REFORMING INSURANCE LAW: - Law Commission

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