Expect greater scrunity from ASX and ASIC on prospectus content and continuous disclosure

Yesterday, ASIC released its annual assessment report of the ASX Group.

Listed companies and companies intending to list on the ASX can expect:

• more scrutiny from the ASX in relation to compliance with listing rules. In particular, in relation to compliance with continuous disclosure obligations (see our article on the recent changes to the ASX Listing Rules and Guidance Note 8 on continuous disclosure); and
• more detailed guidance / procedural requirements in relation to timing and pre-vetting of prospectuses (the ASX and ASIC are likely to be more rigorous in their review of prospectuses, applying the more stringent content requirements detailed in the ASIC Regulatory Guide RG 228: see our article on this topic).

In addition, companies in suspension can also expect to be subject to more monitoring by the ASX and may be required to make more disclosures to the market while in suspension.

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The Insurance Contracts Amendment Bill 2013 – Third Parties (Part 3)

This is a continuation of my occasional series of blogs on the impact of the Insurance Contracts Amendment Bill 2013 on the Insurance Contracts Act. It is the third in the series on the Bill‘s impact on those provisions concerning third party beneficiaries.

Section 48(A) of the Act looks at contracts of life insurance effected on the life of one person for the benefit of another.

The section acknowledges the third party beneficiary’s entitlements to any money payable to that beneficiary under the contract even though the beneficiary is not a party to the contract and notes that that money does not form part of the the estate of the person whose life is insured. The section also entitles anyone who is a party to the contract to exercise their rights to surrender the contract of life insurance, borrow against it or vary it even if the variation puts the contract outside the section’s scope.

The Bill will make some changes to this Section. Those critical changes include the following:-

• The new Section 48A(1A) will make it specific that where the contract of life insurance forms part of a superannuation or retirement scheme, any payments made to the third party beneficiary will be subject to the terms of the contract, the rules of that scheme and any laws governing that scheme.
• Subject to the terms of the contract, the third party beneficiary will be required to comply with the same obligations towards the insurer as if the third party beneficiary was a life insured and the third party beneficiary will be able to discharge the life insured’s obligations to the third party beneficiary.

One thing which appears to be missing is any provision dealing the impact of the life insured’s conduct on the relationship between the insurer and the third party beneficiary. As I mentioned in my last blog, this is one of the major amendments to Sections 48 and 48AA. The Explanatory Memorandum does not offer a reason why.

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The Insurance Contracts Amendment Bill 2013 – Third Parties (Part 2)

This blog continues my occasional series of blogs on the impact of the Insurance Contracts Amendment Bill 2013 on the Insurance Contracts Act. It is the second blog in the special series which looks at proposed amendments to those provisions in the Act which concern the position of third parties.

This particular blog looks at proposed changes to the defences available to insurers to meet claims by third party beneficiaries.

Section 48 is a well known section of the Act and largely concerns the relationship between insurers and named persons who are entitled to claim under a contract of general insurance. In broad terms, Section 48 permits such named persons to make a claim against the insurer even if that person is not a party to the contract.

So how will things be different ?

Firstly there will be some changes to the language of the Section. The expression “named persons with an entitlement to claim“ will be replaced with the expression “third party beneficiaries“. So the focus of the section will be much sharper.

The more fundamental change will be to clarify the operation of Section 48(3).

Section 48(3) currently provides that the insurer has the same defences to an action under this section (by a named party) as the insurer would have in an action by the insured. But does that mean that an insurer can use the conduct of the insured to defeat a claim by an innocent third party beneficiary or is that insurer limited to the conduct of the third party ? 

Section 48(3) will be amended to conclude with the words “including, but not limited to, defences relating to the conduct of the insured (whether the conduct occurred before or after the contract was entered into)”. In amending Section 48(3) this way, an insurer will be able to rely upon the conduct of an insured to defeat a claim by an innocent third party beneficiary.

Section 48AA applies in the context where a Retirement Savings Account provider takes out a contract of life insurance for the benefit of Retirement Savings Account holders. The Bill will make similar amendments in practical terms to Section 48AA as it proposes to make to Section 48 including the proposed amendment to Section 48(3).

These changes will enhance the position of an insurer who is facing a claim by a third party beneficiary whether that claim is founded on Section 48 or Section 48AA.

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The Insurance Contracts Amendment Bill 2013 – Third Parties (Part 1)

This blog continues my series of blogs on the impact of the Insurance Contracts Amendment Bill 2013 on the Insurance Contracts Act.

It is the first in a special series of blogs which looks at proposed amendments to the entitlements of third party beneficiaries – those who get a benefit under a contract of insurance but are not parties to that contract.

Section 41 of the Act is not a section which gets a lot of attention.

Firstly it only concerns contracts of liability insurance. They are contracts of general insurance that provide cover in respect of a liability for loss or damage caused to a person who is not the insured.

Secondly its application arises when an insured is required to obtain its insurer’s consent before making any admissions or compromising any claim made against it. In those circumstances the insured can request the insurer to admit that its contract of liability insurance responds to the claim and confirm that it will assume responsibility for the management of the defence to that claim. If the insurer does not respond within a reasonable time to the insured’s request, it cannot complain if the insured has made any admissions or compromised the claim without its consent.

The Bill proposes to repeal Section 41 in its entirety and replace it with a new Section 41 whose language is almost exactly the same. I say “almost” because there one difference. And it is important. 

Upon its commencement, the new Section 41 will extend beyond the insured to third party beneficiaries. So in exactly the same context, third party beneficiaries will be able to make the same request of the contract’s insurer that the insured under that contract can make, and enjoy the same protection as the insured under the contract enjoys if the insurer does not respond within a reasonable time .  

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The Insurance Contracts Amendment Bill 2013 – Cancellation of Contracts of Life Insurance

This blog continues my series of occasional blogs on the impact of the Insurance Contracts Amendment Bill 2013 on the provisions  of the Insurance Contracts Act.

Today’s blog looks at the proposed amendments to Section 59 of the Act.

Section 59 outlines the procedure which an insurer must follow to cancel a contract of insurance. In broad terms it provides that where an insurer elects to cancel a contract of insurance, the insurer must notify the insured in writing of the proposed cancellation. 

The Bill proposes to add Section 59A.  

The proposed Section 59A concerns the cancellation of contracts of life insurance. It provides that if the insured has made a fraudulent claim under a contract of life insurance or any other contract of insurance held with the same insurer over the same period as the contract of life insurance, the insurer may cancel the contract of life insurance.

In any proceedings in relation to the claim, the Court may disregard the cancellation, order the insurer to pay such amount as the Court considers just and equitable in the circumstances and require the insurer to reinstate the contract, if it would be harsh and unjust for the Court not to do that.

If any proceedings in relation to the cancellation, the Court may require the insurer to reinstate the contract, if it would be harsh and unjust for the Court not to do that.

Whatever it decides to do, the Court must have regard to, amongst other things,  the need to deter fraud.

The Bill also proposes to amend Section 63 of the Act to render any attempt to cancel a contract of insurance otherwise than in accordance with Section 59 (as amended ) or in the case of contracts of life insurance, Section 210 of the Life Insurance Act 2005, ineffective.

Upon the commencement of the Insurance Contracts Amendment Bill, an insurer’s decision to cancel a contract of life insurance in the face of fraud will come under greater scrutiny to the point that a Court may simply disregard it and require the insurer to meet the claim.

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