9BMeaning of acceptable contracts of professional indemnity insurance

##### 9B Meaning of acceptable contracts of professional indemnity insurance (1) An acceptable contract of professional indemnity insurance, in relation to liabilities that are prescribed for the purposes of a nominated provision, means a contract of insurance: (a) that is accepted by ASIC; and (b) that contains a clause indicating that the parties to the contract intend that any claim under the contract will be determined according to the law of a State or Territory specified in the contract; and (c) under which the insured is indemnified to the extent required by the regulations in respect of the prescribed liabilities arising out of or in the course of the insured’s business as an insurance intermediary. (2) Regulations specifying the extent to which a person is to be indemnified under an acceptable contract of professional indemnity insurance may make provision for different amounts according to the date on which the contract is entered into or renewed. (3) Despite section 28 of the Insurance Contracts Act 1984: (a) a failure to comply with a duty of disclosure by a person seeking to enter into an acceptable contract of professional indemnity insurance; or (b) a misrepresentation by such a person to an insurer before such a contract was entered into; whether that failure or misrepresentation was fraudulent or not, is not a ground for the insurer to avoid the contract or to reduce its liability under the contract. (4) An acceptable contract of professional indemnity insurance in respect of liabilities that are prescribed for the purposes of a nominated provision must provide that, despite the fact: (a) that the person entering into the contract subsequently ceases to trade as an insurance intermediary; or (b) that the contract is cancelled under subsection (5); that person, or any other person who becomes responsible for the liabilities of that person, is to continue to be indemnified in relation to a claim: (c) that is made in respect of a contract of insurance entered into by the insurance intermediary; and (d) that gives rise to such a prescribed liability; if that claim is made within the period after entry into that last‑mentioned contract of insurance that is, at the time of entry into that contract, prescribed by regulations made for the purposes of this subsection. (5) The insurer under an acceptable contract of professional indemnity insurance must not cancel the contract unless, at least 3 business days before the date of intended cancellation of the contract, ASIC is notified in writing by the insurer or by the agent of the insurer: (a) of the insurer’s intention to cancel the contract; and (b) of the date of the intended cancellation of the contract; and (c) of the reason for the intended cancellation of the contract. Penalty: 150 penalty units. (6) For the purposes of subsection (5), the following days do not count as business days: (a) a Saturday or a Sunday; (b) a day that is a public holiday or a bank holiday; (i) in the Australian Capital Territory; and (ii) if the insured is a natural person—in the place of residence of the insured; and (iii) if the insured is a company—in the State or Territory in which the insured is incorporated; and (iv) if the insured is a partnership or a body corporate other than a company—in the principal place of business of the insured. (7) A provision in a contract of professional indemnity insurance has no effect if it purports to permit the contract to be cancelled by a person (the premium funder) who has entered into a loan agreement with the insured for the provision of all or a part of the premium payable under the contract if the insured is unable or unwilling to comply with the terms of the loan agreement. (8) In this section: > nominated provision means: (a) paragraph 19(1)(b); or (b) subparagraph 31B(1)(a)(ii) or (b)(ii).