Review of the Marine Insurance Act 1909

The Terms of Reference for this inquiry required the Commission to review the Marine Insurance Act 1909 (Cth) (MIA), taking into account, among other things, the desirability of having a regime consistent with international practice in the marine insurance industry, and whether any change might result in a competitive disadvantage for the Australian insurance industry.

Four areas came to be of central importance during the course of the review. They are the coverage of the MIA; warranties and other statutory provisions with similar effect; non-disclosure, misrepresentation and the obligations of utmost good faith; and the requirement for an insurable interest. A number of other areas also merited specific attention, notably the documentary requirements set out in the MIA. As required by the terms of reference, the Commission prepared a draft Bill to give effect to the recommendations in this report and an explanatory memorandum to accompany it.

If adopted, the Commission’s recommendations would involve significant amendment to the MIA. However, the Commission anticipates that the impact in practice on Australia’s marine insurance industry would be less than that which the scale of the changes to the wording of the MIA might suggest. The amendments would be made within the existing structure and layout of the MIA, which are familiar to the industry both within Australia and, because of the MIA’s similarity to cognate legislation overseas, in foreign jurisdictions.

Key recommendations

• The scope of the MIA should be amended by removing from it provisions relating to the transportation of goods for non-commercial purposes, and inserting them in the ICA.
• The coverage of the MIA should be extended to include adventures on inland waters.
• The concept of marine insurance warranties should be abolished. In place of express warranties, the Commission proposes a regime under which the insurer has a number of structured remedies available to it should there be a breach of any express term of the contract by the insured.
• The implied warranties of seaworthiness and legality should also be removed. However, the Act should specifically permit contracts of marine insurance to include express terms relating to the seaworthiness of a ship and in relation to the legality of the purpose of the insured voyage and the manner in which it is carried out.
• The requirements of disclosure and prohibition of misrepresentation should be modified so that the insured is required only to disclose those circumstances which it knows to be material or which a reasonable person in its position would know to be material.
• The requirement for an insurable interest should be abolished.

A range of other recommendations deal with matter including the regulation of agents and brokers, choice of law and jurisdiction, issues that go to the formalities of the contracts and policies of marine insurance, and the structure and language of the MIA.

Implementation

There has been no formal response to ALRC Report 91 from the Australian Government.

Recommendation 34 suggested amending the draft Financial Services Reform Bill to apply the Insurance (Agents and Brokers) Act 1984 (Cth) to contracts of marine insurance and consequentially repeal ss 59 and 60 of the Marine Insurance Act 1909 (Cth). This recommendation was adopted, and the Financial Services Reform (Consequential Provisions) Act 2001 (Cth) repealed ss 59 and 60 of the Marine Insurance Act.