HCF Life's pre-existing conditions term could mislead public: Federal Court
By Eliza Bavin
The Federal Court has ruled in ASIC's favour, finding that a 'pre-existing condition' term in certain HCF Life policies was liable to mislead the public.
The term was used in three contracts issued under HCF Life's 'Recover' range of products.
ASIC alleged that the term could mislead the public as the term purported to allow HCF Life to deny life insurance coverage if a customer did not disclose a pre-existing condition before entering the contract, and a medical practitioner subsequently formed an opinion that signs or symptoms of the condition existed prior to the customer entering the contract, even if a diagnosis had not been made.
ASIC also alleged the term suggested that HCF Life could deny coverage even if the customer was not aware of the pre-existing condition.
Additionally, ASIC said section 47 of the Insurance Contracts Act (ICA) prevents insurers from excluding coverage for non-disclosure of a pre-existing condition if the customer was not aware of it when taking out the insurance.
Justice Jackman said that the "ordinary and reasonable reader would be ignorant of the potential effect of s47 of the ICA, and nothing in the Recover Cover PDSs adverts to the possibility that it may preclude HCF Life from relying upon the Pre-Existing Condition Terms in particular circumstances".
ASIC deputy chair Sarah Court says consumers should rightly expect insurers will provide accurate information to them about their rights.
"Consumers rely on this information to make insurance claims, often in trying personal circumstances. By including a term that was liable to mislead consumers and that purported to give HCF a broader right to deny coverage than was the case, HCF Life misled consumers about their rights," Court says.
ASIC also alleged that the term was an unfair contract term under the Australian Securities and Investments Commission Act 2001, however Justice Jackman dismissed that part of ASIC's case. ASIC says it will consider this decision.
Despite that, ASIC says it will seek penalties for misleading conduct. The matter will return to court for case management on November 8, 2024.
HCF Life replaced the 'pre-existing condition' term in its life insurance products on November 9, 2023.
In April 2021, the unfair contract terms regime was expanded to include insurance contracts, arising from a recommendation of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.
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