Australian insurance providers and lawyers should watch with interest moves in the United Kingdom to remove insurer-friendly laws that are blatantly biased against policyholders, The Hon Michael Kirby AC CMG says.

The Hon Michael Kirby AC CMG parties at the AILA conference.

In a wide-ranging speech to AILA’s national conference on Hamilton Island last month, Mr Kirby said that, while not as progressive as Australia’s Civil Liability Act reforms had been, the UK legislative amendments were welcome. One in particular was worth considering in Australia.

The UK 18 months ago introduced the Consumer Insurance (Disclosure and Representations) Act 2012 that abolished the duty of disclosure on the insured. Instead, it placed the duty on insurers to ask express questions, which in turn had to be answered honestly by consumers.

He said the measure was passed by the Westminster Parliament through a procedure reserved for non-controversial Bills, indicating it had significant support from the community and the insurance industry. He queried why Australia continued to operate under non-disclosure penalties abandoned in the UK.

“The fact the 2012 Act had the support of the insurance market in the UK, which has otherwise proved more circumspect and resistant to reform than that of Australia, raises a legitimate question in Australia,” Mr Kirby said.

“Are Australian insurers less well equipped to know which questions to ask than their UK counterparts?”

However, he believed CLA reforms in other areas were more advanced and instructive than the UK reforms. In particularly he singled out Section 56 of the Insurance Contracts Act (ICA) that allowed judges, where they considered it appropriate, to disregard insignificant or non-causative fraud in claims. Unlike Australia, the UK legislature was not willing to trust judges with the discretion to refuse avoidance in fraud cases.

He said, while welcome, the wider UK reforms still had a way to go to match the significant progress made in Australia in the past 30 years. For example the UK law commissions were not prepared to take the step of embracing the wider reciprocal statutory concept endorsed by the ICA in Australia.

That was despite evidence that such an approach had been correct in principle and advantageous in application.

“The UK law remains largely hostage to the special interests of the insurance industry and the power of that industry’s lobbying to defeat a broader measure of justifiable law,” he said.

 

30 years of ICA

Mr Kirby also took a walk down memory lane, noting that 2014 marked 30 years since the enactment of the Insurance Contracts Act 1984. The ICA had been immensely beneficial to both insurers and consumers, but nevertheless faced significant hurdles as the industry and the law came to grips with modernisation.

He said insurance law in Australia, before the ICA, was chaotic. Much of it was governed by common law judicial decisions from England, applied to federal and state statutes on specific and narrow subjects.

“Quite apart from the obscurities and challenges this situation presented to specialist lawyers like myself, struggling to understand and find the applicable law, the difficulties were even greater for the vast array of clerks, agents and claims managers in the Australian insurance industry,” he said.

“How they trained employees in those days to address, with accuracy, legal disputes over insurance liability is a source of wonderment.”

He said that implementing the ICA had not been without difficulties, and the single Act would occasionally require updating and review. But the benefits to insurers, insureds and lawyers had far outweighed the negatives.

“The chaos is now over. The previous injustice and disproportion have been reduced. In Australia, the rule of law means more than the law of rules,” Mr Kirby said.

 

New Sutton edition

Mr Kirby reminded delegates that an updated edition of the late Professor Ken Sutton’s Insurance Law in Australia and New Zealand would soon be available. First published in 1980, the book has been through three editions, but this release will include material to reflect changes of the past 30 years.

The update was written by expert indemnity insurance lawyers and lecturers Ian Enright and Rob Merkin, with Mr Kirby acting as a consultant.

The new edition recognises recent changes to the law and legislation, and removes case studies and other materials that are now obsolete. However, it keeps much of Professor Sutton’s original content to provide background for lawyers and scholars.

Publisher Thomson Reuters is offering AILA members a discounted rate for book.

Click here for details.

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