Uptick in litigation predicted if Insurance Contracts Bill passes in current form

In its submissions on the draft Insurance Contracts Bill, released by the government in late February, law firm Bell Gully says removing the existing exemption would open insurance policies to legal challenge, particularly in the area of exclusions. Even the ability of an insurer to exclude pre-existing medical conditions from cover could be jeopardised, the firm says.

“The terms that are currently carved out were considered by Parliament to be critical to insurers’ assessment of risk and reflect the unique nature of the operation of insurance contracts,” Bell Gully says.

“Insurance contracts differ from other types of contracts in that in order to operate, insurers need to have a clear understanding of the extent of the risk they are taking on.”

This includes exclusions which can be used to ensure insurance covers only unforeseeable claims. “Exclusion clauses are fundamental to the operation of insurance policies because they are critical in determining the scope of the risk that is being covered.”