The Federal Court of Australia has found that TAL Life Limited (TAL) breached its duty to act with utmost good faith pursuant to s 13 of the Insurance Contracts Act 1984 (Cth) (ICA) in seeking to avoid an income protection policy.1
The insurance claim in question was the subject of a case study before the Financial Services Royal Commission and a referral to the Australian Securities and Investment Commission (ASIC) to investigate.
The decision is the culmination of one of a number of such investigations undertaken by ASIC in the wake of the Royal Commission, and by no means is it expected to be the last. It serves as useful guidance for insurers on the extent of their obligations when investigating and assessing an insured’s claim for indemnity.
Facts
In December 2013 the insured made a claim under an income protection policy (Policy) with TAL, after she was diagnosed with cervical cancer.
After investigating the insured’s claim, TAL discovered that the insured suffered from a period of depression between 2007 and 2009, which was not disclosed when taking out the Policy. TAL subsequently rejected the claim, and avoided the Policy, based on the insured’s failure to disclose this prior history of depression. TAL wrote to the insured in terms that the non-disclosure was in breach of her own duty of good faith under s 13 of the ICA and her duty of disclosure under s 21 of the ICA, and reserved its rights to seek reimbursement of any benefits already paid under the Policy.
There was no dispute that the prior condition was unrelated to the insured’s cervical cancer.
The insured sought internal review of TAL’s decision, and when that was unsuccessful lodged a dispute with the Financial Ombudsman Service (FOS), which was resolved on commercial terms.
As noted at the outset, the insured’s experience became a case study before the Royal Commission, which resulted in a referral to ASIC. Following investigation ASIC commenced proceedings against TAL, alleging (among other things) that it breached the duty of good faith under s 13 of the ICA in the manner it avoided the Policy, notwithstanding the FOS resolution.
1 Australian Securities and Investments Commission v TAL Life Limited (No 2) [2021] FCA 193.
