REFORMING INSURANCE LAW: - Law Commission
REFORMING INSURANCE LAW: - Law Commission
REFORMING INSURANCE LAW: - Law Commission
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assured). By contrast Australian law draws a distinction (albeit not sufficiently clearly) between<br />
pre-contract duties of disclosure and the avoidance of misrepresentation (primarily imposed on<br />
the assured) and the post-contractual duty of utmost good faith (primarily imposed on the<br />
insurers). The incidence of the duties is thus much the same, but the Australian approach is far<br />
more logical in that post-contractual duties are governed by the contract and are enforced by<br />
contractual remedies 49 rather than by the artificial scrabbling around for remedies which has<br />
characterised the English post-contractual duty of utmost good faith.<br />
3.13 In the following paragraphs the operation of Australian law is outlined and comparisons<br />
with English law are made.<br />
4 NON-DISCLOSURE AND MISREPRESENTATION<br />
The duty of disclosure<br />
Structure of the legislation<br />
4.1 The Insurance Contracts Act 1984 draws a distinction between disclosure and utmost good<br />
faith: the former is a pre-contractual obligation set out in s 21, while the latter is an implied term<br />
provided for by s 13 which operates post-contractually. The point is emphasised by s 12, which<br />
makes the duty of disclosure (defined in s 11 as the s 21 duty) paramount but specifically states<br />
that the assured is under no further duty of disclosure. The distinction between pre- and postcontractual<br />
matters is not as clear as it might be, because s 13 refers to utmost good faith<br />
applying to both “matters arising under or in relation to” the policy, the latter phrase clearly<br />
being wide enough to encompass pre-contractual matters. 50 Accordingly, the courts have<br />
suggested that a failure to disclose may fall within the duty of utmost good faith in s 13: 51 Mann<br />
comments that in practice insurers rely upon both ss 13 and 21 in non-disclosure cases, 52 and this<br />
was the general view put to the author. If the UK was to adopt similar provisions it would make<br />
sense to ensure that pre-contract disclosure and post-contact good faith are kept quite distinct.<br />
The following analysis is concerned with the operation of s 21.<br />
4.2 The duty of disclosure has to be read in conjunction with s 21A, which effectively removes<br />
the duty for domestic insurance, and s 22, which imposes a duty on the insurers to inform the<br />
assured in writing of the nature and effect of the duty of disclosure and, if s 21A applies, also<br />
clearly inform the assured in writing of the general nature and effect of s 21A. If the assured is<br />
not notified, the insurers may not exercise any right in respect of the assured’s failure to comply<br />
49<br />
Subject to the operation of s 54 of the 1984 Act.<br />
50<br />
Similarly worded arbitration clauses have been so construed. For the authorities, see Merkin, Arbitration <strong>Law</strong>,<br />
para 5.52 et seq.<br />
51<br />
CIC Insurance Ltd v Barwon Region Water Authority (1999) 10 ANZ Ins Cas 61-425.<br />
52<br />
Para12.120.1. See also para 13.201.,where the point is made that s 13 alone is not in practice relied upon in nondisclosure<br />
cases. Cf Sutton, paras 3.199 to 3.200.<br />
15