According to the Government, too many people are confused by
lengthy insurance contracts and their disclosure documents. As
such, the Government has indicated that it is committed to
implementing a mandatory one page KFS that will clearly set out
what is and is not covered under a Home Building and Home Contents
Insurance policy (Home policy).
On 1 March 2012, the Government released a discussion paper to
seek community feedback on the content, format, structure and
provision of the KFS, to ensure that it achieves this purpose.
According to the Government, the KFS will allow consumers to
quickly and easily check the basic terms of the insurance policy,
including the nature of the cover and any key exclusions.
What should it include?
In prescribing the proposed content of the KFS, the Government
has considered what it deems to be essential features of policies
and has provided a number of headings. Those headings include:
Name of policy;
Type of policy;
What is covered;
What is NOT covered;
Submissions in the initial consultation phase indicated that due
to the diversity within the Home policy market, information
regarding the type of policy (Sum-Insured, Sum-Insured plus Margin
and Total Replacement) should be restricted to cover only the
policy in question and not all of the potential policy types.
However, with a view to educating consumers, the Government has
asked for comment as to whether a definitive explanation of the
types of policies available should be provided on the reverse side
(effectively a second page) of the KFS, to further increase
This is seemingly an acknowledgement that one page is already
seen as inadequate to properly explain the scope of cover.
Fitting it all in...
It is well understood across the industry that the cover
available under various policies is a key area of interest to
consumers. In this regard, consumers place a considerable focus on
the relevant exclusions that may apply.
What exclusions should be included in the 'what is NOT
Should the 'what is NOT covered' section of the KFS
only reflect the reverse of the 'what is covered'
Should the 'what is NOT covered' section reflect only
events in relation to those contained in standard cover or should
it be extended to include parts of the standard cover
Will costs for industry increase with an increase number of
excluded events and exemptions? If so, please elaborate.
This highlights the difficulty the Government is encountering
in trying to explain entire insurance policies, in just one
In addition, as previously raised in our update of April 2011
here), the Government is also seeking comment about how to
address issues associated with concurrent causes.
That is, if losses are caused by 'concurrent effective or
proximate causes' (one of which was covered by the policy, and
the other, excluded), the application of the principle identified
in Wayne Tank & Pump Co Ltd v Employers Liability Assurance
Corp Ltd  QB 57 applies.
The potential adverse financial outcomes consumers may face as a
result of the Wayne Tank principle have been raised as a potential
area of concern. In order to address this concern it is proposed
that the KFS will contain a short statement raising the potential
application of the Wayne Tank principle and its potential effect.
The proposed statements reads:
In situations where there are two or more concurrent causes for
damage to your property and one of the causes is excluded under
this policy any claim made in respect of that damage may be
The Government then puts forward a number of further discussion
queries regarding this statement. One of which is:
Is the wording of the statement regarding the Wayne Tank
principle appropriate? If not, why not?
Including legal standards such as 'concurrent causes'
may only further muddy the waters and is arguably contrary to the
Government's intention to limit the KFS. If the Wayne Tank
principle is primarily an issue in the context of flood, a
statement that 'if a loss is caused by both flood and any other
cause then cover is excluded' may be clearer.
Too much content, not enough paper?
Although the Government's aims are laudable, the discussion
paper highlights the underlying complexity in the defined
terms/phrases used. We have only touched upon some of the issues
Merely referring to one word items such as 'Impact',
'Flood' or 'Riot' as excluded causes is unlikely to
leave insureds any wiser, but may discourage them from reading the
full PDS where such terms are defined and explained.
In order to fully understand the cover, the PDS/policy is still
required and the use of a KFS may lead to greater confusion if it
results in a failure of consumers to read the relevant
Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).