The Australian Securities and Investments Commission (ASIC) will appeal after the Federal Court last month dismissed its unfair contract terms proceedings against insurer Auto & General.

Justice Ian Jackman ruled the clause requiring policyholders to inform Auto & General “if anything changes about your home or contents” is not an unfair contract term.

But ASIC says it remains concerned that the term imposes an unclear obligation on policyholders regarding what they must disclose, and that the term could mislead or confuse the customer as to their obligations and rights.

The regulator’s case concerned policies sold between April 5 2001 and last year.

In its notice of appeal, ASIC says the judge erred in finding the notification term is “reasonably necessary” to protect the insurer’s legitimate interest.

Justice Jackman said in his ruling that legitimate interests include the insurer’s ability to choose which risks it will insure, and that the information gathering process ensures it is not covering risks it is unwilling to insure.

The notice of appeal also says the judge erred in finding the notification term would not cause a significant imbalance in the rights and obligations of the parties involved.

The appeal will be heard by the Full Federal Court on a date yet to be determined.