Disclosure and Concealment in Consumer Insurance Contracts

Julie-Ann Tarr

• Publisher: Routledge-Cavendish
• Year: 2013
• ISBN:
  9781135337698
• Edition: 1
• Topic: Diritto
• Subtopic: Teoria e pratica del diritto

This book provides an in-depth examination of the theoretical, legal, social and economic foundations to disclosure and concealment of information in relation to the formation of consumer insurance contracts. A comparative treatment of this issue is undertaken with particular attention given to the judicial and legislative approaches adopted in the United Kingdom, the United States of America, Australia and New Zealand.

It will be relevant to those researching and studying insurance law, all legal practitioners involved with the formation of consumer insurance contracts and non-legal practitioners working within the field of insurance.

APPENDIX 1
INSURANCE CONTRACTS ACT 1984

Act No 80 of 1984 as amended

Consolidated as in force on 12 July 1999 (includes amendments up to Act No 44 of 1999)

Prepared by the Office of Legislative Drafting, Attorney General’s Department, Canberra

PART II—THE DUTY OF THE UTMOST GOOD FAITH

12 This Part not to be read down

The effect of this Part is not limited or restricted in any way by any other law, including the subsequent provisions of this Act, but this Part does not have the effect of imposing on an insured, in relation to the disclosure of a matter to the insurer, a duty other than the duty of disclosure.

13 The duty of the utmost good faith

A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.

14 Parties not to rely on provisions except in the utmost good faith

1. If reliance by a party to a contract of insurance on a provision of the contract would be to fail to act with the utmost good faith, the party may not rely on the provision.
2. Sub-section (1) does not limit the operation of section 13.
3. In deciding whether reliance by an insurer on a provision of the contract of insurance would be to fail to act with the utmost good faith, the court shall have regard to any notification of the provision that was given to the insured, whether a notification of a kind mentioned in section 37 or otherwise.

15 Certain other laws not to apply

1. A contract of insurance is not capable of being made the subject of relief under:
   • any other Act; or
   • a State Act; or
   • an Act or Ordinance of a Territory.
2. Relief to which sub-section (1) applies means relief in the form of:
   • the judicial review of a contract on the ground that it is harsh, oppressive, unconscionable, unjust, unfair or inequitable; or
   • relief for insureds from the consequences in law of making a misrepresentation;

but does not include relief in the form of compensatory damages.

PART IV—DISCLOSURES AND MISREPRESENTATIONS

Division 1—The duty of disclosure

21 The insured’s duty of disclosure

1. Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:
   • the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or
   • a reasonable person in the circumstances could be expected to know to be a matter so relevant.
2. The duty of disclosure does not require the disclosure of a matter:
   • that diminishes the risk;
   • that is of common knowledge;
   • that the insurer knows or in the ordinary course of the insurer’s business as an insurer ought to know; or
   • as to which compliance with the duty of disclosure is waived by the insurer.
3. Where a person:
   • failed to answer; or
   • gave an obviously incomplete or irrelevant answer to;

a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter.

21A Eligible contracts of insurance—disclosure of specified matters

1. This section applies to an eligible contract of insurance unless it is entered into by way of renewal. Position of the insurer
2. The insurer is taken to have waived compliance with the duty of disclosure in relation to the contract unless the insurer complies with either sub-section (3) or (4).
3. Before the contract is entered into, the insurer requests the insured to answer one or more specific questions that are relevant to the decision of the insurer whether to accept the risk and, if so, on what terms.
4. Before the contract is entered into, both:
   • the insurer requests the insured to answer one or more specific questions that are relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; and
   • the insurer expressly requests the insured to disclose each exceptional circumstance that:
     • is known to the insured; and
     • the insured knows, or a reasonable person in the circumstances could be expected to know, is a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; and
     • is not a matter that the insurer could reasonably be expected to make the subject of a question under paragraph (a); and (iv) is not a matter covered by sub-section 21(2).
5. If:
   • the insurer complies with sub-section (3) or (4); and
   • the insurer asks the insured to disclose to the insurer any other matters that would be covered by the duty of disclosure in relation to the contract;
   the insurer is taken to have waived compliance with the duty of disclosure in relation to those matters.
   Position of the insured
6. If:
   • the insurer complies with sub-section (3); and
   • in answer to each question referred to in sub-section (3), the insured discloses each matter that:
     • is known to the insured; and
     • a reasonable person in the circumstances could be expected to have disclosed in answer to that question;
       the insured is taken to have complied with the duty of disclosure in relation to the contract.
7. If:
   • the insurer complies with sub-section (4); and
   • in answer to each question referred to in paragraph (4)(a), the insured discloses each matter that:
     • is known to the insured; and
     • a reasonable person in the circumstances could be expected to have disclosed in answer to that question; and
   • the insured complies with the request referred to in paragraph (4)(b); the insured is taken to have complied with the duty of disclosure in relation to the contract.
     Onus of proof—exceptional circumstance
8. In any proceedings relating to this section, the onus of proving that a matter is an exceptional circumstance covered by sub-paragraph (4)(b)(iii) lies on the insurer.
   Definition
9. In this section:
   eligible contract of insurance means a contract of insurance that is specified in the regulations.

22 Insurer to inform of duty of disclosure

1. The insurer shall, before a contract of insurance is entered into, clearly inform the insured in writing of the general nature and effect of the duty of disclosure and, if section 21A applies to the contract, also clearly inform the insured in writing of the general nature and effect of section 21 A.
2. If the regulations prescribe a form of writing to be used for informing an insured of the matters referred to in sub-section (1), the writing to be used may be in accordance with the form so prescribed.
3. An insurer who has not complied with sub-section (1) may not exercise a right in respect of a failure to comply with the duty of disclosure unless that failure was fraudulent.

Division 2—Misrepresentations

23 Ambiguous questions

Where:

• a statement is made in answer to a question asked in relation to a proposed contract of insurance or the provision of insurance cover in respect of a person who is seeking to become a member of a superan-nuation or retirement scheme; and
• a reasonable person in the circumstances would have understood the question to have the meaning that the person answering the question apparently understood it to have;

that meaning shall, in relation to the person who made the statement, be deemed to be the meaning of the question.

24 Warranties of existing facts to be representations

A statement made in or in connection with a contract of insurance, being a statement made by or attributable to the insured, with respect to the existence of a state of affairs does not have effect as a warranty but has effect as though it were a statement made to the insurer by the insured during the negotiations for the contract but before it was entered into.

25 Misrepresentation by life insured

Where, during the negotiations for a contract of life insurance but before it was entered into, a misrepresentation was made to the insurer by a person who, under the contract, became the life insured or one of the life insureds, this Act has effect as though the misrepresentation had been so made by the insured.

26 Certain statements not misrepresentations

1. Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation.
2. A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms.
3. This section extends to the provision of insurance cover in respect of:
   • a person who is seeking to become a member of a superannuation or retirement scheme; or
   • a person who is a holder, or is applying to become a holder, of an RSA.

27 Failure to answer questions

A person shall not be taken to have made a misrepresentation by reason only that the person failed to answer a question included in a proposal form or gave an obviously incomplete or irrelevant answer to such a question.

Division 3—Remedies for non-disclosure and misrepresentation

28 General insurance

1. This section applies where the person who became the insured under a contract of general insurance upon the contract being entered into:
   • failed to comply with the duty of disclosure; or
   • made a misrepresentation to the insurer before the contract was entered into;
     but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into.
2. If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.
3. If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under sub-section (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.

29 Life insurance

1. This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into:
   • failed to comply with the duty of disclosure; or
   • made a misrepresentation to the insurer before the contract was entered into;
     but does not apply where:
   • the insurer would have entered into the contract even if the insured had not failed to comply wi...