ESSAY ON COMMERCIAL LAW STUDENT REQUIRES

Essay on Commercial Law

Essay on Commercial Law

Contracts of general insurance are governed in Australia by the Insurance Contracts Act, 1984 (Cth) (the "Act"), which is a piece of legislation characterised as being designed to protect insureds so that a fair balance is struck between the interests of insurers, insureds and other members of the public. Section 21 of the Act defines what an insured is, and is not, obliged to disclose to an insurer before a contract of insurance is entered made. (Astor, 2009 Pp. 13) However, its provisions are subject to the insurer adequately informing the insured in writing of the general nature and effect of the duty of disclosure, failing which the insurer cannot rely on a failure to disclose in order to exercise its rights to decline a claim as a result, unless such failure was fraudulent. Section 21(1) specifies the disclosure required of an insured as follows: 21(1) "every matter that is known to the insured, being a matter that - (a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or (b) a reasonable person in the circumstances could be expected to know to be a matter so relevant.

Accordingly, section 21(1) is concerned not just with what the insured in question actually knows but, imports the concept of the reasonable person. The test established by section 21(1) is quite different from that which had been in place at common law prior to the commencement of the Act, whereby the extent of the duty was established by reference to what a prudent insurer would consider should have been disclosed. In effect, the Act places the onus on the insurer to ask for the information that it requires to understand the risk and thus, underwrite the risk.

The remainder of section 21 limits the duty of disclosure. Section 21(2) specifies that the duty does not require the disclosure of a matter: The insurer knows or in the ordinary course of the insurer's business as an insurer ought to know; or as to which compliance of the duty of disclosure is waived by the insurer. Section 21(3) states that where the insured fails to answer or gives an obviously incomplete or irrelevant answer to a question included in a proposal form, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter. Accordingly, it is of some importance for underwriters to ensure that they are satisfied that a proposal form has been adequately completed prior to offering terms. Misrepresentation Section 23 to 27 of the Act concern pre-policy misrepresentations by insureds (the making of which would constitute a breach of the duty of disclosure). The contents of the division largely mirror those of the preceding division concerned with the duty of disclosure. However, of particular interest is section 26 which specifies that certain statements are not in fact ...