Sometimes when you claim under a life insurance policy for example:
an insurer will refuse your claim due to alleged non-disclosure. This means that when you applied for your insurance cover, there were matters which the insurer believes you didn’t tell them when you applied for the insurance cover and that you breached your duty of disclosure.
Disputes with non-disclosure are legally very complex, and you shouldn’t just accept that what an insurer says is correct. It often isn’t and you should seek legal advice about your rights and entitlements.
Duty of disclosure in injury/illness insurance
If you took a policy out for TPD cover, income protection or trauma insurance prior to 5 October 2021, you had to tell the insurer about the matters that you know, or a reasonable person in your circumstances ought to know, are relevant to the insurer’s decision to offer you insurance cover.
It is not uncommon for people to fail to tell an insurer about a very minor medical condition because the condition is minor, and its effect on the person’s ability to work is minimal. However, often insurers still think these matters are relevant.
Insurers may avoid your cover
If an insurer can prove that there were matters that weren’t disclosed but were required under your duty of disclosure, they can sometimes “avoid” your cover. This means the insurance cover is treated as if it never existed, and you are refunded your insurance premiums.
If this happens, then the insurer will decline any claim that was made on that policy.
However, an insurer can only avoid an insurance policy if they can show that if they knew what you hadn’t told them, they wouldn’t have offered you the insurance cover you applied for. In other words, if the thing you didn’t tell them about wouldn’t have changed their decision, then the insurer is not entitled to any remedy, and they have to assess your claim in the normal way.
Insurer may change the terms of your cover retrospectively
Depending on the nature of the matter that wasn’t disclosed, sometimes an insurer will retrospectively vary your insurance cover. So, for example, an insurer might apply a mental health exclusion to the policy, and that exclusion applies from the date that the policy was taken out.
Importantly, an insurer’s rights to either avoid a policy or to retrospectively vary an insurance policy are limited by the legislation. So, if your insurance is avoided or your claim is rejected due to a disclosure issue, you should get advice about whether the insurer’s decision on your claim is within the law.
There have also been changes to the law over the years so any rights the insurer might have will depend on when you bought your policy or increased your insurance cover.
Whether the insurer can vary or avoid your insurance cover is likely to depend on “underwriting”. Underwriting is the consideration of the material that an insurer looks at when they offer an insurance policy. Insurers are often very hesitant to provide their underwriting material, and sometimes refuse to provide it. You have the right to information that has been relied upon to assess your claim, and we can help you get this information.
Insurers “fishing” for information
Sometimes when you lodge an insurance claim, insurers get you to sign general authorities.
We have seen many instances when insurance companies will use those general authorities to obtain medical records that are 10 or 20 years old. Insurers are not supposed to simply go fishing for information like that. Insurers have legal obligations to assess claims honestly, efficiently and fairly and if an insurer does go fishing for information without a proper basis, they might be in breach of their legal obligations.
ASIC has recently investigated insurance companies for this conduct and their media release about their findings can be found here.
Delays due to non-disclosure investigations
Sometimes when insurers undertake a non-disclosure investigation, there can be very long delays in the assessment of the claim. We’ve seen many instances where insurance companies undertake these investigations, unreasonably delay claims, and take much longer than they should have to accept a claim.
If an insurer unreasonably delays the acceptance of a claim, you might be entitled to ask for interest in addition to the benefit that you might otherwise be entitled to. Interest is payable if the insurer has ‘unreasonably withheld’ your benefit. Unsurprisingly, insurers often have different views to us, about when a benefit was unreasonably withheld.
If you think your claim took too long to be paid because of a lengthy non-disclosure investigation, you should get some advice about whether you have a claim for interest.
Duty to not misrepresent
Since 5 October 2021, if you have applied for insurance cover (eg, TPD, income protection, trauma insurance), you have had a duty to take reasonable care to not misrepresent information to the insurer. A very important aspect of this is what the actual questions asked were. This is a relatively new matter which only came into being because of the Hayne Royal Commission into Banking and Financial Services Misconduct.
In our view, this change to the law is good and we are hopeful it’ll lead to fewer disputes in relation to alleged non-disclosure.
What do I do if an insurer is disputing my insurance claim?
If an insurer has indicated that they think there was something wrong in your application for insurance cover, you should get legal advice as soon as possible. In almost all cases, we would not recommend responding to an insurer’s ‘show cause’ letter alleging misrepresentation or non-disclosure without first having a chat to a lawyer.
We are happy to speak with you about your case, without charge, to understand your situation. If you later need to engage us to act for you, we would do so on a no win, no fee basis.
Contacting Berrill & Watson
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📞 Brisbane: 07 3013 4300
📞 Anywhere else in Australia: 03 9448 8048
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