INSURANCE CONTRACTS AMENDMENT BILL 2010

i Insurance Contracts Amendment Bill 2010 No. , 2010

Contents

1 Short

title

...........................................................................................

2 Commencement

.................................................................................

3 Schedule(s)

........................................................................................

Schedule 1--Scope and application

Part 1--Duty of utmost good faith

Insurance Contracts Act 1984

Part 2--Bundled workers' compensation contracts

Insurance Contracts Act 1984

Part 3--Bundled contracts generally

Insurance Contracts Act 1984

Schedule 2--Electronic communication

Insurance Contracts Act 1984

Schedule 3--Powers of ASIC

Insurance Contracts Act 1984

Schedule 4--Disclosure and misrepresentations

Part 1--Insureds' duty of disclosure

Insurance Contracts Act 1984

Part 2--Eligible contracts of insurance

Insurance Contracts Act 1984

Part 3--Insurers' duty to inform of duty of disclosure

Insurance Contracts Act 1984

Part 4--Non-disclosures by life insureds

Insurance Contracts Act 1984

Schedule 5--Remedies of insurers: life insurance contracts

Part 1--Unbundling of contracts

Insurance Contracts Act 1984

Part 2--Remedies for non-disclosure and misrepresentation

Insurance Contracts Act 1984

Insurance Contracts Amendment Bill 2010 No. , 2010 ii

Part 3--Remedy for misstatement of date of birth

Insurance Contracts Act 1984

Part 4--Cancellation of contracts

Insurance Contracts Act 1984

Schedule 6--Third parties

Part 1--Requests by third party beneficiaries to insurers for

information

Insurance Contracts Act 1984

Part 2--Insurers' defences in actions by third party

beneficiaries

Insurance Contracts Act 1984

Part 3--Rights and obligations of third party beneficiaries

under life insurance contracts

Insurance Contracts Act 1984

Part 4--Rights of third parties to recover against insurers

Insurance Contracts Act 1984

Part 5--Representative actions by ASIC on behalf of third

party beneficiaries

Insurance Contracts Act 1984

Part 6--Non-disclosure or misrepresentation by members of

group life insurance schemes

Insurance Contracts Act 1984

Schedule 7--Subrogation

Insurance Contracts Act 1984

Insurance Contracts Amendment Bill 2010 No. , 2010 1

A Bill for an Act to amend the Insurance Contracts

Act 1984, and for related purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Insurance Contracts Amendment Act

2010.

2 Commencement

(1) Each provision of this Act specified in column 1 of the table

commences, or is taken to have commenced, in accordance with

column 2 of the table. Any other statement in column 2 has effect

according to its terms.

2 Insurance Contracts Amendment Bill 2010 No. , 2010

Commencement information

Column 1

Column 2

Column 3

Provision(s) Commencement

Date/Details

1. Sections 1 to 3

and anything in

this Act not

elsewhere covered

by this table

The day this Act receives the Royal Assent.

2. Schedule 1

The day this Act receives the Royal Assent.

3. Schedule 2

A single day to be fixed by Proclamation.

However, if any of the provision(s) do not

commence within the period of 6 months

beginning on the day this Act receives the

Royal Assent, they commence on the day

after the end of that period.

4. Schedule 3

The day this Act receives the Royal Assent.

5. Schedule 4

The day after the end of the period of 18

months beginning on the day this Act

receives the Royal Assent.

6. Schedule 5,

Part 1

The day this Act receives the Royal Assent.

7. Schedule 5,

Part 2

The day after the end of the period of 12

months beginning on the day this Act

receives the Royal Assent.

8. Schedule 5,

Parts 3 and 4

The day this Act receives the Royal Assent.

9. Schedule 6,

Parts 1 to 4

The day after the end of the period of 12

months beginning on the day this Act

receives the Royal Assent.

10. Schedule 6,

Part 5

The day this Act receives the Royal Assent.

11. Schedule 6,

Part 6

The day after the end of the period of 12

months beginning on the day this Act

receives the Royal Assent.

12. Schedule 7

The day after the end of the period of 6

months beginning on the day this Act

receives the Royal Assent.

Insurance Contracts Amendment Bill 2010 No. , 2010 3

Note:

This table relates only to the provisions of this Act as originally

passed by both Houses of the Parliament and assented to. It will not be

expanded to deal with provisions inserted in this Act after assent.

(2) Column 3 of the table contains additional information that is not

part of this Act. Information in this column may be added to or

edited in any published version of this Act.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or

repealed as set out in the applicable items in the Schedule

concerned, and any other item in a Schedule to this Act has effect

according to its terms.

Schedule 1 Scope and application

Part 1 Duty of utmost good faith

4 Insurance Contracts Amendment Bill 2010 No. , 2010

Schedule 1--Scope and application

Part 1--Duty of utmost good faith

Insurance Contracts Act 1984

1 Subsection 11(1) (definition of duty of the utmost good

faith)

Omit "section 13", substitute "subsection 13(1)".

2 Subsection 11(1)

Insert:

third party beneficiary, under a contract of insurance, means a

person who is not a party to the contract but is specified or referred

to in the contract, whether by name or otherwise, as a person to

whom the benefit of the insurance cover provided by the contract

extends.

3 Section 13

Before "A contract", insert "(1)".

4 At the end of section 13

Add:

(2) A failure by a party to a contract of insurance to comply with the

provision implied in the contract by subsection (1) is a breach of

the requirements of this Act.

(3) A reference in this section to a party to a contract of insurance

includes a reference to a third party beneficiary under the contract.

(4) This section applies in relation to a third party beneficiary under a

contract of insurance only after the contract is entered into.

5 After section 14

Insert:

Scope and application Schedule 1

Duty of utmost good faith Part 1

Insurance Contracts Amendment Bill 2010 No. , 2010 5

14A Powers of ASIC--insurer's failure to comply with the duty of

the utmost good faith in relation to handling or settlement

of claims

(1) This section applies if an insurer under a contract of insurance has

failed to comply with the duty of the utmost good faith in the

handling or settlement of a claim or potential claim under the

contract.

(2) Despite any provision of Chapter 7 of the Corporations Act 2001

or any regulation made under that Chapter, ASIC may exercise its

powers under Subdivision C of Division 4 of Part 7.6 of that Act or

Subdivision A of Division 8 of that Part in relation to the insurer as

if the insurer's failure to comply with the duty of the utmost good

faith were a failure by the insurer to comply with a financial

services law.

Note:

Subdivision C of Division 4 of Part 7.6 of the Corporations Act 2001

deals with variation, suspension and cancellation of an Australian

financial services licence, and Subdivision A of Division 8 of that Part

deals with banning persons from providing financial services.

(3) In this section:

financial services law has the meaning given by section 761A of

the Corporations Act 2001.

6 Application

(1)

The amendments made by this Part apply to:

(a) a contract of insurance that is originally entered into after the

commencement of this item; and

(b) a contract of general insurance that was originally entered

into before the commencement of this item and is renewed

after that commencement.

(2)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

(a) increase a sum insured under the contract; or

(b) increase the number of life insureds under the contract; or

then:

Scope and application Schedule 1

Bundled workers' compensation contracts Part 2

Insurance Contracts Amendment Bill 2010 No. , 2010 7

Part 2--Bundled workers' compensation contracts

Insurance Contracts Act 1984

7 At the end of subsection 9(1)

Add:

; or (f) entered into or proposed to be entered into:

(i) for the purposes of a law (including a law of a State or a

Territory) that relates to workers' compensation; and

(ii) to provide insurance cover in respect of an employer's

liability under a rule of the common law that requires

payment of damages to a person for employment-related

personal injury.

8 Application

The amendment made by this Part applies to:

(a) a contract of insurance that is originally entered into after the

commencement of this item; and

(b) a contract of general insurance that was originally entered

into before the commencement of this item and is renewed

after that commencement.

Schedule 1 Scope and application

Part 3 Bundled contracts generally

8 Insurance Contracts Amendment Bill 2010 No. , 2010

Part 3--Bundled contracts generally

Insurance Contracts Act 1984

9 After subsection 9(1)

Insert:

(1A) If a contract of insurance, or a proposed contract of insurance,

includes:

(a)

provisions

(the

first group of provisions) that would, if they

comprised a single contract or proposed contract, form a

contract referred to in any of paragraphs (1)(a) to (f); and

(b)

provisions

(the

second group of provisions) that would, if

they comprised a single contract or proposed contract, form a

contract other than a contract referred to in any of

paragraphs (1)(a) to (f);

then subsection (1) applies as if the first group of provisions and

the second group of provisions were each a separate contract or

proposed contract.

(1B) Despite subsection (1A), if a contract of insurance, or a proposed

contract of insurance, includes:

(a)

provisions

(the

first group of provisions) for the purposes of

a law referred to in subparagraph (1)(f)(i); and

(b)

provisions

(the

second group of provisions) that provide

insurance cover of the kind referred to in

subparagraph (1)(f)(ii);

then subsection (1) applies as if the first group of provisions and

the second group of provisions were together a separate contract or

proposed contract.

(1C)

If:

(a) a provision of a contract of insurance, or a proposed contract

of insurance, affects the operation of a group or groups of

provisions included in the contract or proposed contract; and

(b) because of subsection (1A) or (1B), subsection (1) applies as

if that group or those groups of provisions were a separate

contract or proposed contract;

Scope and application Schedule 1

Bundled contracts generally Part 3

Insurance Contracts Amendment Bill 2010 No. , 2010 9

then the first-mentioned provision is, for the purposes of

subsection (1), to be regarded as a provision included in that

separate contract or proposed contract.

10 Application

(1)

The amendment made by this Part applies to:

(a) a contract of insurance that is originally entered into after the

commencement of this item; and

(b) a contract of general insurance that was originally entered

into before the commencement of this item and is renewed

after that commencement.

(2)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

(a) increase a sum insured under the contract; or

(b) increase the number of life insureds under the contract; or

then:

(d) the contract is treated, to the extent of the variation, as if it

had been originally entered into after the commencement of

this item; and

(e) the amendment made by this Part applies to the contract to

the extent of the variation.

Schedule 2 Electronic communication

10 Insurance Contracts Amendment Bill 2010 No. , 2010

Schedule 2--Electronic communication

Insurance Contracts Act 1984

1 Subsection 62(1)

Omit "or 77".

2 Section 70

Omit "a notice, a statement", substitute "a notice or other document".

3 Subsection 71(1)

Omit "a notice, a statement, any other document or any information",

substitute "a notice or other document or information".

4 Paragraph 71(2)(b)

Omit "a notice, a statement, any other document or any information",

substitute "a notice or other document or information".

5 Subsection 71(2)

Omit "notice, statement, other document", substitute "notice, other

document".

6 Subsection 71(3)

Omit "a notice, a statement, any other document or any information",

substitute "a notice or other document or information".

7 Section 72

Repeal the section, substitute:

72 Content and other requirements for notices etc. to be given in

writing

A reference in this Act to the giving of a notice or other document

or information to a person, in writing, is a reference to giving the

person a notice or other document or information in writing that

complies with the requirements (if any) prescribed as to:

(a) the content and legibility of the notice, other document or

information; and

Electronic communication Schedule 2

Insurance Contracts Amendment Bill 2010 No. , 2010 11

(b) the material that may accompany the notice, other document

or information.

72A Method for giving written notices or documents

A notice or other document that is required or permitted by this Act

to be given to a person in writing may be given:

(a) to a body corporate in any way in which documents may be

served on the body corporate; or

(b) to a natural person:

(i)

personally;

(ii) by post to that person at the person's last-known

address.

Note:

A notice or other document may also be given to a person by

electronic communication in accordance with the Electronic

Transactions Act 1999 and any regulations made under that Act.

8 Section 77

Repeal the section.

9 Application

The amendments made by this Schedule apply in relation to a notice or

other document or information given to a person under this Act after the

commencement of this item.

Schedule 3 Powers of ASIC

12 Insurance Contracts Amendment Bill 2010 No. , 2010

Schedule 3--Powers of ASIC

Insurance Contracts Act 1984

1 At the end of Part IA

Add:

11F ASIC's power to intervene in proceedings

(1) ASIC may intervene in any proceeding relating to a matter arising

under:

(a) this Act; or

(b) Part 3 of the Medical Indemnity (Prudential Supervision and

Product Standards) Act 2003.

(2) If ASIC intervenes in a proceeding under subsection (1):

(a) ASIC is taken to be a party to the proceeding; and

(b) ASIC has all the rights, duties and liabilities of such a party

(subject to this Act or Part 3 of the Medical Indemnity

(Prudential Supervision and Product Standards) Act 2003, as

the case requires).

(3) Without limiting subsection (2), ASIC may appear and be

represented in a proceeding in which it intervenes under

subsection (1):

(a) by a staff member of ASIC; or

(b) by a natural person or body to whom ASIC has delegated its

functions and powers under this Act; or

2 Application

The amendment made by this Schedule applies to a proceeding

commenced after the commencement of this item.

Disclosure and misrepresentations Schedule 4

Insureds' duty of disclosure Part 1

Insurance Contracts Amendment Bill 2010 No. , 2010 13

Schedule 4--Disclosure and

misrepresentations

Part 1--Insureds' duty of disclosure

Insurance Contracts Act 1984

1 Paragraph 21(1)(b)

Repeal the paragraph, substitute:

(b) a reasonable person in the circumstances could be expected

to know to be a matter so relevant, having regard to factors

including, but not limited to, the nature and extent of the

insurance cover to be provided under the relevant contract of

insurance.

2 Application

(1)

The amendment made by this Part applies to:

(a) a contract of insurance that is originally entered into after the

commencement of this item; and

(b) a contract of general insurance that was originally entered

into before the commencement of this item and is renewed

after that commencement.

(2)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

(a) increase a sum insured under the contract; or

(b) increase the number of life insureds under the contract; or

then:

(d) the contract is treated, to the extent of the variation, as if it

had been originally entered into after the commencement of

this item; and

(e) the amendment made by this Part applies to the contract to

the extent of the variation.

Schedule 4 Disclosure and misrepresentations

Part 2 Eligible contracts of insurance

14 Insurance Contracts Amendment Bill 2010 No. , 2010

Part 2--Eligible contracts of insurance

Insurance Contracts Act 1984

3 Section 21A

Repeal the section, substitute:

21A Duty of disclosure before original entering into of eligible

contract of insurance

Scope

(1) This section applies in relation to the original entering into of an

eligible contract of insurance.

Note:

This section does not apply in relation to the renewal, extension,

reinstatement or variation of an eligible contract of insurance.

Section 21B applies in relation to the renewal of an eligible contract of

insurance.

Position of the insurer

(2) Before the contract is originally entered into, the insurer may

request the insured to answer one or more specific questions that

are relevant to the decision of the insurer whether to accept the risk

and, if so, on what terms.

(3) If the insurer does not make a request in accordance with

subsection (2), the insurer is taken to have waived compliance with

the duty of disclosure in relation to the contract.

(4)

the

insurer:

(a) makes a request in accordance with subsection (2); and

(b) requests the insured to disclose to the insurer any other

matter that would be covered by the duty of disclosure in

relation to the contract;

then the insurer is taken to have waived compliance with the duty

of disclosure in relation to that other matter.

Position of the insured

(5)

If:

Disclosure and misrepresentations Schedule 4

Eligible contracts of insurance Part 2

Insurance Contracts Amendment Bill 2010 No. , 2010 15

(a) the insurer makes a request in accordance with

subsection (2); and

(b) in answer to each specific question included in the request,

the insured discloses each matter that:

(i) is known to the insured; and

(ii) a reasonable person in the circumstances could be

expected to have disclosed in answer to that question;

then the insured is taken to have complied with the duty of

disclosure in relation to the contract.

Definition

(6) In this section and in section 21B:

eligible contract of insurance means a contract of insurance that is

specified in the regulations to be an eligible contract of insurance

for the purposes of those sections.

21B Duty of disclosure before renewal of eligible contract of

insurance

Scope

(1) This section applies in relation to the renewal of an eligible

contract of insurance.

Note:

Eligible contract of insurance is defined in subsection 21A(6).

Position of the insurer

(2) Before the contract is renewed, the insurer may do either or both of

the following things:

(a) request the insured to answer one or more specific questions

that are relevant to the decision of the insurer whether to

accept the risk and, if so, on what terms;

(b) give the insured a copy of any matter previously disclosed by

the insured in relation to the contract and request the insured:

(i) to disclose to the insurer any change to that matter; or

(ii) to inform the insurer that there is no change to that

matter.

Note:

Change, to a matter previously disclosed by an insured in

relation to an eligible contract of insurance, is defined in

subsection (12).

Schedule 4 Disclosure and misrepresentations

Part 2 Eligible contracts of insurance

16 Insurance Contracts Amendment Bill 2010 No. , 2010

(3) If the insurer does not:

(a) make a request in accordance with paragraph (2)(a); or

(b) give the insured a copy of any matter previously disclosed by

the insured and make a request in accordance with

paragraph (2)(b);

then the insurer is taken to have waived compliance with the duty

of disclosure in relation to the renewed contract.

Note:

This subsection is affected by subsection (11).

(4)

the

insurer:

(a) makes a request in accordance with paragraph (2)(a); and

(b) also requests (other than in accordance with paragraph (2)(b))

the insured to disclose to the insurer any other matter that

would be covered by the duty of disclosure in relation to the

renewed contract;

then the insurer is taken to have waived compliance with the duty

of disclosure in relation to that other matter.

Note:

This subsection is affected by subsection (11).

(5)

the

insurer:

(a) gives the insured a copy of any matter previously disclosed

by the insured and makes a request in accordance with

paragraph (2)(b); and

(b) also requests (other than in accordance with paragraph (2)(a))

the insured to disclose to the insurer any other matter that

would be covered by the duty of disclosure in relation to the

renewed contract;

then the insurer is taken to have waived compliance with the duty

of disclosure in relation to that other matter.

Note:

This subsection is affected by subsection (11).

Position of the insured

(6)

If:

(a) the insurer makes a request in accordance with

paragraph (2)(a), but does not give the insured a copy of any

matter previously disclosed by the insured or make a request

in accordance with paragraph (2)(b); and

Disclosure and misrepresentations Schedule 4

Eligible contracts of insurance Part 2

Insurance Contracts Amendment Bill 2010 No. , 2010 17

(b) before the contract is renewed, the insured discloses, in

answer to each specific question included in the request, each

matter that:

(i) is known to the insured; and

(ii) a reasonable person in the circumstances could be

expected to have disclosed in answer to that question;

then the insured is taken to have complied with the duty of

disclosure in relation to the renewed contract.

Note:

This subsection is affected by subsection (11).

(7)

If:

(a) the insurer gives the insured a copy of any matter previously

disclosed by the insured and makes a request in accordance

with paragraph (2)(b), but does not make a request in

accordance with paragraph (2)(a); and

(b) before the contract is renewed, the insured:

(i) discloses any change to the matter; or

(ii) if there is no change to the matter--informs the insurer

that there is no change to the matter;

then the insured is taken to have complied with the duty of

disclosure in relation to the renewed contract.

Note:

This subsection is affected by subsection (11).

(8)

If:

(a)

the

insurer:

(i) makes a request in accordance with paragraph (2)(a);

and

(ii) gives the insured a copy of any matter previously

disclosed by the insured and makes a request in

accordance with paragraph (2)(b); and

(b) before the contract is renewed, the insured:

(i) discloses each matter referred to in paragraph (6)(b);

and

(ii) does either of the things referred to in paragraph (7)(b);

then the insured is taken to have complied with the duty of

disclosure in relation to the renewed contract.

Note:

This subsection is affected by subsection (11).

(9)

If:

Schedule 4 Disclosure and misrepresentations

Part 2 Eligible contracts of insurance

18 Insurance Contracts Amendment Bill 2010 No. , 2010

(a) the insurer gives the insured a copy of any matter previously

disclosed by the insured and makes a request in accordance

with paragraph (2)(b); and

(b) before the contract is renewed, the insured does not disclose

any change to the matter;

then the insured is taken to have informed the insurer that there is

no change to the matter.

(10)

If:

(a) the insurer gives the insured a copy of any matter previously

disclosed by the insured and makes a request in accordance

with paragraph (2)(b); and

(b) before the contract is renewed, the insured informs the

insurer under subsection (7) or (8), or is taken to have

informed the insurer under subsection (9), that there is no

change to the matter;

then neither subsection 21(3) nor section 27 applies in relation to

any failure by the insured to disclose any change to the matter.

Effect of failure to comply with duty of disclosure in relation to

original contract of insurance or previous renewal

(11) If the insured failed to comply with the duty of disclosure in

relation to the contract as originally entered into or any renewal of

that contract, then, despite any other provision of this section:

(a) the insurer is not taken to have waived compliance with the

duty of disclosure in relation to the earlier failure; and

(b) the insured is not taken to have complied with the duty of

disclosure in relation to the earlier failure.

Definitions

(12) In this section:

change, to a matter previously disclosed by an insured in relation

to an eligible contract of insurance, means a change to the matter

that:

(a) is known to the insured; and

(b) a reasonable person in the circumstances could be expected

to disclose in relation to that matter.

Disclosure and misrepresentations Schedule 4

Eligible contracts of insurance Part 2

Insurance Contracts Amendment Bill 2010 No. , 2010 19

renewed contract means an eligible contract of insurance that is

entered into by way of renewal.

4 Application

(1)

Section 21A of the Insurance Contracts Act 1984, as substituted by

item 3, applies to an eligible contract of insurance that is originally

entered into after the commencement of that item.

(2)

Section 21B of the Insurance Contracts Act 1984, as inserted by item 3,

applies to an eligible contract of insurance that is renewed after the

commencement of that item (regardless of when the contract was

originally entered into).

5 Saving of regulations

(1)

Regulations that were in force under subsection 21A(9) of the Insurance

Contracts Act 1984 immediately before the commencement of this item

continue to have effect after that commencement as if they had been

made under subsection 21A(6) of the Insurance Contracts Act 1984 as

substituted by item 3.

(2)

Subitem (1) does not prevent the amendment or repeal of regulations

covered by that subitem.

Schedule 4 Disclosure and misrepresentations

Part 3 Insurers' duty to inform of duty of disclosure

20 Insurance Contracts Amendment Bill 2010 No. , 2010

Part 3--Insurers' duty to inform of duty of disclosure

Insurance Contracts Act 1984

6 Subsection 11(1)

Insert:

life insured includes a proposed life insured.

7 Paragraph 11(10)(b)

Omit all the words after "except", substitute:

if:

(i) the variation is involved in a renewal, extension or

reinstatement of the contract; or

(ii) the varied contract will provide a kind of insurance

cover that was not provided by the contract immediately

before the variation; or

(iii) in the case of a contract of life insurance--the variation

will increase a sum insured under the contract in respect

of the insured; and

8 Section 22

Repeal the section, substitute:

22 Insurer to inform of duty of disclosure

(1) The insurer must, before a contract of insurance is entered into,

clearly inform the insured in writing:

(a) of the general nature and effect of the duty of disclosure; and

(b) if section 21A or 21B applies to the contract--of the general

nature and effect of that section; and

section 31A; and

(d) that the duty of disclosure applies until the proposed contract

is entered into.

(2) If the proposed contract is a contract of life insurance, the insurer

must also, before the contract is entered into, clearly inform any

person (other than the insured) who, under the contract, would

become a life insured of the matters referred to in subsection (1).

Disclosure and misrepresentations Schedule 4

Insurers' duty to inform of duty of disclosure Part 3

Insurance Contracts Amendment Bill 2010 No. , 2010 21

(3)

If:

(a) an insurer complies with subsection (1) in relation to a

proposed contract of insurance; and

(b) the insurer accepts an offer by the insured to enter into the

proposed contract, or makes a counter-offer to enter into

another contract of insurance with the insured; and

months after the insured's most recent disclosure for the

purpose of complying with the duty of disclosure in relation

to the proposed contract;

the insurer must give to the insured, with the acceptance or

counter-offer, a reminder notice stating that the duty of disclosure

applies until the proposed or other contract is entered into.

(4) If the regulations prescribe a form of writing to be used:

(a) for informing a person of the matters referred to in

subsection (1); or

(b) for the reminder notice referred to in subsection (3);

the writing to be used may be in accordance with the prescribed

form.

(5) An insurer who has not complied with subsection (1) and (if

applicable) subsection (2) may not exercise a right in respect of a

failure to comply with the duty of disclosure unless the failure was

fraudulent.

(6)

If:

(a) an insurer is required to comply with subsection (3) in

relation to a contract of insurance; and

(b) the insurer does not do so;

the insurer may not exercise a right in respect of a failure to

comply with the duty of disclosure in relation to a new matter

relating to the contract, unless the failure was fraudulent.

(7) For the purposes of subsection (6), a new matter relating to a

contract of insurance is a matter of which the insured first becomes

aware after the insured's most recent disclosure for the purpose of

complying with the duty of disclosure in relation to the contract.

9 Application

The amendments made by this Part apply to:

Schedule 4 Disclosure and misrepresentations

Part 3 Insurers' duty to inform of duty of disclosure

22 Insurance Contracts Amendment Bill 2010 No. , 2010

(a) a contract of insurance that is originally entered into after the

commencement of this item; and

(b) a contract of insurance that was originally entered into before

the commencement of this item and is renewed, extended,

varied or reinstated after that commencement.

Disclosure and misrepresentations Schedule 4

Non-disclosures by life insureds Part 4

Insurance Contracts Amendment Bill 2010 No. , 2010 23

Part 4--Non-disclosures by life insureds

Insurance Contracts Act 1984

10 After section 31

Insert:

31A Non-disclosure by life insured

(1) This section applies in relation to a contract of life insurance under

which a person (other than the insured) would become a life

insured.

(2) If, during the negotiations for the contract but before it was entered

into, the person (the life insured) failed to disclose to the insurer a

matter that was known to the life insured, being a matter that:

(a) the life insured knew 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 have been

expected to know to be a matter so relevant, having regard to

factors including, but not limited to, the nature and extent of

the insurance cover to be provided under the relevant contract

of insurance;

this Act has effect as if the failure to disclose the matter had been a

failure by the insured to comply with the duty of disclosure in

relation to the matter.

(3) Subsection (2) does not apply in relation to a failure by the life

insured to disclose a matter:

(a) that diminishes the risk; or

(b) that is of common knowledge; or

insurer's business as an insurer ought to know; or

(d) as to which compliance with the duty of disclosure is waived

by the insurer.

11 Application

(1)

The amendment made by this Part applies to a contract of life insurance

that is originally entered into after the commencement of this item.

Schedule 4 Disclosure and misrepresentations

Part 4 Non-disclosures by life insureds

24 Insurance Contracts Amendment Bill 2010 No. , 2010

(2)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

(a) increase a sum insured under the contract; or

(b) increase the number of life insureds under the contract; or

then:

(d) the contract is treated, to the extent of the variation, as if it

had been originally entered into after the commencement of

this item; and

(e) the amendment made by this Part applies to the contract to

the extent of the variation.

Remedies of insurers: life insurance contracts Schedule 5

Unbundling of contracts Part 1

Insurance Contracts Amendment Bill 2010 No. , 2010 25

Schedule 5--Remedies of insurers: life

insurance contracts

Part 1--Unbundling of contracts

Insurance Contracts Act 1984

1 Before section 28

Insert:

27A Contracts of life insurance that provide 2 or more kinds of

insurance cover or insurance cover for 2 or more life

insureds

(1) If a contract of life insurance provides 2 or more kinds of insurance

cover, this Division applies, in relation to each of those kinds of

insurance cover, as if the contract provided only that kind of

insurance cover.

(2) If a contract of life insurance provides a kind of insurance cover in

relation to 2 or more life insureds, subsection (1) applies to the

contract, in relation to each life insured, as if the insurance cover

provided by the contract in relation to that life insured constituted a

separate kind of insurance cover.

(3) If a contract of life insurance provides:

(a) a kind of insurance cover in relation to a life insured that is

underwritten on particular terms; and

(b) insurance cover of that kind in relation to that life insured

that:

(i) is not underwritten; or

(ii) is underwritten on different terms;

then the insurance cover referred to in paragraph (a) and the

insurance cover referred to in paragraph (b) are each to be regarded

as a separate kind of insurance cover for the purposes of

subsection (1).

Note:

Because of this section, the remedies that may be available to an

insurer under this Division in relation to a contract of life insurance

will depend on the kind of insurance cover provided by the contract.

Remedies of insurers: life insurance contracts Schedule 5

Remedies for non-disclosure and misrepresentation Part 2

Insurance Contracts Amendment Bill 2010 No. , 2010 27

Part 2--Remedies for non-disclosure and

misrepresentation

Insurance Contracts Act 1984

3 Subsection 28(1)

Omit "where the person who became the insured under a contract of

general insurance", substitute "in relation to a contract of general

insurance if the person who became the insured under the contract".

Note 1: The heading to section 28 is replaced by the heading "Contracts of general insurance

and certain contracts of life insurance".

Note 2: The following heading to subsection 28(1) is inserted "Contracts of general insurance".

4 After subsection 28(1)

Insert:

Contracts of life insurance (other than contracts with a surrender

value or that provide cover on death)

(1A) This section applies in relation to a contract of life insurance (other

than a contract of life insurance as defined in subsection 29(1A)) if

the person who became the insured under the contract upon the

contract being entered into:

(a) failed to comply with the duty of disclosure; or

(b) made a misrepresentation to the insurer before the contract

was entered into;

but does not apply if:

premium and on the same terms and conditions, even if the

insured had not failed to comply with the duty of disclosure

or had not made the misrepresentation before the contract

was entered into; or

(d) the failure or misrepresentation was in respect of the date of

birth of one or more of the life insureds.

Note:

The following heading to subsection 28(2) is inserted "Remedies".

5 Before subsection 29(1)

Insert:

Schedule 5 Remedies of insurers: life insurance contracts

Part 2 Remedies for non-disclosure and misrepresentation

28 Insurance Contracts Amendment Bill 2010 No. , 2010

(1A) In this section:

contract of life insurance means:

(a) a contract of life insurance with a surrender value; or

(b) a contract of life insurance that provides insurance cover in

respect of the death of a life insured.

Note:

If a contract of life insurance provides insurance cover in respect

of the death of a life insured, and the contract also provides one

or more other kinds of insurance cover, this section applies to the

contract only to the extent that it provides insurance cover on

death. Section 28 applies to the contract to the extent that it

provides the other kind or kinds of insurance cover. This is

because of the effect of section 27A.

Note:

The heading to section 29 is replaced by the heading "Contracts of life insurance with

a surrender value or that provide cover on death".

6 Subsection 29(1)

Omit "where the person who became the insured under a contract of life

insurance", substitute "in relation to a contract of life insurance if the

person who became the insured under the contract".

7 Subsection 29(1)

Omit "apply where", substitute "apply if".

8 Subsection 29(3)

Omit "a contract", insert "the contract".

9 Application

(1)

The amendment made by item 3 applies to a contract of general

insurance whether originally entered into before or after the

commencement of this item.

(2)

The amendments made by items 4 to 8 apply to a contract of life

insurance that is originally entered into after the commencement of this

item.

(3)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

(a) increase a sum insured under the contract; or

(b) increase the number of life insureds under the contract; or

Remedies of insurers: life insurance contracts Schedule 5

Remedies for non-disclosure and misrepresentation Part 2

Insurance Contracts Amendment Bill 2010 No. , 2010 29

then:

(d) the contract is treated, to the extent of the variation, as if it

had been originally entered into after the commencement of

this item; and

(e) the amendments made by items 4 to 8 apply to the contract to

the extent of the variation.

Schedule 5 Remedies of insurers: life insurance contracts

Part 3 Remedy for misstatement of date of birth

30 Insurance Contracts Amendment Bill 2010 No. , 2010

Part 3--Remedy for misstatement of date of birth

Insurance Contracts Act 1984

10 After subsection 30(3)

Insert:

(3A)

If:

(a) the expiration date of a contract of life insurance is calculated

by reference to the date of birth of a person who is a life

insured under the contract; and

(b) the person's date of birth was not correctly stated to the

insurer at the time when the contract was entered into;

the insurer may (instead of doing any of the things referred to in

subsection (2)) vary the contract by changing its expiration date to

the date that would have been the expiration date if the contract

had been based on the correct date of birth.

11 Subsection 30(4)

After "subsection (2)", insert "or (3A)".

12 Application

(1)

The amendments made by this Part apply to a contract of life insurance

that is originally entered into after the commencement of this item.

(2)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

(a) increase a sum insured under the contract; or

(b) increase the number of life insureds under the contract; or

then:

(d) the contract is treated, to the extent of the variation, as if it

had been originally entered into after the commencement of

this item; and

(e) the amendments made by this Part apply to the contract to the

extent of the variation.

Remedies of insurers: life insurance contracts Schedule 5

Cancellation of contracts Part 4

Insurance Contracts Amendment Bill 2010 No. , 2010 31

Part 4--Cancellation of contracts

Insurance Contracts Act 1984

13 After section 59

Insert:

59A Cancellation of contracts of life insurance

An insurer under a contract of life insurance may cancel the

contract if:

(a) a person who is or was at any time the insured failed to

comply with the duty of the utmost good faith; or

(b) the person who was the insured at the time when the contract

was entered into failed to comply with the duty of disclosure;

was entered into made a misrepresentation to the insurer

during the negotiations for the contract but before it was

entered into; or

(d) a person who is or was at any time the insured failed to

comply with a provision of the contract (other than by failing

to pay a premium in respect of the contract); or

Note:

A contract of life insurance may be forfeited under section 210 of

the Life Insurance Act 1995 because of non-payment of a

premium.

(e) the insured has made a fraudulent claim:

(i) under the contract (the first contract); or

(ii) under another contract of insurance (whether with the

insurer concerned or with another insurer) that provides

insurance cover during any part of the period during

which the first contract provides insurance cover.

14 Section 63

Repeal the section, substitute:

63 Cancellations of contracts of insurance void

(1) Except as provided by this Act, an insurer may not cancel a

contract of general insurance.

Schedule 5 Remedies of insurers: life insurance contracts

Part 4 Cancellation of contracts

32 Insurance Contracts Amendment Bill 2010 No. , 2010

(2) Except as provided by this Act or section 210 of the Life Insurance

Act 1995, an insurer may not cancel a contract of life insurance.

Note:

Section 210 of the Life Insurance Act 1995 deals with cancellation of

a contract of life insurance because of non-payment of a premium.

(3) Any purported cancellation of a contract of insurance in

contravention of subsection (1) or (2) is of no effect.

15 Application

(1)

Section 59A of the Insurance Contracts Act 1984 (as inserted by

item 13) and subsections 63(2) and (3) of that Act (as substituted by

item 14) apply to a contract of life insurance that is originally entered

into after the commencement of this item.

(2)

Subsections 63(1) and (3) of the Insurance Contracts Act 1984 (as

substituted by item 14) apply to a contract of general insurance whether

originally entered into before or after the commencement of this item.

Third parties Schedule 6

Requests by third party beneficiaries to insurers for information Part 1

Insurance Contracts Amendment Bill 2010 No. , 2010 33

Schedule 6--Third parties

Part 1--Requests by third party beneficiaries to

insurers for information

Insurance Contracts Act 1984

1 Section 41

Repeal the section, substitute:

41 Contracts of liability insurance--consent of insurer required for

settlement etc. of claim

(1) This section applies in relation to a contract of liability insurance if

it would constitute a breach of the contract if, without the consent

of the insurer, the insured or any third party beneficiary were:

(a) to settle or compromise a claim against the insured or third

party beneficiary; or

(b) to make an admission or payment in respect of such a claim.

(2) If the insured or any third party beneficiary (the claimant) under

the contract has made a claim under the contract, the claimant may

at any time, by notice in writing given to the insurer, require the

insurer to inform the claimant in writing:

(a) whether the insurer admits that the contract applies to the

claim; and

(b) if the insurer so admits, whether the insurer proposes to

conduct, on behalf of the claimant, the negotiations and any

legal proceedings in respect of the claim made against the

claimant.

(3) If the insurer does not, within a reasonable time after being given a

notice under subsection (2), inform the claimant:

(a) that the insurer admits that the contract of liability insurance

applies to the claim; and

(b) that the insurer proposes to conduct, on behalf of the

claimant, the negotiations and any legal proceedings in

respect of the claim made against the claimant;

then:

Schedule 6 Third parties

Part 1 Requests by third party beneficiaries to insurers for information

34 Insurance Contracts Amendment Bill 2010 No. , 2010

(d) the amount payable in respect of the claim is not reduced;

by reason only that the claimant breached the contract as

mentioned in subsection (1).

2 Application

The amendment made by this Part applies to:

(a) a contract of liability insurance that is originally entered into

after the commencement of this item; and

(b) a contract of liability insurance that was originally entered

into before the commencement of this item and is renewed

after that commencement.

Third parties Schedule 6

Insurers' defences in actions by third party beneficiaries Part 2

Insurance Contracts Amendment Bill 2010 No. , 2010 35

Part 2--Insurers' defences in actions by third party

beneficiaries

Insurance Contracts Act 1984

3 Subsection 48(1)

Repeal the subsection, substitute:

(1) A third party beneficiary under a contract of general insurance has

a right to recover from the insurer, in accordance with the contract,

the amount of any loss suffered by the third party beneficiary even

though the third party beneficiary is not a party to the contract.

Note:

The heading to section 48 is replaced by the heading "Contracts of general

insurance--entitlements of third party beneficiaries".

4 Subsection 48(2)

Omit "a person who has such a right", substitute "the third party

beneficiary".

5 Paragraph 48(2)(a)

Repeal the paragraph, substitute:

(a) has, in relation to the third party beneficiary's claim, the

same obligations to the insurer as the third party beneficiary

would have if the third party beneficiary were the insured;

and

6 At the end of subsection 48(3)

Add ", including, but not limited to, defences relating to the conduct of

the insured (whether the conduct occurred before or after the contract

was entered into)".

7 Subsection 48AA(1)

Repeal the subsection, substitute:

(1) This section applies in relation to a contract of life insurance if:

(a) the contract is entered into in connection with an RSA; and

(b) the owner of the policy is an RSA provider.

Schedule 6 Third parties

Part 2 Insurers' defences in actions by third party beneficiaries

36 Insurance Contracts Amendment Bill 2010 No. , 2010

(1A) A third party beneficiary under the contract has a right to recover a

benefit from the insurer in accordance with the contract even

though the third party beneficiary is not a party to the contract.

Note:

The heading to section 48AA is altered by omitting "another person" and substituting

"third party beneficiary".

8 Subsection 48AA(2)

Omit "a person who has such a right", substitute "the third party

beneficiary".

9 Paragraph 48AA(2)(a)

Repeal the paragraph, substitute:

(a) has, in relation to the third party beneficiary's claim, the

same obligations to the insurer as the third party beneficiary

would have if the third party beneficiary were the insured;

and

10 Subsection 48AA(3)

Omit "he or she", substitute "the insurer".

11 At the end of subsection 48AA(3)

Add ", including, but not limited to, defences relating to the conduct of

the insured (whether the conduct occurred before or after the contract

was entered into)".

12 Application

(1)

The amendments made by items 3 to 6 apply to:

(a) a contract of general insurance that is originally entered into

after the commencement of this item; and

(b) a contract of general insurance that was originally entered

into before the commencement of this item and is renewed

after that commencement.

(2)

The amendments made by items 7 to 11 apply to a contract of life

insurance that is originally entered into after the commencement of this

item.

(3)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

(a) increase a sum insured under the contract; or

Third parties Schedule 6

Insurers' defences in actions by third party beneficiaries Part 2

Insurance Contracts Amendment Bill 2010 No. , 2010 37

(b) increase the number of life insureds under the contract; or

then:

(d) the contract is treated, to the extent of the variation, as if it

had been originally entered into after the commencement of

this item; and

(e) the amendments made by items 7 to 11 apply to the contract

to the extent of the variation.

Schedule 6 Third parties

Part 3 Rights and obligations of third party beneficiaries under life insurance contracts

38 Insurance Contracts Amendment Bill 2010 No. , 2010

Part 3--Rights and obligations of third party

beneficiaries under life insurance contracts

Insurance Contracts Act 1984

13 Subsections 48A(1) and (2)

Repeal the subsections, substitute:

(1) The following paragraphs have effect in relation to a contract of

life insurance to the extent that the contract is expressed to be for

the benefit of a third party beneficiary (who may be the life

insured):

(a) the third party beneficiary has a right to recover from the

insurer any money that becomes payable under the contract

even though the third party beneficiary is not a party to the

contract;

(b) if the third party beneficiary is not the life insured, any

money paid to the third party beneficiary under the contract

does not form part of the estate of the life insured.

(2) Subject to the contract, the third party beneficiary:

(a) has, in relation to the third party beneficiary's claim, the

same obligations to the insurer as the third party beneficiary

would have if the third party beneficiary were the insured;

and

(b) may discharge the insured's obligations in relation to the

payment of any money to the third party beneficiary under

the contract.

Note:

The heading to section 48A is altered by omitting "another person" and substituting

"third party beneficiary".

14 Application

(1)

The amendment made by this Part applies to a contract of life insurance

that is originally entered into after the commencement of this item.

(2)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

(a) increase a sum insured under the contract; or

(b) increase the number of life insureds under the contract; or

Third parties Schedule 6

Rights and obligations of third party beneficiaries under life insurance contracts Part 3

Insurance Contracts Amendment Bill 2010 No. , 2010 39

then:

(d) the contract is treated, to the extent of the variation, as if it

had been originally entered into after the commencement of

this item; and

(e) the amendment made by this Part applies to the contract to

the extent of the variation.

Schedule 6 Third parties

Part 4 Rights of third parties to recover against insurers

40 Insurance Contracts Amendment Bill 2010 No. , 2010

Part 4--Rights of third parties to recover against

insurers

Insurance Contracts Act 1984

15 Subsection 51(1)

Repeal the subsection, substitute:

(1)

If:

(a) the insured or any third party beneficiary under a contract of

liability insurance is liable in damages to another person; and

(b) the contract provides insurance cover in respect of the

liability; and

reasonable inquiry, be found;

the other person may recover from the insurer an amount equal to

the insurer's liability under the contract in respect of the liability of

the insured or third party beneficiary.

Note:

The heading to section 51 is replaced by the heading "Claims against insurer in

respect of liability of insured or third party beneficiary".

16 Paragraph 51(2)(b)

Repeal the paragraph, substitute:

(b) the liability of the insured or third party beneficiary, or the

legal personal representative of the insured or third party

beneficiary, to the other person.

17 Subsection 51(3)

Omit "third party has in respect of the insured's liability", substitute

"other person has in respect of the liability of the insured or third party

beneficiary".

18 Application

The amendments made by this Part apply to:

(a) a contract of liability insurance that is originally entered into

after the commencement of this item; and

(b) a contract of liability insurance that was originally entered

into before the commencement of this item and is renewed

after that commencement.

Third parties Schedule 6

Representative actions by ASIC on behalf of third party beneficiaries Part 5

Insurance Contracts Amendment Bill 2010 No. , 2010 41

Part 5--Representative actions by ASIC on behalf of

third party beneficiaries

Insurance Contracts Act 1984

19 Paragraph 55A(1)(b)

After "the insured", insert "or any third party beneficiary under the

contract".

20 Paragraph 55A(1)(c)

After "the insured", insert "or third party beneficiary".

21 Paragraph 55A(1)(d)

After "the insured" (wherever occurring), insert "or third party

beneficiary".

22 Paragraph 55A(2)(b)

After "those insureds", insert "or any third party beneficiaries under the

contract".

23 Subsection 55A(2)

After "all of those insureds", insert "or third party beneficiaries".

24 Subsection 55A(3)

Omit "the insured or each of the insureds", insert "the insured or third

party beneficiary, or each of the insureds or third party beneficiaries,".

25 Application

The amendments made by this Part apply to a contract of insurance

whether originally entered into before or after the commencement of

this item.

Schedule 6 Third parties

Part 6 Non-disclosure or misrepresentation by members of group life insurance

schemes

42 Insurance Contracts Amendment Bill 2010 No. , 2010

Part 6--Non-disclosure or misrepresentation by

members of group life insurance schemes

Insurance Contracts Act 1984

26 Subsection 4(2)

Omit "blanket superannuation contract", substitute "superannuation

contract (other than an individual superannuation contract)".

27 Subsection 11(1)

Insert:

group life contract means a contract of life insurance that is

maintained for the purposes of:

(a) a superannuation or retirement scheme under which there can

be more than one life insured; or

(b) another group life scheme (including a scheme that is not

related to employment) under which there can be more than

one life insured.

28 Subsection 11(1) (paragraph (b) of the definition of

proposal form)

Omit "or retirement", substitute ", retirement or other group life".

29 At the end of paragraph 11(4)(a)

Add "and".

30 Paragraph 11(4)(b)

Omit "only; and", substitute "only.".

31 Paragraph 11(4)(c)

Repeal the paragraph.

32 Paragraph 23(a)

Omit "or retirement", substitute ", retirement or other group life".

33 Paragraph 26(3)(a)

Omit "or retirement", substitute ", retirement or other group life".

Third parties Schedule 6

Non-disclosure or misrepresentation by members of group life insurance schemes Part

Insurance Contracts Amendment Bill 2010 No. , 2010 43

34 Section 32

Repeal the section, substitute:

32 Non-disclosure or misrepresentation by life insured covered

under group life contract

(1) This Division extends to the case where there was a failure to

comply with the duty of disclosure, or a misrepresentation was

made to the insurer, in respect of a proposed life insured under a

group life contract, as if:

(a) the insurance cover provided by the group life contract in

respect of the life insured were provided by an individual

contract of life insurance between the insurer and the insured;

and

(b) the group life contract had been entered into at the time when

the proposed life insured became a life insured under the

group life contract.

(2) For the purposes of this Division, if the failure to comply with the

duty of disclosure, or the misrepresentation, occurred after the

proposed life insured became a member of the relevant

superannuation, retirement or other group life scheme but before

the insurance cover was provided by the group life contract in

respect of the life insured, the failure or misrepresentation is taken

to have occurred before the proposed life insured became a life

insured under the group life contract.

35 Section 32A

Omit "made, to the insurer", substitute "made to the insurer,".

36 Application

(1)

The amendments made by items 26, 29, 30, 31 and 35 apply to a

contract of life insurance whether originally entered into before or after

the commencement of this item.

(2)

The amendments made by items 27, 28 and 32 to 34 apply to a contract

of life insurance that is originally entered into after the commencement

of this item.

(3)

If a contract of life insurance that was originally entered into before the

commencement of this item is varied after that commencement to:

Schedule 6 Third parties

Part 6 Non-disclosure or misrepresentation by members of group life insurance

schemes

44 Insurance Contracts Amendment Bill 2010 No. , 2010

(a) increase a sum insured under the contract; or

(b) increase the number of life insureds under the contract; or

then:

(d) the contract is treated, to the extent of the variation, as if it

had been originally entered into after the commencement of

this item; and

(e) the amendments made by items 27, 28 and 32 to 34 apply to

the contract to the extent of the variation.

Subrogation Schedule 7

Insurance Contracts Amendment Bill 2010 No. , 2010 45

Schedule 7--Subrogation

Insurance Contracts Act 1984

1 Before section 65

Insert:

64 Application to third party beneficiaries

In this Part, a reference to an insured includes a reference to a third

party beneficiary.

2 Section 67

Repeal the section, substitute:

67 Rights with respect to money recovered under subrogation etc.

Scope

(1) This section applies if:

(a) an insurer is liable under a contract of general insurance in

respect of a loss; and

(b) the insurer has a right of subrogation in respect of the loss;

and

insured) from another person in respect of the loss.

Amount recovered by insurer

(2) If the amount is recovered by the insurer in exercising the insurer's

right of subrogation in respect of the loss:

(a) the insurer is entitled under this paragraph to so much of the

amount as does not exceed the sum of:

(i) the amount paid by the insurer to the insured in respect

of the loss; and

(ii) the amount paid by the insurer for administrative and

legal costs incurred in connection with the recovery; and

(b) if the amount recovered exceeds the amount to which the

insurer is entitled under paragraph (a)--the insured is entitled

Schedule 7 Subrogation

46 Insurance Contracts Amendment Bill 2010 No. , 2010

under this paragraph to so much of the excess as does not

exceed the insured's overall loss; and

(i) the amount to which the insurer is entitled under

paragraph (a); and

(ii) the amount (if any) to which the insured is entitled

under paragraph (b);

the insurer is entitled to the excess.

Amount recovered by insured

(3) If the amount is recovered by the insured:

(a) the insured is entitled under this paragraph to so much of the

amount as does not exceed the sum of:

(i) the insured's overall loss; and

(ii) the amount paid by the insured for administrative and

legal costs incurred in connection with the recovery; and

(b) if the amount recovered exceeds the amount to which the

insured is entitled under paragraph (a)--the insurer is entitled

to so much of the excess as does not exceed the amount paid

by the insurer to the insured in respect of the loss; and

(i) the amount to which the insured is entitled under

paragraph (a); and

(ii) the amount (if any) to which the insurer is entitled under

paragraph (b);

the insured is entitled to the excess.

Amount recovered by insurer and insured jointly

(4) Subsections (5), (6) and (7) apply if the amount is recovered by the

insurer and the insured jointly.

(5) If the amount recovered is less than the sum of the paragraph (2)(a)

amount and the paragraph (3)(a) amount, the insurer and the

insured are each entitled to a portion of the amount recovered,

calculated on a pro rata basis in proportion to the paragraph (2)(a)

amount and the paragraph (3)(a) amount.

(6) If the amount recovered is equal to the sum of the paragraph (2)(a)

amount and the paragraph (3)(a) amount:

Subrogation Schedule 7

Insurance Contracts Amendment Bill 2010 No. , 2010 47

(a) the insurer is entitled to the paragraph (2)(a) amount; and

(b) the insured is entitled to the paragraph (3)(a) amount.

(7) If the amount recovered exceeds the sum of the paragraph (2)(a)

amount and the paragraph (3)(a) amount, then:

(a) the insurer is entitled to the paragraph (2)(a) amount; and

(b) the insured is entitled to the paragraph (3)(a) amount; and

each entitled to a portion of the remainder of the amount

recovered, calculated on a pro rata basis in proportion to the

amounts referred to in subparagraphs (2)(a)(ii) and (3)(a)(ii).

Amount awarded by way of interest

(8) If an amount (the interest amount) by way of interest is awarded in

respect of the amount recovered (the principal amount), the

following apply:

(a) if the principal amount was recovered by the insurer, the

insurer is entitled to the interest amount;

(b) if the principal amount was recovered by the insured, the

insured is entitled to the interest amount;

insured jointly, the interest amount is to be divided fairly

between the insurer and the insured, having regard to:

(i) the amounts to which the insurer and the insured are

each entitled under subsection (5), (6) or (7), as the case

requires; and

(ii) the periods of time during which the insurer and the

insured have lost the use of their money.

Rights of insurer and insured are subject to contract and any

agreement

(9) The rights of the insurer and the insured under this section are

subject to:

(a) the relevant contract of insurance; and

(b) any agreement made between the insurer and the insured

after the loss has occurred.

Schedule 7 Subrogation

48 Insurance Contracts Amendment Bill 2010 No. , 2010

Definitions

(10) In this section:

insured's overall loss, in relation to a loss incurred by an insured

to which this section applies, means the amount of the loss reduced

by any amount paid to the insured by the insurer in respect of the

loss.

paragraph (2)(a) amount means the sum of the amounts referred

to in subparagraphs (2)(a)(i) and (ii).

paragraph (3)(a) amount means the sum of the amounts referred

to in subparagraphs (3)(a)(i) and (ii).

3 Application

The amendments made by this Schedule apply to:

(a) a contract of general insurance that is originally entered into

after the commencement of this item; and

(b) a contract of general insurance that was originally entered

into before the commencement of this item and is renewed

after that commencement.

Commonwealth of Australia Bills

INSURANCE CONTRACTS AMENDMENT BILL 2010