Big insurer TAL has been found itself on the wrong end of a Federal Court judgement that it breached its duty to act with utmost good faith under the Insurance Contracts Act.
The case was brought against TAL by the Australian Securities and Investments Commission (ASIC) and resulted from a referral from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
ASIC said it had also alleged that TAL engaged in false and misleading conduct in handling a consumer’s claim but the Court had found that these claims had not been proved.
The case related to a consumer who made a claim under her income protection policy in January 2014 after she was diagnosed with cancer and after obtaining the consumer’s medical history, TAL was alleged to have avoided her policy on the basis that she failed to disclose an unrelated prior medical history.
ASIC alleged that TAL avoided the policy without first giving notice to the consumer of a retrospective investigation into her medical history or offering her an opportunity to address the concerns raised before rejecting her claim.
In his judgment, Chief Justice Allsop found that that at no time prior to avoiding the policy did TAL:
- Tell the consumer it was considering her medical history;
- Tell her that it was examining her medical history to undertake a ‘policy validity investigation’;
- Ask her to address any concerns as to non-disclosure or misrepresentation in her answers; or
- Make any additional enquiries of her medical professionals to whom the consumer had been referred about the contents of the medical records and about her condition.
His Honour also found that TAL breached its duty to act in good faith by telling the consumer that she herself had acted without good faith and by threatening to recover $24,000 in payments that had been made to her after the commencement of TAL’s investigation.