REFORMING INSURANCE LAW: - Law Commission

7.14 The position in Australia has been subject to heavy criticism 351 and was discussed at length
by Treasury Review I, 2003. There was a general consensus that s 54 should no longer be
utilised to condone late notification of circumstances likely to give rise to a claim after the policy
had expired, and the Review duly recommended that notification by an assured to the insurers, of
facts or circumstances which might give rise to a claim outside the period of cover, should be
excluded from the relief provided under s 54. 352 The Review went on to reject the further
suggestion that s 54 should be modified to deny relief in respect of a claim made against the
assured while the policy remained current but not notified until after the policy had expired. A
distinction is, therefore, to be drawn between contractual options in general and the option to
bring coverage back into the year of a claims made policy by notifying circumstances which may
give rise to a later claim.
7.15 These proposals have been incorporated into the draft Insurance Contracts Amendment Bill
2007. The Bill maintains the distinction between policies which do not permit the assured to
notify circumstances which may give rise to a claim and those which do. The former situation is
governed by a revised s 40, under which the principle that the assured has a statutory right to
notify circumstances which may give rise to a claim, so that any later claim is brought within the
policy, is maintained, and indeed the assured has an additional 28 days after termination to notify
circumstances which may give rise to a claim, coupled with the right to receive a statutory
warning of the consequences of his failure to notify. The assured does not, however, have any
right to rely on s 54 to excuse his failure to notify circumstances within the policy or the 28-day
extended period. By contrast, where the policy does give the assured the right to notify
circumstances likely to give rise to a claim (so that reliance on s 40 is unnecessary) and the
assured fails to do so, the rule developed by the courts that the assured can seek to have his
omission excused by s 54 is to be removed. New draft s 54A(2) provides that:
(2) Despite subsection 54(1), the insurer may refuse to pay a claim against the insured or
any third party beneficiary under the contract if:
(a) the insured or third party beneficiary became aware, during the period in
which insurance cover was provided by the contract, of facts that might
give rise to such a claim; and
(b) the insured or third party beneficiary did not give notice in writing to the
insurer of those facts:
(i) during the period in which insurance cover was provided by the
contract; or
351 Schoombee “Antico's Case and Other Recent Decisions on Notification of Claims and Circumstances: Sections
54 and 40 of the Insurance Contracts Act' (1997) 8 Ins LJ 167; Mead “The Effect of Section 54 of the Insurance
Contracts Act 1984 and Proposals for Reform' (1997) 9 Ins LJ 1; J Clarke “After the Dust Settles on Antico: FIA v
Perry Lives” (1997) 9 Ins LJ 29; Sutton “The High Court Widens the "Reach" of the Insurance Contracts Act”
(1998) 26 Australian Business Law Review 57; Masel “Taking Liberties with Claims Made Policies” (2000) 11(2)
Ins LJ 104.
352 A similar problem has arisen in New Zealand under s 9 of the Insurance Law Reform Act 1977: see Sinclair
Horder O’Malley & Co v National Insurance Co of NZ Ltd [1995] 2 NZLR 257; Bradley West Clarke List v Keeman
(1997) 9 ANZ Ins Cas 76,742, and remedial legislation has been proposed by the New Zealand Law Commission,
Report 46, 1998, chapter 3.
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