NEW ZEALAND Law and Practice Contributed by: Aaron Sherriff, Tanya Wood and Nick Laing, Duncan Cotterill
Where acting for an insured, brokers have a general duty to exercise reasonable care and skill in all the cir- cumstances, and to act as a reasonable and compe- tent broker would in the insurance market at the same time. Brokers also have a number of other duties that apply at different times and that are owed to different parties, including as follows. • Where instructions are sent by email and are unconditional, the broker has a duty to act on those instructions and has no duty to confirm them or check that they have been duly received. • The broker has a duty to procure insurance for the insured within a reasonable time. • The broker must explain to the insured the scope of the cover provided in the insurance contract and whether this meets their requirements. • While the broker must ensure that the policy is reasonably fit for the insured’s needs, it is not a requirement to find the insured the cheapest insur- ance of its type in the market for the particular risks covered. • Brokers also have duties in relation to disclosure. The broker must ask questions and obtain all material facts from the insured, but also has an independent duty to the insurer to disclose to the insurer those material facts known to it (MIA, Sec- tion 19). 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract A contract of insurance is defined as a contract involv- ing a transfer of risk and under which a person (insur- er) agrees, in return for a premium, to pay to or for the account of another person (policyholder) a sum of money or its equivalent, whether by way of indemnity or otherwise, on the happening of one or more “uncer- tain events” (Section 7 (1) of the IPSA). A contract of reinsurance falls within the definition of a contract of insurance. An “uncertain event” means an event about which, from the policyholder’s perspective, there is an ele- ment of uncertainty as to when or whether it will take place, and that event is beyond the insurer’s control (Section 7 (2) of the IPSA).
A contract of insurance is binding if it complies with the following general contractual principles: • the parties intended to create legal relations; • there was a valid offer and acceptance; • the terms are certain; and • each party provided consideration. There are no prescribed legislative requirements as to the form and content of life insurance policies. In New Zealand, typical market practice is for the contract to be in writing. The policy can only be mortgaged, transferred or assigned if it is in writing. The requirement for an insurable interest in life insur- ance and indemnity policies was abolished in New Zealand in 1985 (under the Insurance Law Reform Act 1985). 6.5 Multiple Insured or Potential Beneficiaries Third parties cannot generally make a claim under an insurance contract, in accordance with the “privity of contract” doctrine. A third party can claim under a contract where the contract allows such a claim or confers a benefit on that third party; see the Contract and Commercial Law Act 2017 (CCLA). Typically, such third parties are named on the placing slip or policy schedule – or the terms of a policy may automatically extend cover to parties directly involved in the risk, such as on a con- tract works (all risks) policy. Many policies exclude the application of the privity provisions of the CCLA. A third-party plaintiff can claim directly against the insurer of an insolvent insured defendant. An amount equal to the liability incurred by the insured to the third party crystallises as a charge on the insurance monies from the date of the event giving rise to the liability (Section 9 of the Law Reform Act 1936). A third party claiming in this manner requires the leave of the High Court to commence the claim. This right is retained in the CIA, where a third party will be permitted, with the leave of the court, to claim directly from the insurer if the insured party is insolvent or dead.
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