June 2011
It is common for Insurers (whether insuring against Death, Disability or other potential losses) to avoid payment liability by relying on Exclusion Clauses set out in the Policy document.
Section 54 of the Insurance Contracts Act (1984) Cth was introduced more than 25 years ago to ensure the fair operation of all contracts of Insurance, and to protect the interests of an Insured person. It was intended to excuse minor omissions or breaches by an Insured person and was commonly relied upon to prevent the Insurer from refusing to pay a claim in circumstances which only arose by reason of the act or omission of the Insured. (Section 54 did allow an Insurer to reduce its liability proportionately by a percentage that fairly represented any prejudice that it may have suffered by reason of the act or omission).
In a recent and controversial decision the Queensland Court of Appeal looked at an Insurance Policy arising from a light aircraft crash in 1999 which resulted in severe injuries to a passenger of the aircraft. The Court of Appeal held that the Insurer could rely on an Exclusion clause under the Policy which arose solely by reason of the pilot failing to complete an Aeroplane Flight Review, ordinarily required by CASA under the Civil Aviation Act, as required under the Policy.
If nothing else, this case illustrates the importance of complying with all industry safety regulations and regularly reviewing the express terms of any Policy for which you are paying Premiums. Particularly so, if it is for Income or Disablement Protection. If you would like our Firm to review any Policy of Insurance that you have (whether personally or for business purposes) you should consult us.
Advice is available from Matt Howlin, Bruce Honeyman and Jodie Jamieson.