Recommendations do not Apply to Life insurance or Marine Insurance
1. The recommendations in this report do not relate to life insurance or to marine insurance, although we mention life insurance for comparative purposes.1 The reason is that the Australian Commonwealth Parliament has enacted national legislation on both subjects.2 Such legislation is within the constitutional power of the Commonwealth3 and covers the field.4 The Life Insurance Act 1945 (Cth) provides specifically for the exclusion of the operation of named State Acts from the field of life insurance, including the Insurance Act, 1902 (N.S.W.).5 In addition. clause 4(1) of the Insurance Regulation 1902 (N.S.W.), which was made in 1974 after the enactment of section 18 of the Insurance Act 1902, provides that “contracts of marine insurance and contracts of life insurance are exempt from all of the provisions of Part VI” (including section 18) “of the Act”. Item (2) of Schedule 1 to the draft legislation in Appendix I excludes, inter alia, contracts of life insurance and contracts of marine insurance. We therefore envisage that amendment of clause 4(1) of the Insurance Regulation 1902 may be thought desirable so as to avoid difficulties of interpretation that might arise from similar exclusions or exemptions appearing both in the statute and in the Regulation. The decision whether or not to make such an amendment is more properly a matter for the expert attention of Parliamentary Counsel than for this Commission and, accordingly, we do no more than mention it.
2. In passing it should be noted that marine insurance extends beyond losses sustained at sea and is regarded as including, for example, ordinary insurance contracts effected by owners of boats, yachts, and dinghies normally moored or kept in inland waterways. In other words, a growing field of insurance exists that cannot be affected by the recommendations of this report, the law of New South Wales, or even the recommendations of the ALRC in its reference on insurance contracts.6 Unlike the Life Insurance Act 1945 (Cth), which mitigates some of the rigors of the common law,7 the Marine Insurance Act 1909 (Cth) enshrines in statutory form the traditional principles of common law that we consider to be overdue for reform.8
Recommendations do not Apply to Certain Other Insurance
3. Three other kinds of insurance contract are excluded from the recommendations in this report
4. The first exclusion extends to compulsory third party insurance contracts in relation to death and bodily injury caused by the drivers of motor vehicles as described in the Motor Vehicles (Third Party Insurance) Act, 1942. Section 15 of this Act provides a procedure whereby a person (that is, a third party) entitled to a judgment in respect of death or bodily injury may have direct resort to the insurer. Insurers are prohibited from raising against such persons defences based on non-disclosure, misrepresentation and breach of a term of the insurance contract, but may recover from the insured if the latter is guilty of misrepresentation, non-disclosure or breach of such a term. The Act also provides for recovery from a driver who has committed a breach of or has failed to comply with any provision of the Act. This discrete legislation has already changed the common law. Because of this and the structure of the Act, the reforms recommended in this report are not capable of direct application to it but the principles underlying our recommendations could be applied.
5. The second exclusion extends to workers’ compensation insurance. Section 18 of the Workers’ Compensation Act, 1926 (N.S.W.) prescribes the cover to be extended by insurance policies issued pursuant to that Act. The prescribed form of policy contains a basis of contract clause.9 Section 18 contains peremptory provisions imposing liability upon insurers, but contains no counterpart to the provisions of the Motor Vehicles (Third Party Insurance) Act, 1942 referred to in the previous paragraph. This has led to litigation and judicial interpretation of the effect of untrue statements in insurance proposals.10 The result is that reform of the kind envisaged by this report could not be undertaken in relation to insurance contracts governed by the Workers’ Compensation Act, 1926 without detailed study of that Act and the judicial decisions interpreting it. It is plain that the specific recommendations of this report could not safely be applied directly to workers’ compensation insurance. However, as with the Motor Vehicles (Third Party Insurance) Act, 1942 the underlying principles of our recommendations could be applied by suitably drafted provisions.
6. The third exclusion from the recommendations of this report extends to solicitors’ professional indemnity insurance. Section 70A of the Legal Practitioners Act, 1898 (which was enacted in 1980) has the effect of requiring a practising solicitor to be covered by indemnity insurance “the terms of which are approved ... by the Governor...”. The terms currently approved require an insurer to agree not to avoid, repudiate or rescind the insurance contract upon the grounds, inter alia, of non-disclosure or misrepresentation. Thus the subject matter of this report has received direct recent attention in so far as professional indemnity insurance is concerned. Further reform is, in our view, not called for.
Insurance Contracts Subject to the Consumer Credit Act, 1981
7. We have given our reasons for preferring that sections 137 and 138 of the Consumer Credit Act, 1981 should be repealed and replaced by the provisions we recommend (paragraph 7.37). If this is unacceptable, a further exclusion will be required, namely, all insurance contracts subject to sections 137 and 138 of the Consumer Credit Act, 1981 (paragraphs 7.38 and 7.40).
FOOTNOTES
1. See paras 5.1-5.2 above.
2. The Life insurance Act 1945 (Cth) and the Marine Insurance Act 1909 (Cth).
3. Constitution, s.51(xiv) - “Insurance, other than State insurance; also State insurance extending beyond the limits of the State concerned.”
4. Constitution, s.109.
5. Section 8(1).
6. Marine insurance was specifically excluded from the terms of reference.
7. See paras 5.1-5.2 above.
8. See Marine Insurance Act 1909 (Cth), ss.23-27.
9. See Workers’ Compensation Regulations 1926, App. 1; see para. 2.10 above.
10. See comment and cases cited in C.R Mills, Workers’ Compensation (New South Wales) (2nd ed. 1979), pp. 361-364.
