Author: Mark Frewen-Lord
Judgment date: 9 March 2021
Citation: Australian Securities and Investments Commission v TAL Life Limited (No 2)  FCA 193
Jurisdiction: Federal Court of Australia
On 16 December 2013, the Second Insured was diagnosed with cervical cancer and subsequently lodged a claim on her policy. TAL began investigating the claimant's medical history and subsequently avoided her policy due to her failure to disclose a period of depression from 2007 to 2009. In doing so, TAL advised the claimant, by phone and in writing, that she was in breach of s13 (duty of utmost good faith) and s21 (duty of disclosure) of the ICA and could potentially be liable to repay approximately $24,000 in benefit payments.
The Second Insured appealed this decision internally and then to the Financial Ombudsman. The matter was subsequently settled informally with a payment of $25,000 made by TAL to the Second Insured, although TAL remained of the view that the policy remained void ab initio. As the matter was informally settled, the questions before the Court did not concern the merits of TAL's decision to void the policy, but rather its conduct in arriving at that conclusion and thereafter.
This matter was brought to light as a result of the Financial Services Royal Commission. ASIC subsequently brought proceedings against TAL in the Federal Court for misleading and deceptive conduct and a breach of s13 of the ICA under powers granted to it pursuant to s14A of the ICA.
Relief was granted to ASIC in the form of declarations to be made by TAL that it had breached s13 of the ICA however no award for damages was sought or made.
Investigations into non-disclosure or misrepresentation and possible avoidance of policies of insurance should be conducted transparently, with proper enquiry into the evidence and by affording the insured a right of reply.
References made to an insured's breach of the duty of utmost good faith and possible recovery of claims paid should not be made lightly by insurers as the Court will have regard to the significant impact this can have on the mental and economical wellbeing of policyholders.
While ASIC only sought declarations that the insured had breached s13 of the ICA, it has powers under s14A to bring further action under the Corporations Act 2001 for a failure to comply with financial services law.