Commonwealth Consolidated Acts

INSURANCE CONTRACTS ACT 1984 - SECT 44

  (1)   An insurer may not rely on an average provision included in a contract of general insurance unless, before the contract was entered into, the insurer clearly informed the insured in writing of the nature and effect of the provision including whether the provision is based on indemnity or on replacement value of the property that is the subject - matter of the contract.

  (2)   Where the sum insured in respect of property that is the subject - matter of a contract of general insurance that provides insurance cover in respect of loss of or damage to a building used primarily and principally as a residence for the insured, for persons with whom the insured has a family or personal relationship, or for both the insured and such persons, or loss of or damage to the contents of such a building, or both, is not less than 80% of the value of the property, the liability of the insurer in respect of loss of or damage to the property is not reduced by reason only of the operation of an average provision included in the contract.

  (3)   Where:

  (a)   the sum insured in respect of property that is the subject - matter of such a contract is less than 80% of the value of the property; and

  (b)   but for this subsection, an average provision included in the contract would have the effect of reducing the liability of the insurer in respect of loss of or damage to the property to an amount that is less than the amount ascertained in accordance with the formula

    where:

"A" is the number of dollars equal to the amount of the loss or damage.

"S" is the amount of the sum insured under the contract in respect of the property; and

"P" is 80% of the number of dollars equal to the value of the property.

the average provision has the effect of reducing the liability of the insurer to the amount so ascertained.

  (4)   In this section:

"value" , in relation to property, means:

  (a)   if the relevant contract provides for indemnifying the insured in respect of loss of or damage to the property  the indemnity value of the property; or

  (b)   if the relevant contract provides for reinstatement or replacement of the property  the reinstatement or replacement value of the property;

at the time when the relevant contract was entered into.