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Commercial Law Assignment: Impact of Insurance Act


Task: Commercial Law Assignment Topic:
Students should refer to relevant case law and legislation in their response. Question 1: On March 2, 2020, Brad took out a contract of insurance on his rare 2016 Nissan Skyline ‘Nismo’. The insuring agent, RTO, specialises in performance and prestige vehicles. The proposal documents provided by the insurer PVO asked various questions about important risk factors such as accidents and insurance claims, traffic offences and licence suspension.

Brad completed the forms and RTO forwarded the forms to PVO which accepted the forms as forming a valid insurance contract. However, Brad had omitted some information from the forms. In response to a question about prior insurance claims, Brad only disclosed one prior insurance claim for a ‘not at fault’ accident. In fact, Brad had been involved in a further four accidents in the previous five years. One of these claims was for an 'at fault' collision three years prior. Further, in relation to his driving offence record he disclosed only one ticket for using a mobile phone while driving. However, he neglected to mention having had his licence suspended four years prior because of an excessive speeding offence. Most of the relevant sections of the form relating to the driving history and additional claims or accident were left blank. Nevertheless, PVO accepted the forms and insured Brad, effective from March 5, 2020. An accident occurred on April 6, 2020 where the vehicle was extensively damaged to the value of $35,500. At that time, Brad relied on his insurance cover but was denied. Required: Identify the legal issues arising with reference to insurance law. Upon identifying the legal issues, provide advice to Brad. Throughout your answer, you should support your discussion with reference to sections of the relevant legislation and associated case law.

Question 2:
Insurance essay
Good faith in insurance implies, among other things, honesty, and reasonableness. Explain why these aspects of insurance are important for disclosures. In your answer, refer to relevant case law and legislation to support your argument.


Answer 1
Background of case study analysed in the commercial law assignment:
In the case ofthe assessee i.e.,the customer does owe a duty to disclose relevant information in context with the insurance contract while taking the policy or renewing the same and omission of a specified act is being made then the insurer does have the right to reject the claim. The information which is not specified by the client usually isthe non-disclosure of prior insurance claims, omission of disclosure relating to criminal offence and omission of disclosure of existing damage. The present case study is concerned with a contract of insurance of Nissan Skyline in which the insurer (Brad) have omitted information some of the information in the insurance contract. The information which was not provided was relating to driving history and additional claim or accident which was left blank. After the contract, an accident has occurred due to which loss of $35500 has been borne due to damage of vehicle but the claim has been denied by the insurance cover. This report providesa detailed analysis of legal issues concerned with the case along with advice to Brad based onthe provision of the Insurance Act along with previous case laws and judgements.

Main legal issues of case study
The main legal issue in the present case is to assess whether any provision of the Insurance Act has been contravened by Brad as he has not provided information relating to accidental claims and other relevant information. Even misrepresentation has been conducted by the assessee in context with prior insurance claim i.e. he stated that only one insurance claim has been made wherein actual four accidental claims in previous five years have been made. Further, no information has been disclosed in context with driving history along with additional claims. After accomplishment of other formalities insurance was effective from 5th March 2020 and an accident occurred on 6th April 2020 which resulted in the loss of $35500. Now the claim has been made by Brad but it has been denied by the insurance company.Another issue is to assess whether the claim of insurance cover can be denied followingthe provision of the Insurance act or not.

Analysis of Provision of Insurance Act concerned with legal issues of case study
Section 21 of Insurance Contract
Followingthe provision specified in Part IV of the Insurance Contract Act 1984, it is the responsibility of the insured individual to provide or specify the insurer each matter known to the insured as per section 21 of the specified act (Insurance Contract Act 1984, 2017) before finalization of the contract. It comprises matter relating to the decision of the insurer whether to accept the risk along with the information which should be known reasonably could be expected to know a relevant matter. Further, it has been provided that the specified matters are not limited to nature and extent of insurance cover ofthe contract of insurance. In case the individual fails to answer or provided an incomplete answer; a question would be incorporated in the proposal in context with the matter and the insurer would be deemed to waive compliance of duty of disclosure in context with the matter.

In the present case of Brad, it would be appropriate to state that he does owe a duty to disclose facts in context with prior insurance claim truly along with information relating to claim in context with ‘at fault’ collision three years prior. Further, it was his duty to provide information relating to driving offence record as he disclosed one ticked for using a mobile phone and did not mention that his license was suspended four year back due to excessive speeding offence. But he did not specify full information in context with claims and accidents. Thus, following above specified provision it can be assessed that discussed facts are relevant to present damage as possibility exist that loss has occurred due to one of the previous habit of assessing. Hence Brad has contravened provisions of section 21 of the Insurance Act.

Section 54 of the Insurance Contract Act
The provision of section 54 is remedial; as it is connected while doing an act of making an omission that would restrict an insurer from providing a claim in context with loss suffered by an insured person (Insurance Contract Act 1984, 2017). The main purpose of this section comprises striking a reasonable balance between the interest of insurer and insurer in context with contractual terms which have been developed to protectthe insurer from enhancement within the period specified in insurance cover. The balance between two specified items is to be assessed irrespective of the form of the contractual term. Its impact can be accessed from the decision provided in the case of Maxwell v Highway Hauliers Pty Ltd [2014] HCA 33 which asserts that based onthe provision of section 54 insurer might deny making payment of a claim on the reason of any conduct which the insured has conducted or omitted to accomplish after the development of contract (Section 54 of Insurance Contract Act, 2017). In the present case omission of the act has been conducted by Brad as he did not provide information relating to risk factors such as accidents and insurance claims along with traffic offences and license suspension.Thus it would be appropriate to state that insurer has not provided the required information relating to the driving offence as well as previous accidental claims in which he was punished by suspending his license due to driving at excessive speed. Moreover, it was his duty to provide specified information so that the insurance company could assess the risk connected with the client based onthe provided information. Hence, omission of conduct has been made by Brad, thus it would affect insurance claim in case of an accident.

Inherent restriction in context with section 54 of Insurance Contract Act
It has been provided that section 54 does not apply for relieving complaint of restriction which is inherent in the claim. An inherent restriction refers to a claim which is necessary to be known while claimingin context with the related nature ofthe insurance contract. Further, to assess inherent restriction AFCA applies the following approach through ascertaining the following variants:

• Nature of policy (Section 54 of Insurance Contract Act, 2017)
• Particulars or claims that have been made in a specified case

The restrictions or limitation which is inherent to limitation can be specified as indemnity which can be assessed in context with demand which is made on complaint through the third party during period cover. It has been provided in section 54 (1) that in case no specific demand is made then the claim would not satisfy the casual requirement of the section. In the present case inherent to limitation provision would not be applied as loss is related to insurance of car, this decision would be made based onthe conduct of primary party i.e. Brad. The relevant act or omission of conduct should be made after entering into a contract. In other words, omission can be specified as non-performance of conduct which could be the main reason due to which the insurer mightrefuse payment. It is to assess that responsibility is not on the financial firm for indemnifying respect of risk which was never intended to be covered within the insurance cover. However, the financial firm is required to present that omission of the act can be considered as the reason forcontribution to the loss. Further, the insurer owes the duty to clarify the nature and its impact on responsibility relating to disclosure. In case of disclosure has not been made in the required manner then they cannot rely on non-disclosure for denying claim unless non-disclosure was fraudulent. In the present case, it can be provided that the Insurance Company would have to prove that the omission of information is the reason forthe loss, thus the claim has been denied on valid grounds.

Analysis of case judgements in context omission of conduct and misrepresentation
It has been provided in the case of Lindsay v. CIC Insurance Ltd. (1989)that section 21 asserts insured duty in context with disclosure. Further provision has been asserted in section 28 that the insurer does have the power to avoid the contract in case failure to comply with the duty of disclosure has been made or conduct of misrepresentation does exist beforethe insurer entered into the contract. It comprises an analysis of the insured’s liability in case of fraudulent conduct or innocent non-disclosure or misrepresentation (Kronowitz & Gilbert, 2018). The conclusive decision was made in favour of the insurance company that the provision of section 28(3) does not provide an indirect means of avoiding the polity. In case the history of previous claims was provided, the company would not have issued a policy. Thus, the facts are similar to the case study of Brad as he stated misrepresentation and made fraudulent act though not stating facts in context with previous accidental claims along with other information. Thus, a significant probability exists that the company can reject the claim.

Further, in the case of Ferrcom Pty. Ltd. v. Commercial Union Assurance Co. of Australia Ltd. (1989), it was concluded by Supreme Judge that in context with provision specified in section 54 of Insurance Act, it has been concluded that in case disclosure would have led the insurer to not to enter in contract or otherwise to go off risk the liability of risk relating to subsequent claim would be reduced to nil. Similar provisions were provided in the case of Lindsay v. CIC Insurance Ltd. (1989) also (Australian Associated Motor Insurers Limited v Ellis & Anor (1990) 6 ANZ, 2018). It would be appropriate to specify that section 54 is not related tothe state of mind of the insured but with reasonable consequences of the relevant act. The section specifically asserts that in case any acts or omission of conduct can be regarded as a contribution of loss in context with insurance cover provided the contract, the insurer does have the right to deny to pay the claim.

Overall conclusion
It would be appropriate to specify based onthe above provision and previous judgements that Brad does owes the duty of disclosure following section 21 of the Insurance Act. Further,the omission of conduct made by Brad is related to the loss or damage which has been incurred by him; thus Insurance Company does have the right to deny the claim to Brad. The main reason behind the same is that in case Brad has provided facts relating to accident claims and details of other negligence, the company would have cancelled the contract previously or not made it.

Answer 2: Insurance Essay
“Good faith in insurance implies, among other things, honesty, and reasonableness” Analysis of provision relating to good faith in Insurance Act 1984 Good faith is one of the core variants on which an insurance contract depends and it is implied that in the specific contract that both the parties are required to act in a way that any matter arising within the relationshipis accomplishedfollowingthe general concept of good faith. It has been specifically provided in section 13 (2) of Insurance Act 1984 that in a scenario where the contract of insurance does not follow followingthe implied provision in the required manner it would be deemed that breach of requirements of the act has been made. Further, the party would be responsible for a civil penalty of 5000 units for specified conduct (Doctrine of good faith: Australia, 2017). The specified provisions have been provided relating to third party beneficiary in context with insurance contract only after the contract has been developed. The obligation in context with good faith has been provided in subsection 13(1) of Insurance Act 1984 which includes engagement of accomplishing act as well as omits to perform an act. Even it has been provided in section 60 of the cited act that an individual who does not comply or breach the duty of utmost good faith would result in cancellation of the contract of general insurance (Wang, 2017).

Relevance of honesty and reasonableness in context with Good Faith in Insurance
The implied representation of good faith as a general concept is that it should be reasonable and equitable and essential so that it could provide business efficacy to an agreement. Further, it comprises the element of being obvious without saying and capable of clear expression (Bowley, 2019). The doctrine of good faith can be specified as the main construct of common law in which the party is obliged to conduct in good faith either following instructions of court through a plea of party or followingan express term of the contract. It has been clearly expressed in the judgement of courts that to accomplish obligation is context with good faith required parties must comply with honest principles and reasonable standards having regard tothe interest of other parties (Abdullah, 2020). Thus, it can be assessed that good faith in insurance is closely interconnected with honesty and reasonableness. The reason behind the same is that variant of good faith is assessed based on these two elements i.e. honesty and reasonableness.

Analysis of case law supporting the statement that good faith implies honesty and relevance among other things
It has been provided in the case of Kelly v New Zealand Insurance Co Ltd( 'Kelly') (1993) that utmost good faith is significantly dependent on relevant circumstances of the specific case but in the general sense of the concept, it represents fairness, reasonableness, community standard of fair dealing and common ethical sense. Further, it has been provided in the case of CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] 235 it has been concluded that ‘good faith is required to be exhibited in its utmost quality (Bailliet and O’Connor, 2019). Thus, it would be appropriate to conclude that in the above-specified judgement the concept of good faith is connected with its general perception to demonstrate it appropriately i.e. reasonableness and honesty. It can be assessed that in the above-discussed judgement final decision has been taken based onthe perception of Good Fact provided in Insurance Law and analysing its different perspectives on a reasonable basis. As, it has been assessed that it is connected with honesty and reasonableness in comparison to other elements. Moreover, the perception of good faith is assessed and judged better along with honesty and reasonableness.

Another judgement which can be applied for assessing the significance of honesty and reasonableness with ‘Good Faith’ is Ferrcom Pty. Ltd. v. Commercial Union Assurance Co. of Australia Ltd. (1989), where the conclusive judgement was provided that it was concluded by the Supreme Judge that in context with provision specified in section 54 of Insurance Act, it has been concluded that in case disclosure does enforce insurer to revoke the policy or otherwise to deny the risk liability relating to subsequent claim would be reduced to nil. The doctrine of ‘good faith’ does play the main role in ascertaining whether an insurer can cancel the policy or not. It would be assessed based on honesty and reasonableness (Courtney, 2019). Thus, it would be appropriate to state that to evaluate of assessing ‘Good Faith’ insignificant situations, honesty and reasonableness would be applied as key measures for assessing whether the perception of good faith have been applied appropriately or not (Mandiberg, 2019).

In nutshell it can be stated that Good faith in insurance does imply honesty, and reasonableness; moreover they are important for disclosure as they assist in providing decision or reaching conclusion on fair basis.The statement has been provided on the basis of judgement provided in previous case laws where decision in context with Good Faith is taken considering perception of honesty and reasonableness.

Abdullah, N. (2020). Good Faith Under Australian Contract Law. In Good Faith in Contractual Performance in Australia (pp. 89-120). Palgrave Macmillan, Singapore Australian Associated Motor Insurers Limited v Ellis & Anor (1990) 6 ANZ. (2018). (Online). Retrieved through <> Bailliet, C.M. and O’Connor, S., 2019. The good faith obligation to maintain international peace and security and the pacific settlement of disputes. In Research Handbook on International Law and Peace. Edward Elgar Publishing.

Bowley, R. (2019). Transparency in the Insurance Contract Law of Australia. In Transparency in Insurance Contract Law (pp. 549-572). Springer, Cham.

Courtney, W. (2019). Good faith and termination: The English and Australian experience. Journal of Commonwealth Law, 1(1), 185-226. Doctrine of good faith: Australia. (2017). Retrieved through Insurance Contract Act 1984. (2017). (Online). Retrieved through

Kronowitz, R. S., & Gilbert, L. L. P. (2018). The Restatement of Law Liability Insurance, Reasonable Settlement and Bad Faith: Alignment of the Interests of Insurers and their Insureds.

Mandiberg, S. F. (2019). Twists in the Use of Warren Court Fourth Amendment Rhetoric: Searches, Reasonableness, Good Faith. McGeorge L. Rev., 51, 789.

Section 54 of Insurance Contract Act. (2017). (Online). Retrieved through

Understanding the reason for an insurance claim refusal. (2018). (Online). Retrieved through Wang, F. (2017). The Insured's Duty of Disclosure under Australian Insurance Law. NUS-Centre for Maritime Law Working Paper, (17/05).


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