side counsel in comparable disputes elsewhere.