HBA Legal (HBA), part of Crawford & Company, has advised insurers to consider how far their coverage will extend when it comes to “consequential loss” under Australian Consumer Law (ACL).
Last week, HBA attended the 17th annual ANZIIF Australian Liability Conference in Sydney, focusing on social inflation and the increasing cost of premiums. The speakers looked at how insurers and insureds could reduce their exposure to personal injury risks in the tort of negligence.
As one of the speakers, HBA senior associate Courtney Burrows emphasised the significance of policy wording to reduce exposure to these risks.
“Just as there is no ability to contract out of the law of negligence, there is also no ability to contract out of the Australian Consumer Law,” Burrows said.
ACL is in Schedule 2 of the Competition and Consumer Act 2010, and Section 18 states a person must not, in trade or commerce, engage in misleading or deceptive conduct or one that is likely to mislead or deceive.
“The addition of ‘likely to mislead or deceive’ provides an additional aspect to the provision, where the intention of the party making the representation need not to be intentional,” Burrows said. “The test for what is, or is likely to, mislead or deceive is not a burdensome hurdle for claimants to overcome and as the proscription is focused on conduct, rather than representations, it is far wider and includes positive acts as well as omissions or silence.”
Burrows further explained that Section 236 of the ACL allows any person who has suffered loss or damage resulting from misleading or deceptive conduct to seek damages from the other person or against any person involved in the conduct.
“The reach of section 236 is still largely untested and raises significant issues as the claimant does not need to establish a duty of care or negligence as in tort, nor does there need to be privity of contract between the claimant and the other person,” Burrows said. “Establishing a claim under the ACL will be far easier, and there is nothing to suggest courts must draw on analogies with contract law or negligence, such as remoteness or foreseeability, when quantifying claims under the ACL.
“The legislation is there to provide for fair commercial practice, so the ability to circumvent these provisions would undermine the effectiveness of the law in this regard. For example, claims have time limitations, which have been prescribed in the act to six years. Contracts with clauses seeking to reduce this period will not be held as valid. But there [are] certainly things insurers can and should be considering when it comes to liability insurance products – and one such consideration is limiting liability to direct losses only.”
