REFORMING INSURANCE LAW: - Law Commission

third party rights, but that section is confined to the right to recover: it says nothing about
insurers owing any separate duties to third parties. The proposals do not align the rights of third
parties with those of the assured in all cases, but there are a number of situations in which third
parties have been given equivalent rights. Under the proposals:
(1) There is a definition of “third party beneficiary” in s 11(1), being “a person who
is not a party to the contract but is specified or referred to in the contract,
whether by name or otherwise, as a person to whom the insurance cover provided
by the contract extends.”
(2) New ss 13(3)-(4) extend the insurers’ post-contractual duty of utmost good faith
to a third party beneficiary. This means that claims handling and other obligations
owed by insurers to the assured under s 13 are extended to beneficiaries. 552
(3) Third party beneficiaries are entitled to the benefits conferred by s 41 of the 1984
Act, so that a liability insurer owes the same duties to provide information to a
third party beneficiary as he does to the assured: this point is discussed in more
detail above.
(4) Third party beneficiaries are to be given the right to receive policy documents
under a revised version of s 74 of the 1984 Act.
(5) The existing right of a third party under s 48 to make a claim under the policy is
to be redrafted so as to import references to third party beneficiaries as defined in
the addition to s 11(1). However, it is to be made clear under the revised version
of s 48(3) that, in defending an action by a third party beneficiary, the insurers
may raise, as against the third party beneficiary, any defence relating to the precontract
or post-contract conduct of the assured, so that the beneficiary is subject
to defences based on non-disclosure, misrepresentation or breach of one or other
policy provision. 553
(6) Subrogation rights are not to be exercised against third party beneficiaries.
Variation of contracts of insurance
8.51 Section 53 of the Insurance Contracts Act 1984 outlaws any term which confers upon
insurers the right to vary unilaterally the terms of the policy, to the prejudice of the assured or
any third party. The section is limited in its operation to policies declared by the Insurance
Contracts Regulations 1985. The list of policies excluded from s 53 554 is: construction;
commercial; mechanical breakdown; products liability; accidental loss; credit; life;
superannuation; sickness and accident; export credits; and aviation liability. In essence,
therefore, domestic policies alone are covered. It may be, in the light of the extension of all but
domestic policies, that this provision is replicated by the Unfair Terms in Consumer Contracts
Regulations 1999, and indeed the 1999 Regulations may have wider effect.
552 A position reached by the courts in any event: Wylie v National Mutual Life Association of Australasia Limited
(1997) 217 ALR 324; Hannover Life Re of Australasia Limited v Sayseng [2005] NSWCA 214; Dumitrov v S C
Johnson & Son Superannuation Pty Ltd [2006] NSWSC 1372.
553 These changes are extended to ss 48A and 48AA.
554 SR 1985 No 162, reg 31, as amended by SR 2000 No 118.
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