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					    Lloyd’s Australia




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                                       Lloyd’s Australia



Issues raised
1.1   Do the requirements of the FSRA reproduce or replicate the IC Act in any
      specific notable areas (other than the standard cover provisions)? For
      example, does there need to be any specific rationalisation of
      pre-contractual disclosure requirements on insurers under the IC Act,
      given the FSRA disclosure regime?

1.2   If so, to what extent are changes necessary to reduce the duplication of
      information for insureds (while not materially diminishing consumer
      protection)?


No comments.




Issues raised
1.3   What sort of other insurance, if any, should be allowed to be bundled
      with a contract for the purposes of compulsory workers‟ compensation
      legislation, and still be covered by the exclusion in subparagraph
      9(1)(e)(i) of the IC Act?

1.4   Should paragraph 9(1)(e)(i) of the IC Act be amended? If so, how?

1.5   What difficulties might arise if the exclusion in subparagraph 9(1)(e)(i) of
      the IC Act is extended?


No special comments about Workers Compensation, however, surely the same issues arise
with Motor Liability, which is the subject of the next sub-paragraph of the IC Act. Here, it
would seem to be even more pertinent because it is much more likely that other covers will
be included, notably property damage liability. If the Moltoni ruling is to apply to this area
as well, then it would be necessary to issue separate policies for the property damage
liability and the bodily injury liability. Another issue is what to do with limits of liability in
excess of statutory limits? Often the Insurer will offer and the Insured will buy cover in
excess of statutory limits. Are the excess amounts then deemed subject to the IC Act and the
primary limits not subject? Such a situation seems absurd. A suggestion would be to build
into the relevant section a discretion of the Court to allow contracts which include covers
which are strictly outside the scope of the exclusion to benefit from the exclusion if the Court
considers that it would be unreasonable to unbundle the extra cover.




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Issues raised
1.6   Would bringing insurance of water transportation of goods for
      non-commercial purposes within the scope of the IC Act have any
      significant negative consequences?

Since we insure hardly any personal lines cargo business the question is largely irrelevant.
However, we do perceive marine cargo insurance business to be commercial in nature and
would have no objection to personal business following in the footsteps of pleasure craft.




Issues raised
1.7   Should the scope of application of the IC Act to products issued by
      discretionary mutual funds and/or direct offshore foreign insurers be
      modified? In particular:

         is it desirable for the IC Act to apply to products issued by DMFs as
          though they were contracts of insurance, having regard to their
          discretionary nature;

         are there provisions in the IC Act that cause difficulties as they
          currently apply to contracts issued by Lloyd‟s and DOFIs; and

         what, if anything, should be done to make the IC Act‟s application to
          products issued by DOFIs more effective?

1.8   Are there any other insurance-like products which should be subject to
      the IC Act?


So long as the IC Act remains reasonable, protecting the interests of both insurers and
insureds in a fair manner, then there is surely no reason to seek exemption of Lloyd‟s from
the scope of the Act. If Lloyd‟s were to be given exemption, considerable confusion could
result over what laws and principles would apply to the contracts issued and the results
might be worse than any benefits gained.




Issues raised
1.9   Aside from the application of section 22 to renewals, are the provisions
      of the IC Act as they apply to renewals, extensions, variations and
      reinstatements of insurance contracts appropriate? If not, which
      provisions and circumstances have given rise to difficulties?



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The provisions seem adequate at present.




Issues raised
1.10 Are there any notices or documents required in writing under the IC Act
     that should always require traditional writing rather than being
     communicated electronically?

1.11 For those documents that could be communicated electronically, what
     safeguards or protection measures should be included for recipients? For
     example, should there be requirements such that:

        the recipient must consent to electronic communication;

        the communication is capable of being retained and printed;

        the communication is clear and readily understood;

        that place and time of origin is certain;

        that any contractual information can be downloaded or printed; or

        any other requirements?


Email is a wonderful method of communication and its advantages far outweigh its
disadvantages. There should be no bar to its use in insurance. Safeguards should include that
a) it should be capable of being printed, b) it should be signed and dated, c) that it should be
(and not merely be capable of being) retained, d) that its origin should be clear and e) the
insured must give his permission and along with that permission include the email address
to be used in communications. There should also be no reason in principle why insurance
policies themselves could not be issued electronically though this would be a long time
coming. It is not necessary to specify that communication should be clear and easy to
understand since this is not specific to email.






Issues raised
1.12 Should there be a reconsideration of the mixed objective/subjective test
     of the insured‟s duty of disclosure?

1.13 Should there be a revised duty of disclosure applying to all policies
     whereby potential insureds are required to answer honestly all of a series
     of specific and relevant questions put to them by an insurer?




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1.14 Should section 21A be repealed?

1.15 Should section 21A be extended to include life insurance?

1.16 Should insurers be required to inform insureds what information is
     relevant to their decision to accept their risk or not?

1.17 Should the duty of disclosure requirements be streamlined so that the
     duty that applies to new contracts of insurance also applies at the time of
     renewal or variation of contracts?

1.18 Should the phrase „relevant to the decision of the insurer whether to
     accept the risk‟ found in paragraph 21(1)(a) and subsection 26(2) of the
     IC Act be amended following the High Court of Australia‟s decision in
     Permanent Trustee Australia Ltd v FAI General Insurance Company Ltd (in
     liq)?1 If so, why and what is a suggested replacement?




1   (2003) 197 ALR 364; (2003) 12 ANZ Ins Cas 61-565. The majority of the High Court (McHugh, Kirby and
    Callinan JJ) stated (at paragraph 32): „whether the matter should be disclosed, is a decision about the relevant
    risk, rather than, for convenience, what we call the “commerciality” of the contract of insurance… The focus of
    attention is upon the risk, i.e. the particular insurance hazard. It is not, as such, upon the much broader
    question of commercial willingness on the insurer to accept the risk, still less emotional or individual reactions
    to that question.‟

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Issues raised
1.19 Should warnings be given by the insurer to the insured advising them
     that:

        an insurer does not verify facts made by an insured until a claim is
         made; and

        the duty of disclosure still applies between the completion of a form
         seeking insurance and the date the contract comes into effect?


4.1. We are open to minor changes. We agree that it is unfair for prospective insureds to be
expected to know what individual insurers would each consider relevant and disclosure
duties in this circumstance could be amended along the lines suggested by Martin Harris in
his pre-issues submission. His suggestion was to change the words "relevant to the
decision of the insurer whether to accept the risk and, if so, on what
terms"
to read “"relevant to the decision of a potential insurer whether to accept
the risk and, if so, on what terms"


4.2. and 4.3. However, under no circumstances should the duty of disclosure be mollified to a
duty to answer specific questions honestly. After Australia has experienced so much pain
over the Section 54 issue, with insurers withdrawing from professional indemnity markets,
increasing premiums and restricting cover, why should you now bring further trouble upon
yourselves by alienating insurers with such an imposition? Most jurisdictions around the
world maintain the insured‟s duty of disclosure and Australia would be out on a limb by
removing it. Since Lloyd‟s tends to underwrite mostly larger commercial business, the duty
of disclosure should not be dumbed down to the lowest common denominator of individual
insureds. Perhaps it should not be dumbed down in any circumstance since the lack of
ability of private insureds to understand or comply with the proper duty should not be a
reason to penalise insurers. That said, since we do not insure much personal business there
should be no objection to maintaining the distinction between normal and personal
insurances (called eligible contracts of insurance by the IC Act) if it is felt that the public
interest would be better served by that. Any merging of the two types should not be at the
expense of the normal duty of disclosure.

4.4. No comments.

4.5. Definitely not. Since we tend to insure the larger commercial risks, the process of
acquiring an appreciation of the risk is much more dynamic than with personal insurances.
Each insurance is assessed on its individual merits. If there were some set of fixed criteria by
which to assess a risk then we could all go home and get a computer to do the job for us.
Instead, we are presented with a description of the risk and there then follows a process of
interaction between us and our insureds via the brokers whereby we learn more about the
risk and we will ask new questions as we go along this process. We do not in principle know
which questions we will ask until we have a rough understanding and then we will continue
along the process of discovery until we are confident how much premium to charge and
what cover conditions to offer. We believe that the public interest is served far better by this
approach than by the predominantly statistical methods employed in the underwriting of
mass market business and we are able to offer much more competitive premiums and terms
as a consequence. Forcing us to rate business on the basis of fixed questionnaires will either


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put premiums up considerably or else push us out of the market. We have to be allowed to
underwrite business with confidence and it would not be possible to do that without reliance
upon normal rules and processes of disclosure.

4.6. We have no strong view on this.

4.7. See comment on 4.1 above.

4.8. No. However, the standard notices of disclosure are inadequate because they do not
clearly inform the insured that the insurers may void the policy or reduce their liability to
zero even if the non-disclosure or misrepresentation is not fraudulent.







Issues raised
1.20 Should section 25 of the IC Act be expanded to include a non-disclosure
     by a life insured?

No comment.






Issues raised
1.21 Should the section 22 obligation that is imposed on insurers be extended
     to renewals and variations of contracts?

1.22 Should section 22 be amended so that it emphasises the importance of
     giving honest answers and the effect of failing to do so or of making
     misrepresentations?

1.23 Should the requirements for oral disclosures apply to all contracts of
     insurance (not just certain „eligible contracts of insurance‟)?

1.24 What is the best way of ensuring insureds understand the importance of
     the duty of disclosure message that is given to them by insurers?

1.25 Should the regulations provide a form of words to be used to be given
     orally to satisfy the duty of disclosure for contracts that are not „eligible
     contracts of insurance‟?

1.26 Should section 69 provide that an oral duty of disclosure given to one
     insured or their agent be deemed to be given to all insureds who are
     parties to the proposed contract of insurance?

1.27 Should subsection 21(1) be amended so that where a number of contracts
     are sold at the same time (that is, there is a bundle of contracts) the
     insurer is obliged to inform the insured only once of its duty to disclose?


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4.10. No. Insurers already have enough obligations to inform. In any case, where variations
are concerned, all that would happen is that the insured would be at a loss because it is
usually in the insured‟s interest to have the cover provided by the variation commencing as
soon as possible. Variations are usually improvements of cover but the improvement will not
take place until the insurer‟s obligation has been fulfilled. The IC Act clearly requires to
inform the insured *before* the contract incepts or the alteration is effective. Doing this
would practically delay the effective date of the alteration until the insurer had sent a written
notice and waited the number of days reasonable to allow the insured to receive it.
4.11. No. For the reasons given in various answers above.

4.12. No.

4.13. As this relates to oral disclosure and only applies to eligible contracts, no comment.

4.14. No.

4.15 No particular comment. However, the very dilemma posed by the question highlights
the overbearing problems associated with the giving of notices. Would it not be cheaper for
the government to launch an education campaign informing the general public about this
duty than to make every insurance contract subject to so much wasteful administration?
Alternatively, make the various associations of insurers responsible for such a campaign so
that they would bear the cost. In that way the common law maxim that every individual is
deemed to know the law would again operate to its best advantage.

4.16. Yes that would be a useful improvement. The present wording of the IC Act only
imposes a requirement to inform of the general effect of the Act as opposed to any specific
contractual provision so it seems that perhaps it is implicit in the Act that only one notice
need be issued.




Issues raised
1.28 Should the law be amended so that where an insured uses the services of
     an intermediary any non-disclosure or misrepresentation made by the
     intermediary to the insurer is said to be that of the insured?

1.29 Should any limits be placed on this „sheeting home‟ of the non-disclosure
     or misrepresentation to the insured?

1.30 Is this a significant concern requiring legislative action, or of relevance
     only in unusual cases and therefore not a high priority?


It is unfair to penalise the insured in such circumstance but the prejudice the insurer suffers
as a result should be laid at the broker‟s door and it should be made easier in this situation
for the insurer to seek redress. This would be the consideration for the insurer relinquishing
his common law right to refuse to pay a claim. Let us say that the insurer cannot refuse to
pay a claim in such a situation but that the insurer doesn‟t have to prove negligence against
the broker in any recovery action, which can take up a lot of wasteful effort, but merely the

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fact that the misrepresentation was made. Or how about granting a prima facie supposition
of negligence on the broker‟s part and putting the onus of disproving negligence on the
broker? This kind of suggestion would leave the insured in a much better position and allay
insurers‟ worries that the law was being unduly biased against them in a matter in which
after all only one or other party will win and where thus any solution would be unfair on
someone.




Issues raised
1.31 Does the PDS regime effectively duplicate the requirements of the
     standard cover provisions in terms of purpose and outcomes? If so, how
     are the standard cover provisions duplicated and why is that
     problematic?

1.32 If there is problematic duplication between the PDS regime and the
     standard cover regime (either in whole or in part), how best could
     duplication be addressed (for example, through amendment of the
     IC Act, the creation of new regulations under the FSRA or a combination
     of both)?

1.33 Are there any reasons why the „notification of unusual terms‟ should not
     occur in relation to all, or some, insurance policies or clients?

1.34 Under the IC Act, if an insurer cannot prove that disclosure of unusual
     terms occurred before the contract was entered into, then the insured will
     receive standard cover. Under the PDS regime, the onus is with the
     insured to pursue compensation for loss or damage resultant from an
     insurer‟s breach of the regime. Is the additional consumer protection
     element provided by the standard cover provisions still necessary?


Issues raised
1.35 Alternatively, do the remedies available under the standard cover
     provisions mitigate the need for remedies under the FSRA, in relation to
     prescribed contracts? If so, should further remedies be provided under
     the IC Act?

1.36 Are there any other issues that should be considered in relation to the
     operation of the PDS regime and the standard cover provisions?


S37 is untenable and meaningless in larger commercial insurances of the type commonly
underwritten by us because of the impossibility of determining exactly what is meant by “of
a kind that is not usually included in contracts of insurance that provide similar insurance
cover” in a contract which is effectively tailor-made for the particular client. Our preference
is for it to be repealed. The FSRA regime seems much more sensible.




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Issues raised
1.37 Should the standard cover regulations be retained? If so, is it feasible to
     modernise the regulations? If not, how could the policy intention of the
     standard cover regulations be otherwise achieved?


No comment.




Issues raised
1.38 Does the interpretation in Hams case give effect to the policy intention of
     section 35 of the IC Act? If not, what would amount to „clearly informing‟
     the insured as to how an insurance contract differs from the standard
     contract?

1.39 Could the requirements under section 35 of the IC Act be better dealt
     with by expanding the operation of section 37? If so, how could
     section 37 be expanded to maintain or improve the current standard
     cover regime?


See comments above.




Issues raised
1.40 Is the restriction in section 15 of the IC Act on remedies available to the
     insured for unfair contractual terms still appropriate? If so, are there any
     remedies under other laws that should be similarly restricted in the
     context of insurance contracts?


We are not in favour of making insurance contracts subject to judicial review. If however,
this was seen to be a step which which would be in the public interest, then it should be
restricted in scope to mass personal risks. Imposing such terms on commercial insurance
contracts would wreak utter havoc in the commercial environment. This would be a definite
case of too many cooks spoiling the broth – we have been providing commercial insurances
for centuries and both insurers and their customers have a fair idea what the business is
about. Mass market risks are by contrast a relatively recent phenomenon and present needs
in that area have been characterised significantly since the advent of the computer age so
some sort of fall-back might be appropriate. Please don‟t confuse this with the traditional
commercial insurance risks.




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Issues raised
1.41 Should the prescribed interest rate be increased so as to provide an
     incentive to insurers to finalise claims?

1.42 Should it be made clear in the IC Act whether compound interest is
     available in addition to the prescribed interest under section 57? If so,
     how?

1.43 Are contractual remedies sufficient for insureds, or should there be an
     opportunity to obtain damages for consequential loss, punitive or
     exemplary damages in tort for unreasonable delay in payment of claims?

In the larger commercial environment it is common for insurers to allow 30, 60 or even 90
days for insureds to pay premiums because it is recognised that large companies have
special concerns over accounting periods and administration and in recognition of the often
international nature of transactions. We agree that it should not be possible for insurers to
get away with claim payment delays due to simple bad faith but there needs to be a better
perspective here, it is not all one-sided. Insurers do not usually charge interest on late
payment of premiums and even if they did, it would be practicably impossible to collect,
instead they enforce premium payment by the threat of coming off risk. Even so, they get no
recompense for the delay in payment and often no time on risk premiums when, rarely, they
do come off risk. Please recognise that we are being as generous over this matter as is
commercially possible for us to be and we do not wish to embark on a policy of
confrontation. In the large risks which we often insure, we are regarded as partners with our
insureds in achieving business aims and the suggestions made only serve to turn this happy
state of affairs into an unhappy and confrontational one. Such a change in attitudes will only
make things much worse in the longer term. We have to have a quid pro quo here and 30
days would seem a fair delay for the payment of claims. No increase in interest rates either
please and certainly no consequential or punitive damages. Or should we also pursue
changes in law to enable us to more easily claim interest damages on late payment of
premiums? Well, that would be fair wouldn‟t it? Obviously, the logical conclusion of such a
course of action is self-destruction of the entire market.

And once again, there is an obvious distinction to be made here between commercial and
mass-market risks.




Issues raised
1.44 Should there be a statutory definition of „fraud‟?

1.45 Should an insurer be entitled to avoid a policy for immaterial
     non-disclosure or misrepresentation?

1.46 Should section 29 of the IC Act be repealed? Alternatively, should it be
     partially repealed so its application is limited to whole of life and
     endowment policies?



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1.47 If section 29 should be repealed or partially repealed, should life insurers
     be able to use the remedies that are available under section 28 or is there
     another approach that would be preferable?

1.48 Should the different categories of insurance, for example life insurance
     and general insurance, be dealt with in separate parts of the IC Act?

1.49 Should the three year time periods mentioned in section 29 be repealed?

1.50 How should bundled contracts be dealt with where there has been a
     misdescription or a non-disclosure by an insured?

1.51 Should the wording in subsections 29(1), (2) and (3) of the IC Act
     concerning „the contract‟ and „a contract‟ be made certain?

1.52 Should section 30 provide other remedies where there has been a
     misrepresentation or non-disclosure concerning age?

1.53 Should the interest rate used in section 30 be the same as that used in
     section 57?

1.54 Should Division 3 of Part IV of the IC Act apply to non-superannuation
     group life schemes?


7.1 No special view.
7.2 Definitely. Especially if the misrepresentation or non-disclosure was fraudulent. In that
case the mere act of fraud would itself constitute a new situation which would so increase
the risk that voidance is the only option.

7.3/7.4 No comments.

7.5. No strong view. Perhaps this would be helpful.

7.6. No comment.

7.7. If the breach of duty was fraudulent then the entire bundle should be capable of being
voided. If not fraudulent then only the aspect of the bundle affected should be subject to
remedy.

7.8 No comments.

7.9 / 7.10 / 7.11. No comments.




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Issues raised
1.55 Section 60 of the IC Act provides the circumstances in which an insurer
     can cancel a contract of general insurance. Should there be a similar
     provision for when a contract of life insurance should be cancelled?

1.56 Should insureds have a statutory right to cancel policies on notice and
     receive a pro-rata refund?

1.57 Is there a need for clarification under section 58 of the IC Act with
     respect to what is a renewable policy?

1.58 Should section 58 be amended to harmonise the notice of cancellation of
     statutory policy with section 60, that is 14 days?

1.59 Should the laws relevant to cancellation of policy be brought together
     under one statute? Is the IC Act the appropriate statute?

1.60 Is there a need to clarify section 59? If so, how?

1.61 Should the period of notice for the cancellation of policies be reviewed?
     What is the appropriate period of notice where the reason for
     cancellation is a fraudulent claim?

1.62 Should interim contracts of life insurance be able to be cancelled without
     notice, in the same way that general insurance contracts are?

1.63 Should the IC Act allow an insurer, in relation to a contract placed by an
     intermediary, the option of issuing a cancellation notice or avoiding the
     contract ab initio (on providing proper notice) when the premium
     remains unpaid for a specified period after the contract‟s commencement
     date?

1.64 What should be the minimum notification requirements for an insurer of
     its intention to cancel?



7.12 No comment.
7.13 No. If this must be the case then for short tail business insurers should have the right to
deduct from the return premium any claim already paid or pending. A loss can happen at
any time and the entire premium has been paid to cover the possibility of a loss happening at
any time. If then the loss happens soon after the inception of the contract, it would be unfair
to allow any return premium on a pro rata basis. For long tail business not only could a loss
happen at any time but it might not become apparent until after expiry of the policy period.
The premium takes into account this long tail nature of the risk and has been weighted
accordingly. Hence there should be no return premium at all if the Insured cancels a long tail
risk.
7.14. The only case where this might conceivably be a problem is in the insurance of long
term construction projects or similar insurances on projects which are of limited duration.
The insurance would normally end when the project ends and hence would not be classified
as a renewable contract. However, if the project were of long duration, i.e., more than one or

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two full years, the insurance might be set up on an annual basis. This could lead to
ambiguity over whether renewal should be offered.
7.15. No comment.
7.16 No comment.
7.17. S59 seems clear enough as it is.
7.18. The current 3 day period for most situations is adequate. If any change is made for
fraud it would be acceptable if this were reduced to instant notice. (Remember that the
Insured has the benefit of the court overturning the effect of a refusal to pay a fraudulent
claim – perhaps that could be extended to provide a few extra days cover but the principle
should be for no notice in this circumstance.)
7.19. No comment.
7.20 A contract on which the premium has not yet been paid should be regarded as an
interim contract of insurance and should be capable of being cancelled ab initio or from a
specified date automatically without further notice provided the terms of the payment
condition are properly communicated beforehand.
7.21. Given that the permissions to cancel are all normal in the sense that they do not allow
unilateral action by the insurer for no good reason, the present 3 days seems adequate (see
also comment on 7.18 above)






Issues raised
1.65 Should section 31 be repealed? If so, why?

1.66 Should section 31 be expanded so it also applies where it is alleged there
     has been innocent non-disclosure or misrepresentation?

1.67 Should other entities other than the courts (for example, dispute
     resolution bodies) be allowed to disregard minor misrepresentations and
     non-disclosures? Is legislative change required to enable this to occur?


8.1 No, for the reason given above “Section 31 offers an equitable solution to fraud on a
relatively minor scale and it should be retained.
8.2 No. The insured is not better off. If there was misdescription of the risk then it had its
effect from the time of inception of the contract. The Insured only appears to be better off
because the fraud happened to have been made at the time of the claim. The effect of the
fraud takes place at the time of the fraudulent action, just as the effect of the innocent
misrepresentation takes effect at the time of the misrepresentation, not at the time of any
subsequent loss. This is a common mistake made by people who misunderstand the nature
of risk. If there is a misdescription, the insurer is prejudiced from the moment of the
misdescription even if no claim has occurred because the premium he is charging is for a
risk, not specially for a claim. If this erroneous logic were pursued to a logical conclusion
then all premiums would be returned at the end of the policy period if no claims had
occurred because the insurer suffered no prejudice during the period as no claim was paid!

8.3. This would only muddy the waters. Far better would be to allow at least in the case of
commercial contracts for full adr or arbitration procedures. However, this does not seem to
be the ethos at the moment: if you want the courts to retain control over the law and legal
practice then don‟t confuse it by letting other bodies stick spanners in.

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



Issues raised
1.68 Are technical changes to section 58 required? If, so which ones and why?


Both S58(5) and S58(6) are completely unworkable in any large commercial insurance
contract. Where for example multiple locations or interests are insured the chance of having
a total loss of property insured is virtually non-existent. Furthermore, the term „total loss of
the property insured‟ is ambiguous if the insurance cover is for first loss. In that case
supposing the insurance was for a first loss of $1m on property which was valued at $100m,
does the entire property have to be destroyed before subsection 5 will operate? Should it not
rather be when the entire sum insured has been used up? Further similar problems can be
envisaged when the insurance is for less tangible interests such as liabilities. Another
problem is assessing what constitutes the hypothetical premium in insurances which are in
our case usually very tailored to fit the risk. Even a renewal of an existing risk can be subject
to big changes in premium depending on changing circumstances. Certainly the insured
should be made to pay the full premium if there has been a loss for the reasons given earlier
in this submission. But in any case, the whole section is fraught with difficulties. The concept
of not having to pay premium until a loss has happened is an invitation on the part of the
insured to actions of bad faith and although the Act elsewhere creates an overriding penalty
in respect of bad faith, this does not mean that the Act should put temptation in the insured‟s
path. And in any case the remedy for bad faith is only to cancel the contract whereas the
prejudice suffered by the insurer in this case is by far the greater. Surely here is an open
invitation for an insured, faced with an insurer error in failing to give a renewal notice,
(which may be completely inadvertent or due to a computer error) to keep mum and not
bother to find another insurer? Sub-section 4 of this section is one of the most unfair
conditions ever imposed by law in insurance anywhere. Even if the insurer discovers his
error, he would not be allowed to charge any premium for the time he has been on risk
unless a loss occurs. And yes, by all means prevent this happening ad infinitum.






Issues raised
1.69 Should section 45 be amended so as not to advantage offshore insurers as
     against Australian insurers? If so, should any amendment be limited to
     any classes of insurance policy?

1.70 Should the meaning of „specified‟ in subsection 45(2) be clarified?


8.5 Surely the problem then lies with Section 8 and not S45? But in any case, why should
Australian insurers be prejudiced, does not sub-section 2 of section 8 eliminate the possibility
of foreign insurers being advantaged? If 8(2) operates to waive application of the IC Act as a
whole then that is fair.

8.6. Yes but only if it is along the following lines:



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The term specified as used in ss45(2) means referenced in such a way as to unambiguously
either

(i) distinguish the specified contract as a particular contract from any other particular
contract or

(ii) distinguish the specified contract as a particular type of contract which the insured has
entered into or benefits from or is likely to enter into or benefit from and which is anticipated
by both parties to the first contract to coincide in some material respect with the cover
provided by the first contract.

Sub (ii) above is vital so as to allow the transaction of umbrella insurances in large
commercial insurance placements where it is simply not practicable to specify every primary
contract. For example a policy providing contractors liability on an annual basis in excess of
underlying insurance limits placed on a project basis would need to specify the underlying
policies *generically* as “any primary contractors liability policies taken out on a project
basis”. Such projects might be numerous and it would be totally impracticable to advise the
insurers of all such policies being entered into from time to time. The umbrella insurer will
have a disincentive to underwrite such business if he is going to have to drop down to
primary insurance limits and contribute just because he was unable to exactly specify the
policy he was supposed to be excess of. And yet, the concept of an umbrella insurance in
such a situation is clearly to the benefit of the insured. The law should not prevent insurers
from creatively meeting the needs of insureds.




Issues raised
1.71 Should the legislative intent of section 46 of the IC Act be clarified? If so,
     how?


The duty of disclosure specifically exonerates the proposer from disclosing circumstances
which a reasonable person in the situation could not be expected to know. This section could
be usefully amended to dovetail with that provision rather than be specific about pre-
existing defects or imperfections, which is, as is apparent, problematical. There is a clear
relation here to issues of illusory coverage and it would be good idea to check into American
law on this subject, where perhaps they have more experience. We don‟t have time to
investigate the matter more fully due to the short time frame allowed for this submission but
are open to laws which prevent illusory cover being given because we ourselves have no
intention of arranging our contracts to gain such advantages and legislation to protect the
insured here would only advantage us.






Issues raised
1.72 Should the legislative intent of section 47 of the IC Act be clarified? If so,
     how?


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                                       Lloyd’s Australia


1.73 Should section 47 directly address waiting periods that are imposed
     before cover is provided for some trauma conditions?


No comments.




Issues raised
1.74 Is there a need for amendments to the IC Act provisions to deal expressly
     with co-insureds?

         Should there be any additional notification requirements warning
          prospective insureds of the risks of entering into a contract with other
          co-insureds?

         Would it be desirable to introduce the distinction between joint and
          composite policies into the IC Act?

         Should insured contracts in favour of co-insureds be required to state
          whether it is intended to be treated as a joint or composite policy?

1.75 Are there any other measures that would be desirable to address the
     difficulties faced by co-insureds?


Maulder v National Insurance Co of New Zealand Ltd was wrong. It was not up to insurers
to recognise the so called changes in marital practice, it was up to partners in the changing
marital practices to recognise the normal and reasonable provisions of the law. It is accepted
that the law changes slowly over time to reflect what society considers to be reasonable and
just but it has to be indeed slowly because otherwise there would be no discipline. If the law
has to change instantly to follow every trend and fashion in society then it is not law at all, it
is just anarchy.
The insurance contract is not a contract for the supply of social justice, it is a very specific
contract for the provision of money in the event of certain defined events. We all want to see
justice done but insurance is not and never was the medium through which this could
happen. It would be a poor justice system indeed if it took as its operating medium an
insurance policy!
In any case, many commercial policies already make specific provisions relating to the acts of
joint insureds, which is only inevitable on large complex placements where the relationships
between such insureds may be quite complex.






Issues raised
1.76 Should the legislative intent of subsection 48(3) be clarified?




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                                     Lloyd’s Australia


1.77 Should sections 20 and 48 be consolidated?

1.78 Should the „persons‟ referred to in section 48 be limited to existing
     beneficiaries at the time the contract of insurance was entered into?

1.79 Should section 13 also apply to third parties?


10.1 Yes but only if it is in the direction of giving the insurer exactly the same specific
defence as he would have had against the named insured.
10./10.2/10.3 No strong views.




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