ob体育 has commenced the first proceedings alleging unfair contract terms in an insurance contract. The case involves standard form home and contents insurance contracts issued by Auto & General Insurance Company Limited (Auto & General).
ob体育 alleges that since 5 April 2021, a contract term requiring customers of Auto & General to notify it 鈥�if anything changes about your home or contents鈥� is unfair because the term:
- imposes an obligation on customers to notify Auto & General if 鈥榓nything鈥� changes about their home or contents, which customers cannot practically meet.
- imposes an unclear obligation on the customer regarding what they need to disclose to Auto & General.
- suggests that Auto & General has a broader right to refuse claims or reduce the amount payable under claims if the customer does not meet the notification obligation than is available under the Insurance Contracts Act.
- could mislead or confuse the customer as to their true obligations and rights under the contract.
ob体育 Deputy Chair Sarah Court said 鈥榦b体育 is concerned that the broad notification obligation in these contracts is unfair because it is unclear what policy holders are required to do to comply with such a broad obligation, and it is also unclear what their rights are when making a claim.
鈥楥ontract terms need to be proportionate, transparent and clear, so any obligations are easily understood and able to be realistically adhered to by customers. They must accurately describe the actual rights and responsibilities of the parties under the contract.鈥�
ob体育 further alleges the contract term is unfair within the meaning of s12BG of the ob体育 Act as the term:
- causes a significant imbalance in the parties鈥� rights and obligations under the contract,
- is not reasonably necessary to protect Auto & General鈥檚 legitimate interests, and
- would cause detriment to the policy holders if the term were relied on.
ob体育 is seeking declarations that the term is void. ob体育 will also seek injunctions and corrective orders.
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Background
The alleged unfair contract term appears in the following product disclosure statements issued by Auto & General (which are all in substantially identical terms):
- Auto & General Home and Contents Insurance Policy PDS
- Budget Direct Your Home & Contents Insurance Policy PDS
- Australia Post Your Home & Contents Insurance Policy PDS
- ING Home & Contents Insurance Policy PDS
- Catch Insurance Your Home & Contents Insurance Policy PDS
- Virgin Insurance Your Home & Contents Insurance Policy PDS
- Qantas Home and Contents Insurance Policy PDS.
The Auto & General Home and Contents Insurance Policy PDS applies to 1st For Women, Best Buy, Maxxia, Ozicare and Retirease branded home and contents insurance policies issued by Auto & General.
Auto & General no longer issue new home and contents policies for the Australia Post, Catch Insurance and Maxxia brands.
On 5 April 2021, the unfair contract term protections in Subdivision BA of the ob体育 Act were expanded to include insurance contracts with consumers and small businesses. This was a result of a recommendation by the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry (Recommendation 4.7 in the Final Report). Extending the unfair contract term protections to these kinds of insurance contracts was aimed at:聽
- ensuring that consumers and small businesses receive the same protections from unfair terms in insurance contracts as they do for other financial services; and
- encouraging insurers to improve the level of clarity and transparency in their contracts and remove potentially unfair terms.
The Royal Commission also found it was too easy for insurers to deny claims based on the policy holder鈥檚 failure to meet broad disclosure obligations.聽
On 9 November 2022, the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 was assented to. Among other things, this Act will introduce civil penalties under the ob体育 Act for breaches of the unfair contract term prohibition from 10 November 2023.
Editor's note 1:
On 15 August 2023, the Court made programming orders and listed the matter for trial on 4 and 5 March 2024.
Editor's note 2:聽
On 4 and 5 Mach 2024, the trial was held before his Honour Justice Jackman. Judgement has been reserved.聽