The Australian Securities and Investments Commission (ASIC) has commenced legal action against insurer, This Australian Life (TAL) with allegations that the Insurer has breached legislation.
The action stems from TAL’s declinature of a customer’s claim for income protection in 2014 following the customer’s diagnosis of cervical cancer. It is alleged that TAL advised the customer that her claim was accepted and later declined the claim on the basis of non-disclosure of a pre-existing, unrelated medical history of depression.
Under a retail policy, there is generally a duty upon a customer to disclose any known pre-existing medical conditions pursuant to section 21 of the Insurance Contracts Act 1984 (the Act). This assists the insurer in ascertaining whether they are agreeable to providing insurance cover considering those conditions or whether cover will be provided with an exclusion of the pre-existing conditions. An insurer is required to inform the customer of their duty of disclosure under section 22 of the Act. The duty of disclosure continues until the policy is accepted and the duty will arise again if insurance cover lapses and the customer chooses to reinstate or replace cover.
In circumstances where there is non-disclosure of a known medical condition which later gives rise to a claim under the policy then an insurer may exercise its right to void a policy particularly if the non-disclosure would have been a relevant consideration to the insurer in its decision to provide cover. However, if the right to void a policy is exercised by an insurer in circumstances where a pre-existing medical condition is not related to the claimed disabling condition, then relevance of that consideration and validity of the decision to void may be called into question.
The claim against TAL has not been finalised however ASIC has reinforced its power and willingness to bring insurers to account and institute proceedings in circumstances where wrongdoing may be suspected.
We await the determination of the Federal Court.