1. Legislation should be enacted to remedy a defect in section 18 of the Insurance Act 1902 (N.S.W.). The defect is that the section cannot be applied to relieve an insured person from the consequences of a breach of the common law duty to disclose material facts to an insurer when making an insurance proposal or renewing a policy. There is good reason to think that section 18 was intended to afford relief in such cases.
2. Section 18 could also be deficient in that it seems not to empower the court to excuse a failure by an insured to observe a “basis of contract” clause.
3. The most convenient way of overcoming these defects and to achieve harmony in the law is to enact general legislation following the form of sections 137 and 138 of the Consumer Credit Act, 1981. This legislation overcomes the specific defects and also achieves a fair accommodation between the interests of insurers and the expectations of honest and careful insured persons in relation to non-disclosure and misrepresentation by insured persons.
4. The precise language of sections 137 and 138 should be followed, except for two amendments to section 137 which will clarify the interpretation of that section but not alter the meaning which we think should be given to the section in its current form, and one amendment to section 138.
5. The legislation following the form of sections 137 and 138 should exclude contracts of insurance or provisions in such contracts answering the following descriptions:
- a life policy as defined by section 4 of the Life Insurance Act 1945 (Cth);
- a contract of marine insurance as defined by section 7 of the Marine Insurance Act 1909 (Cth);
- a third-party policy as defined by the Motor Vehicles (Third Party Insurance) Act 1942 (N.S.W.);
- a policy of insurance or indemnity under the Workers Compensation Act 1926 (N.S.W.) for the full amount of the liability of an employer under that Act to all workers employed by him;
- a policy of indemnity insurance effected pursuant to and in compliance with the provisions of section 70A of the Legal Practitioners Act 1898 (N.S.W.).
6. Subject to paragraph 5, the new legislation should be of general application and preferably should replace sections 137 and 138 of the Consumer Credit Act, 1981. lf, however, it is considered undesirable to repeal these sections so soon after their enactment, the new legislation could simply exclude a contract of insurance subject to section 137 or 138 of the Consumer Credit Act, 1981.
7. Repeal of section 18 of the Insurance Act, 1902 is not desirable or necessary.
