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11 Interpretation
(1) In this Act, unless the contrary intention appears:
“avoid”, in relation to a contract of insurance, means avoid from its inception;
. . .
21 The insured’s duty of disclosure
(1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:
(a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or
(b) a reasonable person in the circumstances could be expected to know to be a matter so relevant.
(2) The duty of disclosure does not require the disclosure of a matter:
(a) that diminishes the risk;
(b) that is of common knowledge;
(c) that the insurer knows or in the ordinary course of his business as an insurer ought to know; or
(d) as to which compliance with the duty of disclosure is waived by the insurer.
(3) Where a person:
(a) failed to answer; or
(b) gave an obviously incomplete or irrelevant answer to;
a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter.
28 General Insurance
(1) This section applies where the person who became the insured under a contract of general insurance upon the contract being entered into:
(a) failed to comply with the duty of disclosure; or
(b) made a misrepresentation to the insurer before the contract was entered into;
but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into.
(2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.
(3) If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place him in a position in which he would have been if the failure had not occurred or the misrepresentation had not been made.
29 Life Insurance
(1) This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into:
(a) failed to comply with the duty of disclosure; or
(b) made a representation to the insurer before the contract was entered into;
but does not apply where:
(c) the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or
(d) the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds.
(2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.
(3) If the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made, the insurer may, within 3 years after the contract was entered into, avoid the contract.
(4) If the insurer has not avoided the contract, whether under subsection (2) or (3) or otherwise, he may, by notice in writing given to the insured before the expiration of 3 years after the contract was entered into, vary the contract by substituting for the sum insured (including any bonuses) a sum that is not less than the sum ascertained in accordance with the formula SP/Q, where:
S is the number of dollars that is equal to the sum insured (including any bonuses);
P is the number of dollars that is equal to the premium that has, or to the sum of the premiums that have, become payable under the contract; and
Q is the number of dollars that is equal to the premium, or to the sum of the premiums, that the insurer would have been likely to have charged if the duty of disclosure had been complied with or the misrepresentation had not been made.
(5) In the application of subsection (4) in relation to a contract that provides for periodic payments, “the sum insured” means each such payment (including any bonuses).
(6) A variation of a contract under subsection (4) has effect from the time when the contract was entered into.
30 Misstatements of age
(1) In this section, “the standard formula”, in relation to a contract of life insurance means the formula SP/Q, where:
S is the number of dollars that is equal to the sum insured (including any bonuses);
P is the number of dollars that is equal to the premium that has, or to the sum of the premiums that have, become payable under the contract; and
Q is the number of dollars that is equal to the premium, or to the sum of the premiums, that would have become payable under the contract if it or they had been ascertained on the basis of the correct date of birth or dates of birth.
(2) If the date of birth of one or more of the life insureds under a contract of life insurance was not correctly stated to the insurer at the time when the contract was entered into:
(a) where the sum insured (including any bonuses) exceeds the amount in dollars ascertained in accordance with the standard formula — the insurer may at any time vary the contract by substituting for the sum insured (including any bonuses) an amount that is not less than the amount in dollars so ascertained; and
(b) where the sum insured (including any bonuses) is less than the amount so ascertained, the insurer shall either:
(i) reduce, as from the date on which the contract was entered into, the premium payable to the amount that would have been payable if the contract had been based on the correct date of birth or correct dates of birth and repay the amount of overpayments of premium (less any amount that has been paid as the cash value of bonuses in excess of the cash value that would have been paid if the contract had been based on the correct date of birth or correct dates of birth) together with interest on that amount at the prescribed rate computed from the date on which the contract was entered into; or
(ii) vary the contract by substituting for the sum insured (including any bonuses) the amount in dollars so ascertained.
(3) In the application of subsection (2) in relation to a contract that provides for periodic payments, “the sum insured” means each such payment (including any bonuses).
(4) A variation of a contract under subsection (2) has effect from the time when the contract was entered into.
31 Court may disregard avoidance in certain circumstances
(1) In any proceedings by the insured in respect of a contract of insurance that has been avoided on the ground of fraudulent failure to comply with the duty of disclosure or fraudulent misrepresentation, the court may, if it would be harsh and unfair not to do so, but subject to this section, disregard the avoidance and, if it does so, shall allow the insured to recover the whole, or such part as the court thinks just and equitable in the circumstances, of the amount that would have been payable if the contract had not been avoided.
(2) The power conferred by subsection (1) may be exercised only where the court is of the opinion that, in respect of the loss that is the subject of the proceedings before the court, the insurer has not been prejudiced by the failure or misrepresentation or, if the insurer has been so prejudiced, the prejudice is minimal or insignificant.
(3) In exercising the power conferred by subsection (1) the court:
(a) shall have regard to the need to deter fraudulent conduct in relation to insurance; and
(b) shall weigh the extent of the culpability of the insured in the fraudulent conduct against the magnitude of the loss that would be suffered by the insured if the avoidance were not disregarded;
but may also have regard to any other relevant matter.
(4) The power conferred by subsection (1) applies only in relation to the loss that is the subject of the proceedings before the court, and any disregard by the court of the avoidance does not otherwise operate to reinstate the contract.
33 No other remedies
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.
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URL: http://www.nzlii.org/nz/other/nzlc/report/R46/R46-Appendix-3.html