Your common law duty of care
The four separate statutory duties discussed in the proceeding sections co-exist with your duty of care under the common law to do all things that a reasonably prudent adviser would do.
Your common law duty of care is always there. It overlaps with and extends your statutory duties.
Your common law duty of care in risk insurance practices is highlighted by two recent court cases dealing with the insured’s obligations to disclose relevant matters to the insurer under section 29 of if the Insurance Contracts Act and in particular the insurer’s right to avoid the contract within three years under sub-section 29(3) of the Insurance Contracts Act.
You can read sub-section 29 here: Section 29 of the Insurance Contracts Act.
In Commonwealth Financial Planning Ltd v Couper  NSWCA 444, the NSW Court of Appeal upheld a NSW District Court finding that an adviser had negligently engaged in misleading or deceptive conduct by failing to warn a client about sub-section 29(3) of the Insurance Contracts Act before recommending a client switch life insurance policies.
The insurer successfully relied on sub-section 29(3) to avoid the contract and defeat the client’s claim based on the insured’s failure to disclose his health history.
The old policy, in place since 2003, would have covered the claim.
In Swansson v Harrison & Ors  VSC 118 the Victorian Supreme Court held an adviser was negligent with respect to what a ‘reasonably prudent advice provider’ would have done.
The client told the adviser he had been diagnosed with a stomach condition. But the adviser to failed to ask any more questions before cancelling their existing policy believing the matter to be resolved.
An industry expert gave evidence that: ‘A reasonably prudent broker would have rung [the client] to check on his stomach condition before cancelling the first policy. This is because of the precious asset (being continuity of cover) that stood to be lost if there has been some development in respect of that stomach condition’.
The new insurer subsequently relied on sub-section 29(3) of the Insurance Contracts Act to avoid the new policy on the basis of nondisclosure. The court found for the insurer, but also held that the damages should be reduced by 50% based on contributory negligence.
You can read an April 2014 article on the Swansson case in RiskInfo here: Court verdict send warning to advisers on disclosure.
These cases highlight the fact that a risk insurance adviser owes a duty of care to their clients and that this duty overlaps with and extends the statutory duties created under the Corporations Act.
They show how you have to be very careful when recommending a client lapse a policy, i.e. the necessary first step in switching to a new policy.