Chris Boys, Director of Assure Legal, discusses a matter he sees cropping up more and more often in his practice: insurance non-disclosure issues for people with English as a Second Language. Insurance policies often require large amounts of relatively complex personal information and significant problems can arise if inaccurate answers are given, he writes.
New Zealand is a nation of immigrants, the 2013 census showed that one in four Kiwis were born overseas. If new migrants do not have good English, problems can arise when contracts are entered into. In applications for insurance policies, which require often large amounts of relatively complex personal information, there are significant problems which can arise if inaccurate or incomplete answers are given. Failure to disclose material facts (non-disclosure) allows an insurer to avoid the policy; to cancel the contract from inception.
The rationale behind the remedy of avoidance is that had the insurer known the true facts they may not have offered the insurance or may have offered it under alternative terms. As, in practise, the investigations which provide evidence of non-disclosure only occur after a claim has been made against the policy, the remedy is severe; the (un)insured party has suffered a loss and the avoidance removes any ability to recover.
In New Zealand the law does not recognise situations where:
- The non-disclosure was innocent or not deliberate;
- the non-disclosed fact did not relate to the insured risk for which the claim was made;
- the materiality of the non-disclosure was of a technical nature which the average person could not be expected to know.
The fact that a person entering into a contract of insurance did not have the language to understand the questions being asked of them is legally irrelevant.
If an intermediary has assisted with answering the questions and knew the true answers the knowledge of the intermediary is deemed to be known by the insurer under section 10 of the Insurance Law Reform Act 1977. In Dome v State Insurance General Manager (1987) 5 ANZ Insurance Cases 60-835, employees of the insurer attempted to assist a man with poor English to complete an application. Material information about previous losses was not disclosed. Because, due to the language problems, the staff never found out about the previous losses, section 10 could not apply. However, the Court found that the staff and their employer had been negligent because they knew, or should have known, that their translation was inadequate.
Current business practise in New Zealand is for many insurance transactions to be completed online. This throws translation issues into sharp relief as a growing issue. In the author’s own experience the number of new immigrants running into similar problems is growing. Anecdotally this has led to otherwise valid motor accident claims, life insurance claims, and an earthquake damage claim being declined.
Australia and the UK
In Australia and the UK, the law around non-disclosure has been reformed. Never Zealand lags behind by several decades. Reform is currently being considered in New Zealand, however, the last three proposed rounds of reform were never translated into actual legislation so watch this space.
In Australia under S22 of the Insurance Contracts Act 1984, the insurer has a duty to “clearly inform the insured in writing” of various aspects and details of their obligations to disclose. While the test for materiality in the Australian statute is objective, the requirement to “clearly inform the insured” if followed in New Zealand, should be suited to the particular insured, after all, it ensures the insurer has accurate information about the risk they are underwriting and protects the insured against a claim not being paid.
The UK law of disclosure was reformed by the Consumer Insurance (Disclosure and Representation) Act 2012, and the Insurance Act 2015. The 2012 legislation requires a consumer to take reasonable care not to make a misrepresentation, “to be determined in the light of all the relevant circumstances”. If someone has less than perfect English this would be a relevant circumstance known to them.
Law reform is needed and should be coming. Whether the scope of the reforms will include provision for those with language difficulties is to be seen. On a practical note, the Office of Ethnic Communities website ethniccommunities.govt.nz offers a language line telephone translation service, use of this and similar resources may help alleviate some of these issues.
Chris Boys, Director of Assure Legal, specialises in Insurance Law and Litigation. He is a co-author of the LexisNexis title Insurance Claims in New Zealand. Prior to entering the legal profession, Chris worked extensively in the Insurance Industry in New Zealand and England, handling claims, handling complaints and as a Lloyds Broker. Contact Chris at firstname.lastname@example.org or connect via LinkedIn