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The Moat around Insurance Law in Australia


The Australian Financial Complaints Authority (‘AFCA’) serves an extremely useful purpose in receiving and resolving complaints against financial services licence holders (which includes insurers and insurance brokers).

AFCA was recently concerned with a dispute over a claim by the Estate of a Life Insured for indemnity under an extended group life policy in circumstances where the Life Insured had proffered an application replete with fraudulent non-disclosures and misrepresentations, to extend a basic group life policy.

The Insurance Contracts Act 1984 (Cth) informs the entitlements of life insurers confronted with fraudulent non-disclosures and misrepresentations. Having determined that the Insurance Contracts Act offered the life insurers no relief against the claim for indemnity, the life insurers and Estate may have been surprised when AFCA ruled that common law and equity principles permitted the life insurers to deny the Estate indemnity.

The ruling placed squarely in issue the relationship between those common law and equity principles (whose content AFCA never articulated) and the provisions of the Insurance Contracts Act.

On appeal, the Federal Court held that the Insurance Contracts Act prevailed to the exclusion of any applicable common law or equity principles and, in so doing, left the life insurers without relief.


Dr Deepak Sharma was a medical practitioner of many years standing.

Around about 1999, Dr Sharma suffered a myocardial infarction. As a result, he underwent an operation during which three stents were placed into two different sections of his coronary arteries.

In 2011, Dr Sharma applied to ING (subsequently called OnePath) to extend the basic group life insurance policy which he held. In so doing, he gave negative answers to questions about his medical history which included questions about any history of heart or vascular complaints. He said nothing about his operation in 1999.

The answers were false and given fraudulently.

In late 2011, One Path transferred its the book of insurance (including Dr Sharma’s policy) to the Colonial Mutual Life Assurance Society Ltd (which traded as Commsure).

In 2017, Dr Sharma made a claim under the extended policy for a terminal illness benefit. He died in April 2017. Commsure denied the Estate indemnity on the basis of fraudulent non-disclosure and misrepresentation.

In 2021, Commsure transferred the business to AIA Australia Ltd.

Dr Sharma’s Entitlement to Indemnity

Insurance Contracts Act

The Insurance Contracts offers an extensive regime to manage the parties’ interests when there are allegations of fraudulent non-disclosure or misrepresentation.

But the Courts have held[1] that generally a life insured’s obligations only extend to the life insurer at the inception of the policy’s inception.

AFCA correctly adopted this principle.

The Insurance Contracts Act and Common Law and Equity Principles

Section 33 of the Insurance Contracts Act provides that

‘The provisions of this Division are exclusive of any right that the insurer has otherwise than under this Act in respect of a failure by the insured to disclose a matter to the insurer before the contract was entered into and in respect of a misrepresentation or incorrect statement.’

But what about insurers who subsequently assume the risk undertaken by an earlier insurer?

AFCA interpreted Section 33 to be limited to the relationship between the life insurer and the initial insurer. It was not fair to extend it to an insurer who subsequently assumes the risk and whose common law and equitable entitlements would therefore be defeated.

The Federal Court disagreed.

‘I cannot accept as correct the reasoning of AFCA that s 33 does does not operate as a code so as to exclude general common law or equitable principles. Whilst s7 of the ICA states that is the “intention of the Parliament that this Act is not, except in so far as this Act, expressly or by necessary intendment, otherwise provides, to affect the operation of any other law of the Commonwealth... or the operation of any principle or rule of the common law (including the law of merchant) or of equity,” I am clearly of the view that s 33 is a contrary expression of intent in that the remedies for non-disclosure and misrepresentation in Division 3 of Pt IV operate as an exclusive code, save for rights of the insurer “otherwise than under this Act.” So understood, it is simply not to the point that AFCA concluded that the provisions of Division 3 do not operate “adequately” or “properly” where a subsequent insurer assumes the risk of misrepresentation or non-disclosure of a person who became a group member when an earlier insurer was on risk and therefore resort could be had to general common law or equitable principles to fill the gap. (Emphasis added)’

The provisions of the Insurance Contracts Act, particularly those relating to non-disclosure and misrepresentation, are a code dictating an insurer’s entitlements whether the insurer initially accepted the risk or subsequently assumed it.


The Federal Court returned the matter to AFCA with a direction that it determine the matter in accordance with the law.


The Insurance Contracts Act is unique and needs to be embraced by insurers and insured whenever the subject policy is governed by Australian Law and not otherwise excluded from the Act.

There are very few ways around that.

The name of the case is Sharma v H.E.S.T. Australia Ltd [2022] FCA 536 (13 May 2022)

[1] See Sharma v LGSS Pty Ltd [2018] FCA 167

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