- The issues to be determined by the Federal Court were whether TAL Life Limited (TAL) had engaged in misleading and deceptive conduct in handling the insured’s claim, and whether TAL had breached its duty to act with utmost good faith towards the insured under the Insurance Contracts Act 1984 (Cth) (the ICA).
The insured was diagnosed with cervical cancer in December 2013. She made a claim on her income protection policy with TAL. The claim was accepted. TAL investigated the insured’s medical history and identified that she had a prior history of depression in 2007-2009 which had not been disclosed in her application for income protection insurance. TAL subsequently rejected the claim, avoided the policy and informed the insured that she had acted without good faith. TAL also threatened to recover $24,000 in payments that had already been made under the policy.
At no time prior to avoiding the policy did TAL inform the insured that it intended to investigate 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 application, or make any additional enquiries with her medical professionals.
After the matter had been investigated by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the Australian Securities and Investments Commission (ASIC) issued proceedings against TAL for alleged breaches of the ICA and for misleading and deceptive conduct in contravention of the ASIC Act and the Corporations Act 2001 (Cth).
The decision at trial
The Court found TAL guilty of breaching its duty to act with utmost good faith towards the insured pursuant to the ICA. The Court found that TAL failed to act with decency and fairness towards the insured in reaching its decision without giving her a proper opportunity to put material before it. The Court also found that the insured was treated without decency or fairness in being told she had acted without good faith.
The ASIC’s allegations regarding misleading and deceptive conduct were dismissed.
Implications for you
This decision highlights the importance that insurers act consistently with commercial standards of decency and fairness to ensure that claims are handled in a fair and transparent manner and with utmost good faith.