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Territory
Insurance
Conference
resilient future
Greg Pynt, barrister, Francis Burt Chambers, Perth
Oh behave
Some of the ways in which the Insurance
Contracts Act 1984 (Cth) controls the way in
which insurers conduct claims
• Onus of proof
• Section 54 of the ICA
• Utmost good faith in claims handling
Subject to the terms of a policy, if:
• an exclusion qualifies the entire insuring
promise, the insured bears the onus of
proving the qualification does not apply;
• the insuring promise is subject to a specific
exclusion, the insurer bears the onus of
proving the application of the exclusion.
The explosion cover only applied if there was
physical evidence of the explosion. The
requirement for physical evidence applied to all
explosions and therefore had to be satisfied
every time. Accordingly, the insured would bear
the onus of proving physical evidence of an
explosion.
Highway Hauliers was not indemnified if the driver of a
prime mover:
(a) had not achieved a minimum score on a driver test
known as the ‘PAQS test’; or
(b) was a non-declared (not an insurer-approved)
driver.
• but for s 54, the effect of a policy is that the
insurer could refuse to pay all or part of a
claim because of a post-contractual act or
omission of the insured or of some other
person; and
• the circumstances that gave rise to the claim
fall within the insurer’s ‘core’ promise.
If engaged, the relief allowed by s 54 depends
on whether the relevant ‘act or omission’:
• “could reasonably be regarded as being
capable of causing or contributing to” an
insured loss, in which case it is dealt with by s
54(2); or
• could not reasonably be regarded as capable
of causing or contributing to an insured loss,
in which case it is dealt with by s 54(1).
If an act or omission “could reasonably be
regarded as being capable of causing or
contributing to” an insured loss, the insurer can
refuse to pay the claim, except to the extent
that the insured proves the act or omission did
not cause or contribute to the loss.
If an act or omission could not reasonably be
regarded as being capable of causing or
contributing to an insured loss, the insurer
cannot refuse to pay the claim; it can only
reduce its liability to pay the claim by the extent
to which it has been prejudiced by the act or
omission.
There is an implied term in every insurance
contract to which the ICA applies, that requires
each of the parties to it to act towards the other
parties with utmost good faith in respect of any
matter arising under or in relation to the
contract: s 13.
The duty applies to all aspects of the claims
handling process.
The duty of utmost good faith obliges an insurer to
be full and frank with its insured about:
• its handling of a claim;
• the reasons for its decision to reject a claim (if
that is its decision);
• the reasons for its decision to pay its insured less
than what the insured is claiming (if that is its
decision);
• the progress of a subrogated claim or the defence
of a third party claim it is conducting in the
insured’s name.
• investigate a claim or notification of
circumstances, or inform an insured why it has
decided not to do so;
• make a decision about whether or not to pay a
claim, or explain to its insured why it is taking
time for the insurer to make that decision;
• pay a claim if that is what it has decided to do.
The ICA controls the way in which insurers
conduct claims, for example, by ss 13, 14
and 54.
The underlying theme of the ICA as far as
insurers is concerned is: Oh behave.