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Determination
Case number | 12-00-1044725 |
Financial firm | Zurich Australian Insurance Limited |
Case number: 12-00-1044725 9 October 2024
The complainant holds a travel insurance policy with the financial firm (the insurer). The policy covered the complainant and her late husband (MR) for travel from 24 May 2023 to 7 July 2023. She lodged a claim for expenses incurred, including repatriation costs for MR who died while travelling overseas.
The insurer declined the claim on the basis that MR failed to comply with his duty to take reasonable care not to make a misrepresentation when he completed a medical assessment for approval of his existing medical conditions (EMC). The insurer says MR misrepresented his health conditions at inception of the policy. It says if the correct health conditions had been disclosed, the insurer would not have accepted the insurance contract.
The complainant says that MR disclosed his known EMC and the insurer granted approval for these conditions. The complainant seeks to have the claim paid.
No. The insurer is not entitled to decline the claim or cancel the approval of existing medical conditions. The insurer has not shown that MR breached his duty to take reasonable care not to make a misrepresentation (duty) regarding the claimed conditions.
Further, the insurer has failed to make available the relevant underwriting guidelines, as well as a statutory declaration from an appropriate representative confirming the application of the guidelines relied on to cancel the approval of the EMC. I am therefore not satisfied that the insurer has established it was prejudiced had MR breached his duty regarding disclosure of his high blood pressure.
Yes. The insurer’s claims handling has caused the complainant stress and inconvenience. The insurer should pay the complainant $2,500 in non-financial loss compensation.
The outcome is fair because the insurer has not established that MR breached his duty and even if he had with regard to his high blood pressure, the insurer has not established the prejudice it suffered. It is therefore fair that the insurer accepts the claim. It is also fair the insurer pays the complainant non-financial loss compensation given the undue stress and anxiety she has experienced under the claim.
This determination is in favour of the complainant.
Should the complainant accept this determination, the insurer is to within 21 days:
No. The insurer is not entitled to decline the claim or cancel the approval of existing medical conditions. The insurer has not shown that MR breached his duty to take reasonable care not to make a misrepresentation (duty) regarding two of the claimed conditions.
Further, the insurer has failed to make available the relevant underwriting guidelines, as well as a statutory declaration from an appropriate representative confirming the application of the guidelines relied on to cancel the approval of the EMC. I am therefore not satisfied that the insurer has established it was prejudiced had MR breached his duty regarding disclosure of his high blood pressure.
The complainant’s policy was issued on 27 March 2023. There is no dispute this policy was obtained wholly, or predominantly, for the complainant’s personal purposes. Therefore, it is a ‘consumer insurance contract’ as defined by the Insurance Contracts Act 1984 (the Act).
As a result, MR had a duty when taking out this policy. This is set out in section 20B of the Act.
To refuse to pay a claim on this basis, the insurer must be able to at least show:
On 27 March 2023 the complainant and MR purchased the policy on the website. MR applied for additional cover for his EMC at the time of inception and completed an online medical assessment.
The insurer provided a preliminary explanation of what it considered to be an Existing Medical Condition prior to the start of the online medical assessment. MR selected ‘Yes’ to declare he had EMC to declare, which then prompted further questions in relation to EMC.
At policy inception, MR was required to nominate the condition they wished to declare. The system nominates several conditions which may to be selected. Further questions are then generated by the system.
MR declared the following medical conditions in his application for EMC cover:
The insurer says that medical records reveal that MR had a history of:
which were not disclosed prior to the policy being issued (Existing Medical Conditions).
The death certificate for MR states that the cause of death was:
The insurer says that these causes of death directly relate to the Existing Medical Conditions noted above that were not disclosed to the insurer.
The complainant says that MR declared his known medical conditions to the best of his ability.
As set out in Section 20B(2) of the Act, whether MR has taken reasonable care not to make a misrepresentation is to be determined with regard to all the relevant circumstances.
Section 20B(3) sets out some factors to take into account. These are:
The complainant says MR contacted the insurer to confirm that hypertrophic cardiomyopathy (HCM) was the correct condition to select when he had obstructive hypertrophic cardiomyopathy (HOCM). The complainant has provided a copy of MR’s phone records showing he dialled a 1300 number of the insurer.
The insurer has been unable to provide a copy of this call recording. In the absence of any evidence to refute this statement from the complainant, I accept it to be truthful. The option of HOCM was not available to be selected from the options presented. MR selected HCM on the advice from the insurer.
The complainant says that he also ticked ‘yes’ to pending surgery. The complainant says that no further questions were asked in relation to the nature of the surgery. She says that had the insurer asked the question, MR would have disclosed that the pending surgery was a septal myomectomy and possibly a mitral valve repair. Surgery was booked for when MR returned from the holiday overseas.
The complainant says that by virtue of disclosing HOCM, MR disclosed mitral valve regurgitation. She says that the mitral valve was affected due to the obstruction caused by the heart muscle thickening (HOCM) and therefore part of the conditions of HOCM.
The complainant has provided a copy of a letter from Dr IN, MR’s cardiothoracic surgeon. Dr IN notes that a mitral valve replacement may not be required if the dynamic obstruction is removed.
The complainant has also provided a copy of a letter from Dr IE, MR’s cardiologist dated 8 March 2023. The letter is addressed to Dr YL, general practitioner, and reports on the investigations that had recently been completed and the findings. Dr IE notes the diagnosis of HOCM, following an MRI which revealed a septal thickness of 24mm and noted moderate mitral regurgitation.
I am satisfied that based on the available medical information, that MR understood that mitral regurgitation is a complication of HOCM. I am therefore not satisfied that the complainant would have known that it was required to be a condition separately disclosed.
Based on what has been provided, I am not satisfied that MR has made a misrepresentation in relation to mitral regurgitation.
The question the insurer asked in the medical assessment was:
Have you ever had any of the following conditions?
- Angina and/or heart attack and/or narrowed arteries of the heart?
- Heart-related breathlessness and/or ankle swelling
- Stroke and/or mini stroke (TIA)
- None of these
MR selected Heart-related breathlessness and/or ankle swelling.
The insurer says that these questions are auto-populated in relation to Ischaemic Heart Disease (IHD).
The insurer says that MR failed to disclose his history of a heart attack when he answered the question. The insurer relies on entries being recorded in MR’s medical history that show ‘septal infarct’:
The insurer says that there are multiple notations that MR suffered from a septal infarct, including in cardiology referrals. Further, the hospital summary includes the reference to NSTEMI despite his angiogram findings saying that there were normal coronary arteries. Accordingly, the insurer says that MR misrepresented that he suffered from IHD.
The complainant disputes that MR suffered from a septal infarct or IHD. She has provided a letter from Dr IE dated 21 February 2024 where he says:
Of note, MR did not have coronary artery disease. He had a coronary angiogram at N Public Hospital on 5 December 2022 which revealed normal coronary arteries.
The complainant says that although MR had elevated troponin levels when he initially presented to N Hospital, neither she or MR were informed that he had suffered a heart attack and that the result of normal coronary arteries had discounted the provisional diagnosis of a heart attack when he initially presented to the hospital with chest pain. The complainant says that this was prior to MR being diagnosed as suffering from HOCM.
Further, the complainant relied on a report from Dr IE dated 10 July 2024 where he says about the raised troponin levels:
This is not uncommon situation and is often not considered a heart attack in layman’s terms which implies blocked coronary arteries but rather belongs to a medical category of troponin elevation with normal coronary arteries which in MR’s case was probably related to his HCM.
The complainant has also provided a letter from Dr AK dated 15 July 2024. Dr AK did not treat MR but is the practice owner who reviewed the clinical records of MR held by the practice where Dr YL was employed. Dr AK notes:
His file entry of ‘Septal Infarct, Myocardial’ was done by Dr YL on 28/6/2019. There is no entry of a consultation on that date (Dr YL saw him for a chest infection on 17/6/2019). Likewise, there is no entry for an investigation (blood test or ECG) on that date, nor any hospital discharge summary or specialist report on that date, to trigger that entry into his medical history. As such, I have to assume that the entry was erroneous (possibly entered into a wrongly opened file). There is no other evidence in our own notes that MR had had an infarct, and his previous and subsequent specialist reviews have likewise not indicated a previous infarct or evidence of ischaemic heart disease.
I note that Prof MF, MR’s previous cardiologist, does not record any history of angina, septal infarct or coronary artery disease in any of the letters to Dr YL dated 15 February 2022, 9 February 2021 and 8 September 2020.
Given the available information, I am satisfied that MR has correctly answered the question regarding IHD. I place greater weight on the complainant’s recollection of what was advised to her and MR by the specialist that he did not have coronary artery disease. There is no information to support that MR was advised that he had suffered a heart attack or a septal infarct.
While the insurer places weight on MR’s clinical notes recording a history of IHD, this is not consistent with what was understood by MR of his condition. Further, there is genuine doubt of the accuracy of him suffering a septal infarct in 2019. This is consistent with a lack of other supporting information, including blood tests, or other tests or any information from his treating cardiologist at the time, Prof MF.
I am therefore satisfied that MR did not breach his duty by failing to disclose a history of IHD.
The insurer says that MR made a misrepresentation as he did not advise that he suffered from high blood pressure, also known as hypertension (HT).
The complainant does not dispute that MR suffered from HT but says that his condition was stable and treated with medication. She also says that a large portion of the population suffer from HT and therefore does not understand why it needs to be listed as an EMC.
Prior to commencing the questionnaire, the insurer stated that an EMC included:
- taking prescription or over the counter medication to treat, control or prevent their condition? Eg insulin for diabetes, aspirin for strokes, Paracetamol for back pain
The EMC questionnaire required MR to:
Please enter the medical condition
And then to hit ‘Search’.
Under ‘Search’ it says:
If you would like to exit, please press finish.
I am satisfied that HT is an EMC as MR was prescribed medication to treat his blood pressure.
However, I am not satisfied that the insurer has established that MR has breached his duty not to make a misrepresentation regarding HT. The insurer has not provided any information that would support that MR made a false statement. The insurer has not provided any evidence by way of screenshots of the application process in support of their position that MR declared that he suffered from no further EMC. In those circumstances, silence does not amount to a misrepresentation.
I am satisfied that the medical history shows that MR had HT. However, for the reasons discussed above, I am not satisfied that MR was required to disclose his mitral valve regurgitation and IHD.
While MR did suffer from HT, I am not satisfied that MR has breached the duty.
Whether a person has failed to take reasonable care is to be determined with regard to all relevant circumstances including but not limited to how clear and specific the questions asked by the insurer were.
Having regard to all the circumstances, I do not accept MR breached the duty to take reasonable care not to make a misrepresentation.
The insurer has provided a definition of an EMC which includes ‘taking prescription or over the counter medication to treat, control or prevent their condition’, However, the insurer has not established that MR has made a misrepresentation by providing an incorrect answer.
HT is not an obviously minor or trivial condition; however, MR was not asked whether he suffered from HT and did not deny he had suffered HT. The question is not whether he failed to disclose HT, but whether he made a misrepresentation about it.
Prior to completing the questionnaire, under the explanation of an EMC, it notes that some medical conditions are automatically included. There is a hyperlink. However, the insurer has not provided a further explanation of what is included in this link. I am therefore not satisfied that the question about the EMC is clear and specific. In any case, the complainant answered ’Yes’ to the question about EMC, and that answer was correct.
It is not sufficient for the insurer to ask the insured to declare all medical conditions. The insurer is required to ask a specific question to establish whether an insured has made a misrepresentation. That is, whether the insured did knowingly provide an incorrect answer to the question.
MR did not have a positive obligation to disclose HT but a duty not to make a misrepresentation in relation to any specific question about HT.
Although I am not satisfied that MR has breached the duty, I note that even if I were satisfied that MR had breached his duty of, I am not satisfied that the insurer has established prejudice.
Section 28 of the Act describes the rights of the insurer where there has been a breach of the duty to take reasonable care not to make a misrepresentation. Section 28(3) says where a person has breached their duty to take reasonable care not to make a misrepresentation, the insurer’s liability for a claim may be reduced to the extent the insurer was prejudiced. This returns the insurer to a position in which it would have been but for the breach.
When considering if an insurer is entitled to reduce its liability under section 28 of the Act it is necessary to consider what the insurer would have done if the relevant failure had not occurred. The insurer has the onus to show what it would have done and the extent of any prejudice it has suffered as a result. The standard the insurer must meet is the balance of probabilities.
The insurer has provided a copy of the ‘Test EMC Assessment’. The insurer says that this assessment assumes MR had disclosed IHD, mitral valve regurgitation and HT. The assessment says that the insurer would not have approved cover for the following conditions:
Further, the test EMC assessment says that MR would not be covered for any claims arising from those conditions or any directly or indirectly related conditions which include (but not be limited to) the following conditions:
The insurer says:
The insurer says in their response to AFCA that if MR had declared HT at inception, they would have declined cover. The insurer refers to the Test EMC Assessment and says:
Hypothetically, high blood pressure on its own would not preclude cover, however taking MR’s medical history as a whole into account, cover was declined, as shown in the Test medical Assessment.
However, I am not satisfied that the insurer has established this. The evidence from EMC was based on all three conditions of HT, IHD and mitral regurgitation being included. There is no information to show that if only HT (which is stable with prescribed medication) had been disclosed, would not result in approval for MR’s EMC. MR had already disclosed significant health issues of HCM (and arguably HCOM) which required surgery, cardiomyopathy with heart failure, impaired contractility and arrhythmias. These are significant health issues, yet approval for EMC had been given.
The insurer has not provided any evidence by way of underwriting guidelines or statutory declarations from their underwriters in support of their claim that approval would not be given had MR disclosed his HT. I am therefore not satisfied that the insurer has established it was prejudiced by MR’s breach of his duty.
There is not dispute that MR died because of his disclosed EMC.
Dr IE notes:
…I feel that the most likely cause of death is either an arrhythmogenic death from his HOCM or acute pulmonary oedema secondary to significant LVOT obstructions, both possibilities would be related to his HOCM.
As I am satisfied that the insurer has not established that the EMC would not have been approved had MR complied with his duty and disclosed his high blood pressure. It is required to meet the complainant’s claim in accordance with its policy terms.
The insurer is to pay interest in accordance with section 57 of the Act from the date of the paid invoice, until payment of the claim to the complainant.
Yes. The insurer’s claims handling has caused the complainant stress and inconvenience. The insurer should pay the complainant $2,500 in non-financial loss compensation.
Under our Rules, AFCA can award up to $5,400 compensation for non-financial loss. This must relate to poor claims handling or other actions of the insurer which cause an unusual degree of stress, delay, or inconvenience.
We will not award compensation for the ordinary degree of inconvenience involved in making a claim.
The complainant has referred to several occasions where the insurer’s claims handling has caused her an unusual degree of stress and inconvenience. She refers to delays in receiving communication from the insurer, particularly following the claim being declined. She also says that she received emails addressed to MR which she says caused her additional distress.
I am satisfied that the insurer’s claims handling was at times poor which has caused the complainant an unusual degree of stress and inconvenience. In all the circumstances, it is fair that the insurer pays the complainant $2,500 in non-financial loss compensation.
The outcome is fair because the insurer has not established that MR breached his duty and even if he had with regard to his high blood pressure, the insurer has not established the prejudice it suffered. It is therefore fair that the insurer accepts the claim. It is also fair the insurer pays the complainant non-financial loss compensation given the undue stress and anxiety she has experienced under the claim.
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. I have reviewed and considered all of the information the parties have provided.
While the parties have raised a number of issues in their submissions, I have restricted this determination to the issues that are relevant to the outcome.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
Section | Terms |
20B – The insured’s duty to take reasonable care not to make a misrepresentation |
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20C – Warranties of existing facts to be representations | A statement with respect to the existence of a state of affairs that is:
does not have effect as a warranty but has effect as though it were a statement made to the insurer by the insured during the negotiations for the contract but before it was entered into. |
27AA – Meaning of relevant failure |
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28 – General insurance | …
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60 – Cancellation of contracts of general insurance |
the insurer may cancel the contract. |
63 – Cancellation of contracts of insurance void | (1) Except as provided by this Act, an insurer must not cancel a contract of general insurance. … (3) Any purported cancellation of a contract of insurance in contravention of subsection (1) or (2) is of no effect.
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