The Maritime Law Association of Australia and New Zealand (MLAANZ) has recommended amendments be made to the Commonwealth Marine Insurance Act 1909 (MIA) following changes to the UK Marine Insurance Act 1906 (UK MIA), on which the law is based. In this article Gallagher's National Head of Marine, Stephen Rudman, unpacks why MLAANZ has proposed these amendments to the MIA, and what they could mean for the marine and logistics industry.
What are the proposed amendments to the Marine Insurance Act (MIA)?
In February 2015 the United Kingdom enacted the Insurance Act 2015, which made significant reforms to insurance law as outlined in the Marine Insurance Act 1906. In particular, it changed the UK MIA in the key areas of utmost good faith, disclosure, warranties and remedies for breach of contract.
MLAANZ is now seeking to have sections of the MIA amended in a similar fashion. It has proposed a draft Bill for an Act to (among other things):
- extend the MIA’s operation to cover inland waters and incidental air risks
- amend the MIA to properly reflect the duty of utmost good faith
- repeal the 12-month limit on time policies and introduce new sections to the MIA that regulate the rights of insurers to cancel contracts and policies.
Why amend the Marine Insurance Act?
MLAANZ, with support from the marine insurance community, is pursuing these amendments to the Marine Insurance Act for three main reasons:
- to harmonise Australian law with international standards and, in particular, recently changed UK practices
- to maintain the competitiveness of the Australian marine insurance market
- to implement key recommendations made by the Australian Law Reform Commission (ALRC).
The amendments proposed by MLAANZ are largely based on the ALRC’s Review of the Marine Insurance Act 1909. The report, published in 2001, found a strong need to have a regime “consistent with the international practice in the marine insurance industry.” As it is, the MIA is “out of step with the modern expectations of fairness in commercial dealings with insurer and insured – and in this respect at least, it is in need of reform.”
In response to a letter from MLAANZ president Neil Beadle, former Attorney General, George Brandis QC, echoed the Commission’s findings. He wrote that “as a consequence of [the amendments to the UK MIA], the laws dealing with marine insurance contracts in the United Kingdom and Australia are no longer so closely aligned.”
What do the proposed amendments mean for marine, cargo and logistics companies?
Back in 2001, the ALRC said that, if adopted, its recommendations would involve significant amendment to the MIA. However, it anticipated that “the impact in practice on Australia’s marine insurance industry would be less than which the scale of the changes to the wording of the MIA might suggest.”
The proposed amendments to the MIA would be made largely within the existing structure and layout of the Act, with the exception of a few new sections. For marine, cargo and logistics companies, the biggest impact will be on how they contract out of risk.
Currently, logistics providers in Australia can contract completely out of all risk, loss or damage to their customer’s goods. The proposed changes to the MIA will mean that these providers will have to act with the utmost good faith, and will no longer be able to contract outside of their terms and conditions. This is a good thing for end customers, but it does mean the law will be slightly more restrictive for logistics providers.
Any questions about how changes to the Marine Insurance Act might impact your business?
Actual changes to the Marine Insurance Act 1909 have yet to be made, and there is currently no legislative proposal to amend the MIA. It’s not clear when the recommendations from MLAANZ or the ALRC will be taken into consideration, or what impact they’ll have on insurance policies or premiums.
If you’re concerned about how these proposed changes might impact your insurance, drop me a line. We have a team of skilled, specialist marine insurance brokers who will be able to help you understand what’s being proposed and how it may affect your business.
Stephen also talks about the proposed reforms in this short video interview.