There is certain information that is vital to the formation of a contract of insurance (“COI”). Concealment or misrepresentation of information by one party may prejudice the position of the other under the COI and result in disputes.
If you know that your motor vehicle is an imported version of a Lexus, you have an obligation to disclose this to your insurer. If you don’t, you are in breach of what’s known as the “duty of utmost good faith”.
In Australian Securities and Investments Commissions v Youi Pty Ltd [2020] FCA 1701 unreasonable delays caused by Youi and it’s repairers in repairing an insured’s property triggered ASIC to bring proceedings against Youi alleging that Youi breached their statutory duty of utmost good faith when they failed to handle the insured’s claim with full and frank disclosure, fairness and in a timely manner.
The duty of utmost good faith is central to and regulates all aspects of insurance contracts. It applies to inception, the terms of the contract and to the parties’ responsibilities in case a claim arises under the COI. It is an implied statutory term inserted into every general COI in Australia.
Similar to common law, the duty spans from the pre-contractual stage of duty of disclosure to post-contractual stage (the making and handling of claims).
Remember that this is an ongoing duty and applies throughout the life of the COI. The key is ongoing disclosure.
The duty of utmost good faith is regulated under part II of the Insurance Contracts act 1984 (Cth).
