A top lawyer specialising insurance litigation has suggested Australia’s non-disclosure laws could be in need of a revamp as there is currently no distinction between consumer and corporate risks.
“In the UK, when they look at things like non-disclosure, there’s a distinction between consumer risks and more corporate risks – but we don’t have that distinction in Australia,” says Gareth Horne, a partner with Clyde & Co.
“That means that quite often decisions are made by courts focussed on mum and dad standards – whether it’s things like car insurance or home insurance or contents insurance – and the same judicial views are then being imposed on very large corporate risks.”
Horne’s comments come after the NSW Court of Appeal ordered an insurer to honour a policy for a service station that was hit by an explosion, even though the operators failed to share two relevant reports analysing hydrocarbon pollution on the site.
The court found that even though the matter was relevant to the insurer, the consumer wasn’t obligated to share the reports because they were not specifically asked about pollution – an incredibly common risk in the service station industry.
“I think there is increasingly going to be a need for a distinction between presentation of risk of domestic lines, like home and car, as opposed to more corporate lines,” said Horne.
“There hasn’t been an incentive to do that yet because we’ve had a fairly soft insurance market so insurers have been prepared to write the risks on that basis but as the law has developed, there have been more interpretations of the Insurance Contracts Act in a way which could be viewed as a little bit more consumer-friendly – when we combine that with the harder insurance market we’re now seeing, I think there will be an increasing demand from the industry for that.”
However, while there may be a need in the future, Horne says he’s not sure who would campaign for a revamp of Australia’s laws.
“The big question is whether anyone’s going to respond to that in the market – will the insurance council take that up, would politicians take that up? I think it’s pretty difficult unless we start seeing the type of thing that led to tort reform back in the early 2000s, when insurance becomes prohibitive in cost.
“That’s the thing, if these types of decisions start driving cost, making insurance prohibitive, it’s probably only then that you’re going to see a legislative response.”
