ASIC has taken the unprecedented step of intervening in a court case between an insurer and a claimant over a protracted flood dispute. It’s a move that Peter Kell, ASIC’s Executive Director of Consumer Protection, said demonstrates the court’s acknowledgment of the regulator’s “legitimate public interest role” in consumer protection cases.

The NSW Supreme Court yesterday granted ASIC leave to appear as amicus curiae (friend of the court) in Hams v CGU Insurance, an ongoing case which ASIC says raises important consumer protection questions about insurance law. CGU opposed ASIC’s application.

Mr and Mrs Hams suffered extensive damage to their rural property following heavy rainfall in February 2000. They were insured, but CGU refused to pay, relying on a flood exclusion clause in the policy.

It’s a major heightening of the tension between ASIC and the industry over flood insurance and the many associated issues it raises. ASIC said this case raises important questions about the Insurance Contracts Act, which requires insurers to clearly inform consumers in writing of limitations in their insurance policies.

While the regulator isn’t appearing in support of either side in this matter, as amicus curiae it will make submissions to the court about two important legal issues:

• Whether simply providing a copy of the insurance policy will always be enough to clearly inform consumers about the departure from standard cover under an insurance policy.

• Whether insurers must explain to consumers that they may not be covered at all if there is more than one cause of damage and one of those causes is covered and one is excluded under the policy. This issue can arise in cases involving flooding after storms, as many policies provide cover for storm water, but exclude flood.