Mortgage protection insurance win after complaint to AFCA

Richie (a pseudonym) was referred to us in July 2024 by a Community Legal Service in Melbourne. He was experiencing significant financial hardship and was in arrears on his mortgage. He had purchased a mortgage protection insurance policy when he took out his mortgage. He lodged a claim on that insurance due to his inability to work due to illness, but that claim was rejected. We were asked to review the rejection of the mortgage protection insurance claim.

We were unable to assist Richie with a total and permanent disability (TPD) claim or income protection claim because he did not hold any disability insurance when he stopped working due to his illness.

What is mortgage protection insurance?

A mortgage protection insurance policy is insurance that covers you if you get sick or injured (or sometimes unemployed) and can’t pay your mortgage. The benefits paid usually cover your mortgage repayments for a period of time (usually years), if you are unable to work. In Richie’s case, his policy paid him a benefit of $2,604 per month for 30 months.

Berrill & Watson offers pro bono review of Richie’s claim

We agreed to review the documents relating to the rejection of Richie’s mortgage protection insurance claim on a pro bono basis.  We quickly identified that, whilst he ceased work in 2018 due to illness, his claim forms (which he completed) and medical statement (which his doctor completed) both said that he became unable to work due to illness from 2023.

After further investigation, we noticed that 2023 was the year that he first got medical help and the year that the claim was first lodged.

Comprehensive history obtained to maximise a successful appeal

We agreed to speak with Richie (with help from his social worker) and took the following history from him:

• He worked in a heavy manual role and struggled with fatigue and shortness of breath up until he finally stopped work in 2018.
• Some time in 2016 or 2017, he went to hospital for his condition and was told that his tests were normal and there was nothing that could be done.
• Because of the advice he got at the hospital, he did not seek medical help when he stopped work in 2018, and he simply ceased work.
• Shortly after he ceased work, he got access to his super (he turned 60 in 2019) and lived on that.
• His condition continued to deteriorate after he stopped working, and he got a diagnosis and medical treatment in 2023.
• He had now used up all of his superannuation.

Further medical evidence crucial

Based on the history provided by Richie and his financial counsellor and social worker, we decided that if we got further, more accurate medical evidence from a doctor, we could lodge a complaint with the insurer and try to overturn the rejection of his claim. We needed medical evidence to support that Richie:

1. ceased work due to illness in 2018 (not 2023);
2. has not been able to work due to illness since 2018; and
3. not accessing medical treatment from 2018 to date was due to the misleading advice he got about his illness at the hospital in 2016/17; and
4. would not have been able to work since 2018 due to his illness, even if he was getting medical treatment.

With the help of his social worker, we were able to get a supportive report from Richie’s GP and lodge an Internal Dispute Resolution (IDR) complaint with the insurer.

Insurer puts up a fight after the IDR complaint

Then the insurer fought… hard!

They took every possible point and pointed to the fact that Richie:

1. had no resignation letter (he was a casual employee);
2. no payslips or other leave records (his employer was a company that no longer existed); and
3. no medical evidence from the relevant time.

They continued to reject his claim.

Further supporting evidence obtained to support a valid claim

We addressed the above by getting his tax records to show no income had been declared and that no tax returns had been filed since 2018, when Richie stopped working due to his illness.

We also got the records from Incolink (a scheme that some employers pay into to support their employees with things like extra insurance, annual, sick and long service leave). These records showed no additional payments after 2018, which we said was consistent with Richie stopping work at this time.

Complaint escalated to the Australian Financial Complaints Authority (AFCA)

After lodging our IDR complaint, the insurer maintained its rejection, and we took Richie’s claim to AFCA (also on a pro bono basis).

The insurer tried to have the complaint excluded from AFCA’s jurisdiction due to time limit issues. We successfully resisted this by making detailed submissions to AFCA.

The insurer then made repeated, repetitive submissions about why the claim was rightly rejected. Their submissions consistently appeared to focus on two points:

1. That Richie’s initial claim forms, lodged in 2023, indicate that he stopped work in 2023 (five years after he last worked); and
2. That he had not seen a doctor when he first stopped working.

With some effort and help from his social worker, we eventually did find one clinical note in Richie’s medical file from 2017, which showed some shortness of breath. This, with the other supporting documents we had put together, allowed us to put submissions to AFCA to say that the mortgage protection insurance claim should be accepted.

AFCA finds in Richie’s favour

Fortunately, AFCA agreed with our submissions and determined that the insurer was responsible to pay Richie monthly payments for 30 months plus interest, and a small payment for non-financial loss. This money will help Richie save his home from foreclosure.

Get help from an insurance lawyer

Richie’s case shows the importance of making sure claim forms are properly completed from the outset and the need to get strong medical evidence in support of any insurance claim related to injury or illness. Once we got involved, we were able to get these things for Richie and get his claim approved!

Contacting Berrill & Watson

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📞 Anywhere else in Australia:  03 9448 8048

📧 info@berrillwatson.com.au

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