Commentary on Sections Part 5: Good Faith and Contracting Out Section 16: Contracting out: non-consumer insurance
120.This section applies to all non-consumer insurance contracts. It concerns the situations in which an insurer can “contract out” by using a term of the non-consumer insurance contract to put the insured in a worse position than it would be in under the default rules contained in the Act.
121.Section 16(2) provides that, generally speaking, parties can agree to contract terms which are less favourable to the insured than provisions of the Act. Such terms may appear in the insurance contract itself or any separate contract. However, such terms will only be valid if the insurer has complied with the “transparency requirements” contained in section 17.
122.There is only one situation in which the insurer cannot contract out to the detriment of the insured, which is set out in section 16(1). This is the prohibition on basis of the contract clauses and similar provisions in section 9.