TAL Life Limited had breached its duty to act with utmost good faith under the Insurance Contracts Act, according to the Federal Court of Australia.
In the 62-page ruling in Australian Securities & Investments Commission v TAL Life Limited, Chief Justice Allsop declared: “TAL failed to act towards the second insured with decency and fairness in reaching its decision without giving the second insured a proper opportunity to put material to TAL.
“I also consider, though it can be seen as part of the same breach, that TAL should have told the second insured of the investigation and their concerns and that the failure to do so in the circumstances was likewise failing to treat her with decency and fairness. TAL failed thereby to act towards the second insured with the utmost good faith.”
The chief justice was referring to TAL’s handling of a 2014 claim made under an income protection policy by a customer who was diagnosed with cancer.
According to ASIC – which commenced proceedings against TAL in December 2019, following an investigation arising from a Financial Services Royal Commission referral – the insurer avoided the policy on the basis that the insured had failed to disclose an unrelated prior medical history.
In a release today, the regulator noted: “In his judgement, Chief Justice Allsop found that at no time prior to avoiding the policy did TAL: tell the consumer it was considering her medical history; tell her that it was examining her medical history to undertake a ‘policy validity investigation’; ask her to address any concerns as to non-disclosure or misrepresentation in her answers; or make any additional enquiries of her medical professionals to whom the consumer had been referred about the contents of the medical records and about her condition.
“His Honour also found that TAL breached its duty to act in good faith by telling the consumer that she herself had acted without good faith and by threatening to recover $24,000 in payments that had been made to her after the commencement of TAL’s investigation.”
Commenting on the outcome, ASIC Commissioner Sean Hughes said they expect those involved in handling insurance claims to act consistently with commercial standards of decency and fairness. This, he stressed, ensures that claims are handled in a fair, transparent, and timely manner.
“These stories matter not just to individual policyholders, but to the reputation of the market as a whole,” added Hughes. “The community expects to be treated fairly and with dignity and respect by their insurers. The duty of utmost good faith is a long-standing core principle in the relationship insurers have with their policyholders. It fundamentally underpins the trust which consumers place in their insurers.”
