Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (135 of 2020)

Schedule 2   Insurer avoidance of life insurance contracts, and duty to take reasonable care not to make a misrepresentation

Part 2   Duty to take reasonable care not to make a misrepresentation

Insurance Contracts Act 1984

6   Before Division 1 of Part IV

Insert:

Division 1A - Consumer insurance contracts: insured's duty to take reasonable care not to make a misrepresentation

20A Application of this Division

This Division applies in relation to:

(a) consumer insurance contracts; and

(b) proposed contracts of insurance that, if entered into, would be consumer insurance contracts.

20B The insured's duty to take reasonable care not to make a misrepresentation

(1) Subject to this Act, an insured has a duty to take reasonable care not to make a misrepresentation to the insurer before the relevant contract of insurance is entered into.

(2) Whether or not an insured has taken reasonable care not to make a misrepresentation is to be determined with regard to all the relevant circumstances.

(3) Without limiting subsection (2), the following matters may be taken into account in determining whether an insured has taken reasonable care not to make a misrepresentation:

(a) the type of consumer insurance contract in question, and its target market;

(b) explanatory material or publicity produced or authorised by the insurer;

(c) how clear, and how specific, any questions asked by the insurer of the insured were;

(d) how clearly the insurer communicated to the insured the importance of answering those questions and the possible consequences of failing to do so;

(e) whether or not an agent was acting for the insured;

(f) whether the contract was a new contract or was being renewed, extended, varied or reinstated.

(4) Any particular characteristics or circumstances of the insured of which the insurer was aware, or ought reasonably to have been aware, are to be taken into account in determining whether an insured has taken reasonable care not to make a misrepresentation.

(5) The insured is not to be taken to have made a misrepresentation merely because the insured:

(a) failed to answer a question; or

(b) gave an obviously incomplete or irrelevant answer to a question.

(6) To avoid doubt, a misrepresentation made fraudulently is made in breach of the duty to take reasonable care not to make a misrepresentation.

20C Warranties of existing facts to be representations

A statement with respect to the existence of a state of affairs that is:

(a) made in or in connection with a contract of insurance; and

(b) made by or attributable to the insured;

does not have effect as a warranty but has effect as though it were a statement made to the insurer by the insured during the negotiations for the contract but before it was entered into.