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Federal Court Upholds Insurer's Policy Update Clause

Federal Court Upholds Insurer's Policy Update Clause

The Federal Court has provided a green light to Auto & General’s home and contents insurance policy terms, confirming the necessity for policyholders to inform the insurer about significant changes affecting their coverage.
The company emerged victorious in a legal scrutiny instigated by regulatory body ASIC over the disputed clauses.

In a conclusive judgment delivered by Justice Ian Jackman, the contentious clause that requires customers to update the insurer on alterations to their insured properties was found to be sound and justifiable. Echoing the insurer’s stance, Justice Jackman emphasized that such terms empower the insurer to assess the risks it is prepared to assume strategically.

The courtroom reverberated with Justice Jackman's words as he underscored the insurer’s right to revoke coverage or eschew claim payments tied to risks it would customarily decline. This process, he affirmed, is fundamental for Auto & General to stay within its risk appetite contours.

While considering the outcome of the court decision, ASIC showed deference, stating it was digesting the implications of Justice Jackman’s ruling. ASIC had initiated this case based on policies sold within a bustling year starting from April 5, 2021, to May 4, 2022, wherein Auto & General had recorded approximately 1.377 million contracts, with renewals in the mix. At the core of ASIC's argument was the presumed ambiguity wrapped in the insurer's notification clauses that demand policyholders to flag“any changes” during the insurance term.

ASIC’s Deputy Chair, Sarah Court, previously pinpointed that customers are trapped in a vortex of impracticality trying to adhere to such sweeping demands. However, Justice Jackman’s deliberation removed any clouds of doubt by elucidating that the clause wasn't to be interpreted in the extreme. He clarified that no rational individual would burden the insurer with trivialities such as daily household fluctuations.

Rather, Justice Jackman swayed towards the conviction that policyholders were only bound to report substantive changes, thereby underpinning Auto & General’s interpretation of the clause as fair and legally tenable.

Responding to their courtroom victory, Auto & General stressed its commitment to work synergistically with ASIC, underscoring their respect for stringent regulations designed to shelter consumers. 

Published:Tuesday, 26th Mar 2024
Source: Paige Estritori

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