REFORMING INSURANCE LAW: - Law Commission
REFORMING INSURANCE LAW: - Law Commission
REFORMING INSURANCE LAW: - Law Commission
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himself. This issue has not arisen in England, and it must be thought doubtful that the life<br />
assured could be treated as the agent of the policyholder at least in the absence of some form of<br />
wording in the policy which requires truthful statements by the life assured as a condition of<br />
cover. Section 25 is not concerned with non-disclosure, so the law as it stands in Australia does<br />
not give insurers any remedies against the policyholder in the event that the life assured<br />
withholds material facts. Treasury Review recommended 186 that insurers should be protected<br />
against this eventuality, and accordingly the draft Insurance Contracts Amendment Bill has<br />
recommended the addition of a new s 31A to deal with the point. The draft section states that:<br />
If:<br />
(a) during the negotiations for a contract of life insurance but before it was<br />
entered into, a person (other than the insured) who would become a life<br />
insured under the contract failed to disclose a matter to the insurer; and<br />
(b) the matter was of a kind that the insured would have been required to<br />
disclose to the insurer to comply with the duty of disclosure;<br />
this Act has effect as if the failure to disclose the matter had been a failure by the insured<br />
to comply with the duty of disclosure.<br />
Given the imposition of a new duty of disclosure, s 22 has been amended so as to require the<br />
insurers to inform both the policyholder and the life assured of the effect of s 31A.<br />
A New Zealand excursus<br />
4.63 <strong>Law</strong> reform is also under way in New Zealand. There has in the past been piecemeal<br />
reform of the common law on disclosure and misrepresentation. The Insurance <strong>Law</strong> Reform Act<br />
1977, the Insurance <strong>Law</strong> Reform Act 1985 and the Contractual Remedies Act 1979 all have<br />
some impact on the law, in particular by restricting the right of avoidance for misrepresentation<br />
and replacing it with prospective cancellation, although the interrelationship between these<br />
measures and the prevailing common law is complex. In the absence of coherent legislative<br />
activity, judges in New Zealand have encouraged the Government to legislate along the lines of<br />
the Australian legislation. 187<br />
4.64 In May 1998 the New Zealand <strong>Law</strong> <strong>Commission</strong> published its report Some Insurance <strong>Law</strong><br />
Problems, 188 in which it rehearsed the problems raised by the current law and proposed an<br />
Insurance <strong>Law</strong> Reform Amendment Act. The Australian approach was rejected on the grounds<br />
that: (a) there was avoidable uncertainty about the extent of the duty of disclosure, eg, what<br />
constituted fraudulent non-disclosure; and (b) Australian law created the need “to make and<br />
prove difficult hypothetical and retrospective assessments of an insurer’s likely response to the<br />
assured having disclosed a matter, a process sardonically referred to in some of the Australian<br />
literature as retrospective underwriting.” To that it may be said that English law as it has<br />
186<br />
Recommendation 4.4.<br />
187<br />
State Insurance v McHale [1992] 2 NZLR 399, 404 (Cooke P); Quinby Enterprises Ltd v General Accident Ltd<br />
[1995] 1 NZLR 736, 740 (Barker J).<br />
188<br />
Report 46.<br />
41