CLIENT UPDATE March 2010
Consultation to Begin on ‘Unfair’ Terms in Insurance Contracts On 17 March 2010 the Federal Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, released an options paper seeking comments on options to address ‘unfair’ terms included in insurance contracts. This paper arises out of the consideration by the Senate towards the end of last year of amendments to the Trade Practices Act 1974 under which ‘unfair’ terms in consumer contracts would be rendered void. This legislation recently passed the Senate and is expected to come into effect later this year. The Government had originally sought to quarantine insurance contracts from that regime on the basis that the Insurance Contracts Act 1984 (the ‘ICA’) currently offered consumers sufficient protection. The options paper now seeks to: Clarify the nature and scope of the problem, citing a number of examples of claims refused as a result of potentially ‘unfair’ terms; Assess the adequacy of existing regulation governing the area including section 14 of the ICA under which a party to a policy of insurance may only rely upon a provision in a policy in utmost good faith; and Identify and assess options which might remedy the problem. Currently, by virtue of section 15 of the ICA an insurance contract cannot be the subject of ‘judicial review’ under existing State or Federal laws on the ground that it is ‘harsh, oppressive, unconscionable, unjust, unfair or inequitable’. According to Senator Bowen’s statement, the options paper ‘will examine the current carve-out under section 15 of the Insurance Contracts Act for insurance contracts . . . ‘ The Government has also introduced a package of reforms to the Insurance Contracts Act into the House of Representatives on the same day. The Government’s consultation paper seeks information from stakeholders around three questions: 1. Data that would assist in determining the extent to which unfair contract terms in insurance contracts are causing consumers actual or potential loss or damage. 2. Details of existing regulation that affects unfair terms in insurance contracts. 3. Details of any costs and benefits of the status quo and five possible alternative remedies canvassed in the paper.
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Several of the potential alternatives raised for discussion create new remedies not currently available to consumers that may be used to challenge claims decisions and, if enacted, would represent the biggest change to the law in relation to insurance since the ICA commenced over twenty years ago. Copies of the options paper are available here or by searching the Treasury website at www.treasury.gov.au Clients are urged to become actively involved in the consultation process. The closing date for submissions is 30 April 2010.
For more information, please contact the Insurance & Financial Services team: John Myatt
Alph Edwards
Partner
Partner
T: 02 8257 5740 M: 0419 983 575 john.myatt@turkslegal.com.au
T: 02 8257 5703 M: 0417 268 780 alph.edwards@turkslegal.com.au
Lisa Norris
Paul Angus
Partner
Partner
T: 02 8257 5764 M: 0410 582 309 lisa.norris@turkslegal.com.au
T: 02 8257 5780 M: 0408 188 808 paul.angus@turkslegal.com.au
Roger Walter
Peter Riddell
Partner
Partner
T: 02 8257 5736 M: 0419 996 722 roger.walter@turkslegal.com.au
T: 03 8600 5105 M: 0417 465 295 peter.riddell@turkslegal.com.au
Peter Moriarty Partner T: 03 8600 5112 M: 0410 459 857 peter.moriarty@turkslegal.com.au Sydney | Level 29, Angel Place, 123 Pitt Street, Sydney, NSW 2000 | T: 02 8257 5700 | F: 02 9239 0922 Melbourne | Level 10 (North Tower) 459 Collins Street , Melbourne, VIC 3000 | T: 03 8600 5000 | F: 03 8600 5099 Insurance & Financial Services | Commercial Disputes | Workers Compensation | Business & Property
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