New Zealand’s Contracts of Insurance Act 2024 – What to Expect for Policyholders
The Contracts of Insurance Act (the “Act”), which received royal assent in 2024 and will come into force at the latest by November 2027, will overhaul and rationalise insurance law in New Zealand while harmonising it with existing law in other common law jurisdictions. In some respects, the Act should be celebrated as a win for policyholders, as it adopts some of the policyholder-friendly approaches taken in the UK Insurance Act 2015 (the “UK Act”).
The Act is intended to provide greater clarity for both consumers and commercial parties, replacing the previously fragmented law that was contained in multiple statutes and common law principles.
Key Provisions
The Act distinguishes between consumer and non-consumer (ie, commercial) policies. This article focuses only on the latter.
- Disclosure Duties
Previously, an insured’s duty of disclosure was based on the principle of utmost good faith. Under the Bill, this is amended to a duty of fair presentation of the risk, mirroring the UK Act. This requires that a policyholder:- Discloses every “material circumstance” that the policyholder knew or ought to have known, or provides sufficient information to put a prudent insurer on notice to make further inquiries;
- Gives disclosure in a reasonably clear and accessible manner; and
- Makes every “material representation” of fact substantially correct.
Here, “material” means anything that would influence the judgment of a prudent insurer.
For our thoughts on how the English courts have applied the principle of fair presentation, please see A “WIN WIN” for Policyholders - Fenchurch Law APAC.
- Proportionate Remedies
The Act also introduces proportionate remedies where the duty of fair presentation is breached, again mirroring the UK Act,. This is a departure from the previous “all or nothing” position, which meant the insurer could avoid the policy for breach of duty. The Bill now provides that the insurer can either:- Avoid the policy but return the premium (where the breach is not deliberate or reckless);
- Amend the policy terms where the insurer would still have underwritten the policy but on different terms; or
- Where the insurer would have charged a higher premium, it can either raise the premium for the term of the policy or proportionately reduce the indemnity.
- Damages for Late Payment of Claims
Another import from the UK Act, the Act establishes a new cause of action for damages where insurers fail to process claims within a “reasonable time”.- Whether the insurer has reasonable grounds for disputing the claim is a relevant factor in determining whether the obligation has been breached, as is the case under the UK Act.
- An insured will only be entitled to damages if it can establish that the insurer’s breach caused a loss, and those losses will be subject to the usual principle that they must not be too remote.
Aims
The above changes should allow policyholders to understand their obligations, and those of insurers more clearly and allow more efficient resolution of claims disputes.
The Act is designed to provide clarity and address historical imbalances between policyholders and insurers, and levels the playing field for policyholders by making their obligations and rights of recourse easier to understand.
What can be learnt from the UK market?
The coming into force of the UK Act has resulted in relatively few reported cases, making it more challenging to predict how New Zealand courts will interpret the provisions of the Act.
However, market feedback to the UK Act has shown that it has had a positive influence, fostering better communication before a policy is taken out, and fairer treatment of policyholders during the claims process.
Qualitative research suggests that Risk Managers have changed how they approach disclosure following the UK Act, with survey respondents reporting greater engagement with insurers.
While the introduction of damages for late payment has not so far resulted in any successful claims in the UK, the mere presence of the rule may be a motivator for insurers to handle claims diligently.
Most importantly, surveyed risk managers reported that the impact of the 2015 Act has overall been positive. Further, the data shows that, contrary to some initial fears, the introduction of the UK Act did not lead to a spike in disputes. The same result should be hoped for, and expected, in New Zealand.
Matthew King is an Associate at Fenchurch Law.
Arbitration Act 2025 – What policyholders can expect
In the biggest legislative development in the field of arbitration in England for thirty years, the English Arbitration Bill received Royal Assent on 24 February 2025 and was enacted as the Arbitration Act 2025 (the Act). The date on which the Act will come into force is to be determined, but the Government has indicated that this will be “as soon as practicable”.
Rather than replacing the existing statutory framework, the Act amends and adds to the Arbitration Act 1996.
The intention of the Act is to reinforce England’s position as the best place to resolve disputes by arbitration. We consider below how the developments may affect policyholders.
Power to make award on summary basis
The Act codifies the power under which an arbitral tribunal may make a summary award in relation to a claim or issue if the tribunal considers that a party has “no real prospect of succeeding”. This brings welcome clarity, the previous position as to whether a tribunal had such power being uncertain.
This will not markedly change practice for parties used to arbitrating disputes under the LCIA rules, which have previously provided that a tribunal may find a claim is (i) inadmissible; (ii) manifestly without merit; or (iii) manifestly outside the jurisdiction of the tribunal. This change will therefore have the greatest impact on parties arbitrating under ad hoc rules, and offers those parties an opportunity to save time and resources when faced with unmeritorious claims or unmeritorious defences.
Applicable law
Previously, the common law has provided that the law governing an arbitration agreement will be determined by the law governing the underlying contract, unless otherwise provided.
The new approach under the Act provides that, absent express agreement, the law of the seat of the arbitration shall apply, and an express choice of law governing the underlying contract will not constitute an express choice in relation to the arbitration agreement.
While this may seem to lay observers like a technical point, the change in approach is significant. The previous (and criticised) position meant that parties to a non-English law contract, but with a London-seated arbitration agreement (which did not specify the law applying to the arbitration agreement), found that the arbitration agreement was not governed by English law. Parties would therefore not benefit from the full protection and support of English law, which generally seeks to uphold references to arbitration.
Jurisdictional challenges
The Act limits the scope to challenge an award on jurisdictional grounds such that the court will not hear objections which have not been first raised with the arbitral tribunal, or consider evidence that was not put before the arbitral tribunal, save where the applicant shows they did not know and could not with reasonable diligence have discovered that ground, or put the evidence before the tribunal during the arbitration proceedings. It will also not rehear evidence that was heard by the arbitral tribunal, unless the interests of justice dictate otherwise.
These changes represent a significant restriction on a party’s right to challenge substantive jurisdiction.
Upon hearing a jurisdictional challenge the court now has a menu of remedies, including remitting the award to the tribunal for reconsideration or declaring that the award (in whole or in part) has no effect.
In reducing the scope of jurisdictional challenges, parties should have more certainty that an arbitral award will be final.
Codification of Arbitrator’s duty of disclosure
The common law duty of an arbitrator to disclose circumstances that might reasonably give rise to justifiable doubts as to their impartiality has now been codified such that a proposed arbitrator must as soon as reasonably practicable disclose to the referrer (where disclosure is prior to appointment), or to the parties (where disclosure is after appointment), any circumstances which reasonably give rise to justifiable doubts to impartiality.
We would expect this codification to result in earlier disclosures, reducing the risk that a party will apply to remove an arbitrator, potentially scuppering the process.
Emergency Arbitrators
The Act provides welcome certainty as to the enforceability of final awards made by an emergency arbitrator, empowering them to make final awards which can be enforced by the courts.
Conclusion
It can be seen that the Act has introduced a number of changes that should increase the efficiency of the arbitral process and the certainty and enforceability of arbitral awards.
Where policyholders are referring adverse coverage decisions by insurers to dispute resolution, these changes should be welcomed, in the expectation that final decisions will be reached more quickly and economically.
Matthew King is an Associate at Fenchurch Law, Singapore.