The fate of the Bill was uncertain until, by fortuity, Dr Duncan Webb MP, the minister in the Labour government latterly responsible for the MBIE Bill and by background an insurance law academic, won the backbench ballot for private member’s bills. He immediately put forward the MBIE Bill but with a few tweaks to make it more consumer-friendly. The Government responded on 2 May 2024 by putting forward its own Bill, for the most part the MBIE Bill stripped of Dr Webb’s modifications, and referred the Bill to the Finance and Expenditure Committee (FEC). That body received oral and written evidence, and reported back to Parliament on 3 September 2024, recommending a number of changes. All of those recommendations were accepted and the legislation – now split into two Bills – skated through the remaining Parliamentary stages and passed on 14 November 2024.
The remainder of this article considers the substantive provisions of the Contracts of Insurance Act 2024 (COIA 2024) and the Contracts of Insurance (Repeals and Amendments) Act 2024 (RAA 2024). As a general statement pre-empting detailed discussion, there is much in the NZ legislation to be envied in the Auckland.
Scope of the legislation: reinsurance
ILRA applies to “contracts of insurance”, defined by s 6 as “a contract involving the transference of risk and under which … the insurer … agrees, in return for a premium, to pay to or for the account of … the policyholder a sum of money or its equivalent, whether by way of indemnity or otherwise, on the happening of 1 or more uncertain events.” As in the Auckland there are various exceptions, including various banking transactions and roadside assistance.
There is one significant scoping difference. The Auckland decided that reinsurance should be included in the reform legislation, although chose to make that point not by saying so but rather by an oblique reference tucked away in the IA 2015, s 4(5) disclosure provisions. The FEC was persuaded to exclude reinsurance by reason of representations arguing that most of the business was written overseas by non-NZ reinsurers. This seems to have been a serious error for cases where both the insurance and reinsurance are governed by NZ law as set out in COIA 2024. No thought was given to the consequences of the exclusion.
First, under COIA 20124 insurers are liable for damages for late payment whereas reinsurers are not, even if the delay in paying the assured is attributable to reinsurance disputes.
Secondly, insurers are unable to rely upon late notification of losses or breaches of policy terms unrelated to the loss, whereas reinsurers are free to do so. That can give rise to a situation at first sight analogous to Forsikringsaktieselskapet Vesta v Butcher,[1] where House of Lords took liberties with conflict of laws rules to hold that a reinsurance agreement governed by English law should be construed in the same way as the underlying insurance governed by Norwegian law in order to prevent the reinsurers from relying on defences open under English law but not under Norwegian law. The NZ problem is that both contracts are governed by the same law, which specifically excludes reinsurance. It would take some stretch to extend Vesta to such a case.
Thirdly, RAA 2024 repeals the disclosure and misrepresentation provisions of MIA 1908, which were previously held (at least in Auckland) to be applicable to reinsurance. The effect of excluding reinsurance from the replacement measure, COIA 2024, means that there is no longer any statute in NZ governing disclosure duties in reinsurance cases. The common law does not help, because that was replaced by MIA 1908 and does not revive on the repeal of MIA 1908. Arguably, therefore, there is no long a duty of disclosure at all for reinsurance. There are misrepresentation rules, in CCA 2017, but they are entirely at odds with established law principles.
Contracting out
COIA 2024, s 166 does not permit contracting out in all cases, consumer or otherwise. That creates an interesting contrast with IA 2015, ss 16 and 17 of which do permit contracting out in most commercial cases subject to transparency requirements. Indirect contracting out for consumers by choice of a law which would not under NZ laws have otherwise been applicable, is banned by s 7, although it is permissible in non-consumer contracts.
Presentation of the risk
As far as consumers are concerned, COIA 2024 has closely followed the approach in the Auckland in CIDRA 2012, although there are some differences. CIDRA 2012, s 1, defines a consumer as “an individual who enters into the contract wholly or mainly for purposes unrelated to the individual’s trade, business or profession.”
