Practical Guidance Insurance co-authors share their insights on the industry’s recent updates
Insurance law is undergoing significant changes in New Zealand. Long-awaited legislative reforms are finally gaining traction, and the industry has a slew of emerging issues to keep its eye on – from highly anticipated court decisions to the ongoing impacts of climate change.
To help legal professionals navigate this landscape, LexisNexis is releasing Practical Guidance Insurance. Co-authored by special counsel Stephanie Corban and partner Helen Macfarlane and the insurance team at Hesketh Henry, this highly practical how-to guide covers the latest industry changes and developments, as well as the fundamentals that underpin insurance law practice.
Corban and Macfarlane sat down with NZ Lawyer to offer a comprehensive overview of the current state of insurance law in New Zealand, its future direction, and how this is reflected in the new Practical Guidance Insurance resource.
One of the most highly anticipated reforms is the Contracts of Insurance Bill, currently at the Select Committee stage. Duty of disclosure reforms are high on the agenda, as insurers are currently able to avoid a contract in cases of innocent non-disclosure.
Stephanie Corban explains that most of the industry already operates under the Fair Insurance Code and has been careful to take a ‘fair and appropriate’ response in non-disclosure cases. However, the Code is not legally binding (unless the policy wording contains an express agreement by the insurer to comply with the Code), and a key question is what specific remedies will be applied under the Contracts of Insurance Bill.
“We will see a range of remedies based on whether or not the non-disclosure was reckless, and the Bill sets out a matrix to apply,” Corban tells NZ Lawyer.
“The remedy will depend on whether the insurer would have entered into the contract regardless, or entered under different terms – for example, charging a higher premium. As the Bill is currently drafted, if the premium would have doubled, the remedy would be to halve the insurer’s liability.”
Corban notes that the Contracts of Insurance Bill is a crucial reform for the industry, as current legislation is very dated.
“We have Acts ranging from the early 1900s to the 70s and 80s,” she says. “I think there’s strong cross-party support for this Bill, and so once it comes back for the second reading, we can expect to see some traction.”
Helen Macfarlane adds that the overall focus of the bill is to be more protective of insureds – something that is already present in legislation in many jurisdictions globally.
“Our current legislation is out of sync with many other common law jurisdictions, such as the UK and Australia,” Macfarlane says. “These reforms should bring New Zealand more in line with these jurisdictions.”
The last few decades have seen substantial shifts in New Zealand’s insurance landscape, and Macfarlane notes that climate change will be a key issue over the coming years. The industry is already seeing this play out, with several insurers introducing risk-based pricing over fixed nationwide premiums.
“In the space of the last 15-20 years, New Zealand has started to view itself as a ‘disaster-prone’ region,” Macfarlane comments.
“Insurers are looking at that and are adapting their approach. That starts with regional differences, and with the data available to insurers now, they can become more and more nuanced in how they price risk. Inevitably, this will result in some legal challenges and may impact legislative or regulatory response as well.”
Insurance disputes are another area of constant activity, and both Corban and Macfarlane have seen a number of recent cases posing complex questions. Updating case law has been a key part of their work on Practical Guidance Insurance, along with providing commentary on the impacts of recent decisions.
Corban notes that the insurance industry is currently awaiting a Supreme Court decision – a particularly interesting case, as the settlement amount has already been significantly reduced by the Court of Appeal.
“The case looks at liability when someone relies on incorrect information when making a decision,” Corban says.
“In the High Court, $2 million was awarded – but the Court of Appeal reduced this to $300k. Supreme Court decisions on civil cases always involve some very important issues, so that’s a decision that insurers will be awaiting very keenly.”
Macfarlane says that another interesting recent case concerned a life insurance claim for a terminal illness. The case focused on a perceived ambiguity around the phrase, ‘regardless of treatment’, with the insured claiming this meant, ‘without regard to any possible treatment,’ and the insurer saying it meant ‘despite any possible treatment.’
“The High Court found in favour of the insurer, and so did the Court of Appeal, which decided the only reasonable interpretation of the phrase was the one proposed by the insurer,” Macfarlane said.
“What was interesting is that the Court of Appeal took a look at the established rule of contra proferentem, which means an ambiguity is construed against the party that drafted the contract. The Court of Appeal did not apply this rule, because it concluded that the insurer’s interpretation was the only reasonable one.”
Another key decision came in a case related to the Christchurch earthquakes, where an insured argued that an insurer was obliged to accurately assess damage. The insurer disagreed, stating that would be a huge extension of their obligation of good faith, and it would undermine the fundamental principle of insurance – which is that the insured needs to prove their claim.
“The High Court found in favour of the insurer,” Macfarlane explains. “However, it still left some leeway for future cases to potentially have a different outcome.”
Practical Guidance Insurance has now launched in New Zealand and is a subscription resource providing expert guidance, checklists and tools for the practice of insurance law. The resource covers a comprehensive range of topics, from insurance law basics to disputes about cover and regulation of the industry. There is also a topic covering issues arising from natural disasters, prompted by Cyclone Gabrielle and the Auckland Anniversary floods. Ongoing updating by the Hesketh Henrry insurance team allows subscribers to keep up-to-date with legislative developments and case law.
Corban notes that Practical Guidance Insurance has been designed to be easy to navigate, whether or not you have an in-depth knowledge of insurance law. This means it can be used by anyone from lawyers to insurance companies, broking firms, or loss adjustors.
“You don’t need legal knowledge to understand the content,” Corban says. “Having said that, it also has lots of practical information and references to cases, so lawyers will have the most up-to-date information at their fingertips.”
“We’re all sharing the satisfaction of putting out an excellent product and using everybody’s skills to make it happen.”
“We’ve taken a really deep dive into the law, which has been so fun to do,” Macfarlane adds.
“It’s been a really collaborative project, and I’ve really enjoyed seeing our lawyers – and particularly our junior lawyers – becoming really knowledgeable on multiple aspects of insurance law.”
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Helen Macfarlane is a Partner in Hesketh Henry’s Litigation Group and a leading member of the firm’s Insurance and Construction Teams. Read her bio here.
Stephanie Corban is a Special Counsel in Hesketh Henry’s Litigation Group with a significant insurance practice, including providing advice on professional indemnity claims, cover issues and recoveries. Read about Stephanie here.
