On 1 September 2009, the NSW Government passed the Insurance Regulation 2009. This new Regulation replaces the Insurance Regulation 2004 and commenced on 1 September 2009. It provides that contracts of reinsurance are exempt from the operation of sections 18, 18A, 18B and 19 of the Insurance Act. Also already excluded from these provisions are contracts of insurance subject to the Insurance Contracts Act 1984 (Cth) (“ICA”) and life and marine insurance. Among others, motor vehicle CTP insurance and workers compensation insurance are outside the ambit of ss18A and 18B.
The ICA does not apply to contracts of reinsurance, however the Insurance Act contains some remedial provisions which, following the decision in HIH v Wallace, could be relied upon by reinsureds.
s 18 of the Insurance Act is similar to s54 of the ICA. It allows a court to excuse a failure of an insured to observe or perform a term or condition of a contract of insurance where the insurer was not prejudiced by the failure.
s 18A of the Insurance Act provides that a contract of insurance may not be avoided because of a misrepresentation or non-disclosure by an insured unless it was fraudulent or the insured knew or a reasonable person in the insured’s circumstances ought to have known that the misleading statement or omission was material to the insurer in relation to the contract of insurance.
s18B of the Insurance Act restricts the right of an insurer to rely on an exclusion clause where the circumstances excluded did not contribute to the particular loss.
s19 of the Insurance Act provides that a provision of a contract of insurance with respect to the submission to arbitration of any matter arising out of the contract of insurance does not bind the insured.
The Instruments Act 1958 (Vic) includes similar provisions to the Insurance Act. There has been no case law in Victoria similar to HIH v Wallace which considers whether reinsurance is included in the Instruments Act, however without an express exclusion, there is scope for the Instruments Act to include reinsurance contracts.
Who does this affect? Underwriters of reinsurance who have contracts of reinsurance in NSW.
What do you need to do? Be aware that moving forward the NSW Insurance Act does not extend to contracts of reinsurance.