Insurance Law
Insurance disputes in NSW for policyholders and businesses, from denied claims and non-disclosure to AFCA and court.
Insurance law governs the contract between an insurer and the person or business it insures, including when a policy must respond to a claim and how each side must behave. Vamp Law acts for individual policyholders and businesses in insurance disputes, from a denied or reduced claim through to AFCA or court proceedings.
What does insurance law cover?
Insurance law is the law that governs an insurance contract: what the policy covers, how a claim is made and assessed, and how the insurer and the insured must behave towards each other. The main statute is the Insurance Contracts Act 1984 (Cth), which applies to most insurance contracts, although some kinds of cover, such as reinsurance, private health insurance and workers compensation, are excluded or regulated separately.
Vamp Law acts on the insured side of an insurance dispute:
Individual policyholders
home, contents, motor vehicle and other personal policies, where a claim has been denied, reduced or delayed.
Businesses
property, business interruption, professional indemnity, directors and officers, and public liability cover, including disputes about notification and exclusions.
People owed money by an insured
a claim against another person's or company's liability insurer, where the one responsible is insolvent, deregistered or cannot be found.
Every new matter is checked for conflicts of interest before Vamp Law accepts instructions.
What can a policyholder do if an insurer denies a claim?
A policyholder can ask the insurer for its reasons, test them against the policy wording, and challenge the decision through a complaint, AFCA or court. Many disputes turn on a single definition or exclusion and on whether the insurer has read it correctly against what actually happened.
The Insurance Contracts Act also limits the grounds on which a claim can be refused. Under section 54, an insurer generally cannot refuse a claim only because of something the insured or another person did, or failed to do, after the policy was entered into; depending on whether that act or omission could have caused or contributed to the loss, the insurer may instead be limited to reducing the claim by the amount that fairly represents the prejudice it suffered. Where payment is unreasonably withheld, section 57 requires the insurer to pay interest.
What is the duty of utmost good faith?
Every insurance contract contains an implied term requiring each party to act towards the other with the utmost good faith in any matter arising under or in relation to it (section 13 of the Insurance Contracts Act). The duty binds the insured, and it binds the insurer, including in how it assesses and handles a claim, and a party cannot rely on a policy term if doing so would be a failure to act with the utmost good faith (section 14).
For the insurer the duty also has regulatory weight. An insurer's failure to act with the utmost good faith can attract a civil penalty, and since 1 January 2022 handling and settling insurance claims has been a financial service under the Corporations Act 2001 (Cth), which must be provided efficiently, honestly and fairly.
What happens if something was not disclosed when the policy was taken out?
The answer depends on the type of policy and when it was entered into. For a consumer insurance contract, meaning cover obtained wholly or predominantly for personal, domestic or household purposes, entered into on or after 5 October 2021, the duty of disclosure was replaced by a duty to take reasonable care not to make a misrepresentation to the insurer (section 20B). Whether reasonable care was taken depends on all the circumstances, including how clear the insurer's questions were.
Other contracts, including most business insurance, remain subject to the duty of disclosure in section 21. For general insurance, the insurer can avoid the contract only if the failure was fraudulent; otherwise its liability is generally reduced to the position it would have been in without the failure, and it has no remedy if it would have issued the policy for the same premium and on the same terms anyway (section 28). Life insurance has its own rules.
How does subrogation work after an insurer pays a claim?
Subrogation is the insurer's right, after paying a claim, to pursue the person responsible for the loss, usually in the insured's name, to recover what it paid.
The Insurance Contracts Act limits subrogation against people in a family or other personal relationship with the insured, and against the insured's employees, in some circumstances (sections 65 and 66). It also sets out how money recovered is shared between the insurer and the insured, whose uninsured losses, such as an excess, can be affected (section 67).
Can you claim directly against another person's insurer?
In some circumstances, yes. Under the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW), a person owed money by an insured can, with the leave of the court, recover the amount of that insured liability directly from the insurer. Leave must be refused if the insurer can establish that it is entitled to disclaim liability, and proceedings must generally be started within the limitation period that applies to the claim against the insured.
This matters most where the person or company responsible is insolvent, deregistered or cannot be found, so that a judgment against them would be worth little. Section 51 of the Insurance Contracts Act separately allows a claim against the insurer where the insured has died or cannot be found after reasonable inquiry.
How is an insurance dispute resolved?
Internal dispute resolution
A complaint goes first to the insurer, which under ASIC's internal dispute resolution requirements must generally give a final response to a standard complaint within 30 calendar days.
The Australian Financial Complaints Authority
An eligible consumer or small business can then complain to AFCA about an insurer that is an AFCA member. AFCA does not charge complainants, but it has monetary limits, compensation caps and time limits, and it cannot deal with a complaint a court has already decided.
Court proceedings
Where AFCA is not available or not suitable, for example because the claim is too large or the complainant is not eligible, proceedings are brought in the Local, District or Supreme Court of NSW, or the Federal Court.
This page is general information only. Whether a policy responds, and which pathway fits, depends on the facts, the policy wording and the documents.
Frequently asked questions
Individual policyholders and businesses whose claims have been denied, reduced or delayed, and people claiming against another person's insurer. Every new matter is checked for conflicts of interest before instructions are accepted.
Under ASIC's internal dispute resolution requirements, a final response to a standard complaint is generally due within 30 calendar days of the complaint being received.
If the response is late or unsatisfactory, an eligible complainant can take the matter to AFCA.
Read the relevant liability policy and notify the insurer promptly, in the way the policy requires. Notification problems are a common source of coverage disputes, so a business should not wait until proceedings are served.
You may be able to claim against their liability insurer directly, with the court's leave, under the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW).
Vamp Law can advise on whether that pathway is open.
Speak with Vamp Law about an insurance dispute
If your claim has been denied, reduced or delayed, or your business is in a coverage dispute with its insurer, make an enquiry or call +61 431 569 686 to speak with Kyra Pastrovic. Read more about Vamp Law's commercial litigation practice.
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