Insurance law is the practice of law surrounding insurance, including insurance policies and claims. It can be broadly broken into three categories - regulation of the business of insurance; regulation of the content of insurance policies, especially with regard to consumer policies; and regulation of claim handling.

1. BUSINESS LAW
INSURANCE LAW
On completion of this chapter, you should
be able to:
explain the main features of insurable interest
explain the main features of indemnity
explain the main features of utmost good faith
explain the main features of subrogation

2. On completion of this chapter, you should be able to:
 describe the duties and liabilities of insurance agents
and brokers
 list and describe the common forms of insurance
applicable to a business organisation
 explain the difference between general insurance and
life assurance policies
Insurance is a means for persons and business to protect
and compensate themselves against the risk of loss.
Risk is either:
Speculative (uncertain); or
Pure (there will be loss if the risk should occur).
Insurance is concerned with spreading the risk.
Insurance
The insured is indemnified against
unforeseeable loss or damage which may
or may not occur.
Assurance
The assured or their representatives will
receive a sum of money on the
occurrence of an event which must occur
at some time, although the time of
occurrence is uncertain, such as death.

3. The basic principles of insurance can be found in the
common law but a considerable body of
Commonwealth, state and territory legislation has
been enacted which has either replaced or modified
the common law principles.
Insurable interest is stated in ss 16 and 17 of the ICA in
economic terms as pecuniary or financial loss.
Insurable interest exists if a person has suffered loss or
damage and is able to make a claim.
“Return to a pre-loss position”.
Indemnity forms the basis of all general insurance
contracts and aims to put the insured back in their pre-loss
position by the payment of money, repair or
replacement of the lost or damaged property.

4. The value of the insured property is taken at the
date of the loss when determining the amount
recoverable unless it is:
a valued property; or
replacement value property.
Over-insurance
Even where insurance is for more than the
replacement value, the insured is only entitled to
recover to the extent of their loss unless the contract
is non- indemnity:
For example, life assurance.
Double indemnity
While it is possible to take out two or more policies
(double indemnity), the insured cannot make a profit
out of the loss by claiming the full amount on both
policies.

5. All contracts of insurance are contracts of the utmost
good faith (uberrimae fidei), as the proponent has
greater knowledge of the risk to be insured against than
the insurer.
Under the Insurance Contracts Act both parties are
required to act in good faith towards each other (s 13).
How long does the duty of disclosure last?
The duty to disclose all material facts lasts right up
until when the contract is formed (ss 21, 25).
The duty of disclosure is found in
s 21 of the Insurance Contracts Act.
General insurance
The insured must disclose all material facts which can be
reasonably discovered and go to the question of risk whether
they have been asked about them or not.
The onus of proof lies on the insurer and the standard of proof
is the balan sc2e1(o1)f probabilities:
Lindsay v CIC Insurance Ltd (1989)

6. Matters that are not material)
Matters that are not material and do not need to
be disclosed include:
matters that reduce the risk;
that are common knowledge to the insurer;
that the insurer should have known; and
where there has been a waiver of disclosure
by the insurer.
Misstatement of age for life assurance
Where the non-disclosure is related to the insured’s
age, the policy cannot be avoided.
Instead, the sum insured is reduced or increased (or the
premiums reduced) on a proportionate basis.
Misrepresentation
The policy can be invalidated by either mistake or
misrepresentation.
The time to consider the truth of answers is at the time
of making the contract, looking at the surrounding
circumstances and with reference to the facts of the
case.

7. The principle of subrogation is founded on equitable
principles and puts the insurer into the ‘shoes’ of the
insured, but only after payment of the loss.
It only applies to contracts of indemnity such as fire
and motor vehicle insurance.
The cover note
“Short-term cover”
Only provides interim coverage for a short period although it
is a contract in its own right.

8. Issue of a policy
Policy is the dominant document as the proposal is
incorporated into it.
Consideration for the contract is in the form of a premium
in return for the coverage.
If the risk has changed at the time of payment, the effect
may be that the contract will lapse.
Renewal of the policy
Disclosure also applies to renewal, as renewal usually
creates a new contract.
Return of premium
The insured is entitled to a return of their premium if
there has been a total failure of consideration.
Who makes the claim?
The insured normally makes the claim
Must make the claim promptly to avoid prejudicing the
insurer’s rights against a third party:
s 54 — FAI General Insurance Co Limited v Australian
Hospital Care Pty Ltd (2001)

9. Measurement of loss
Generally, in the case of an indemnity contract the insured
will only be able to the actual amount of the loss unless it is
an agreed value policy.
Measurement of loss
If the contract contains a ’subject to average’ clause, the insured bears a
pro rata proportion of any loss:
Sum insured (SI)
Full value of subject x Amount of loss = Amount payable
matter (FV) ( A L) ---------------------------- (AP)
Note: For homeowners, an averaging clause will be ineffective where the
sum insured is 80% or more of the value of the insured property.
Cancellation
A policy may be cancelled where the insured:
failed to comply with the duty of utmost good faith;
failed to comply with duty of disclosure;
made a misrepresentation;
made a fraudulent claim;
breached a term of the contract.

10. Most contracts or insurance are arranged through
intermediaries who can be employees of insurance
companies, agents or brokers.
The duties of an agent or broker are determined by
express and implied terms that make up the agency
agreement and include:
Following the principal’s instructions;
Acting in person;
Acting in good faith;
Exercising reasonable care, skill and diligence;
The duties of an agent or broker are:
Keeping proper accounts;
Maintaining confidentiality of information; and
Accepting only the agreed or customary
remuneration and nothing else.

11. Liability of insurer for agents and employees
The Corporations Act 2001 (Cth) now makes the insurer
responsible for the actions of their agents and employees
Even where the agent/employee is acting outside the
scope of their authority/employment.
Insurance contracts include
Fire insurance
Other kinds of general (indemnity) insurance
Life assurance
Personal accident insurance
Hospital benefits and social service schemes

12. Thank You
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