In early June 2025 the Federal Court of Australia held that the following term in a home and contents insurance policy was not ambiguous because it implied materiality, it did not cause a significant imbalance in the rights and obligations of the parties, and it was reasonably necessary to protect the insurer’s legitimate interests:
Tell us if anything changes while you’re insured with us
Whilst you’re insured with us, you need to tell us if anything changes about your home or contents.
If you don’t tell us about changes, we may:
Refuse to pay a claim Cancel your contract
Reduce the amount we pay Not offer to renew your contract
Examples of the changes we want you to tell us about are [examples are then given]
The court held that the reference to notification “if anything changes” could not be considered literally because any small change would have to be notified. The clause imported an element of materiality in relation to the risks insured.
According to Australia consumer legislation, a contractual term is “unfair” if it satisfies three elements or conditions: it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; it is not reasonably necessary in order to protect the legitimate interest of the party who would be advantaged by the term; and it would cause detriment (whether financial or otherwise) to a party if it were applied or relied on. The consumer legislation applies to insurance contracts. The policy was written in plain language or non-legal style with the aim of being more comprehensible to consumers. The document had a clear structural hierarchy divided into numbered sections which had large font headings and used icons and clear steps. The notification term did not relate to changes in information provided at the commencement or renewal of the policy. It related to changes in the risk of a material nature. The proper construction to avoid absurdity is to qualify the clause “if anything changes about your home or contents” with the requirement of materiality, where materiality relates to the risks insured.
On that basis there was no imbalance between the rights of the parties. The contractual language would convey to a reasonable person in all the circumstances that it is an obligation that includes a materiality requirement. If circumstances occurred during the term of the contract that materially changed the risk, that involves a change to the main subject of the contract. That did not cause a significant imbalance in the parties’ rights and obligations. The term was not unreasonable nor unfair according to statutory requirements. The term was also reasonably necessary to protect the insurer’s rights and interests and was proportionate to the interests being protected.
The challenge to the wording by the Australian Securities and Investments Commission failed.
The analysis of the contract in the judgment shows how, properly used, plain language and clear formatting of policy conditions will be upheld even in the face of the stringent Australian consumer protection legislation.