A recent decision of the Victorian Court of Appeal in Westpac Life Insurance Services Limited v Guirgis  VSCA 239, demonstrates once again that life insurers will face a high evidentiary burden when seeking to rely upon section 29(2) of the Insurance Contracts Act 1984 (Cth) (ICA) to avoid a policy of insurance on the basis of fraudulent non-disclosure and/or misrepresentation.
Was insured aware of her fibromyalgia diagnosis?
In her application for income protection insurance with Westpac in September 2007, Ms Guirgis failed to disclose her diagnosis of, amongst other things such as irritable bowel syndrome, fibromyalgia. This was despite Ms Guirgis seeing at least two specialist rheumatologists for neck and shoulder pain, for which she had treatment.
Ms Guirgis gave evidence that prior to completing the application, no-one had mentioned fibromyalgia to her. However, Ms Guirgis did disclose in her application a consultation with Dr Andrew Gibson, who was acknowledged by the primary judge to be a specialist rheumatologist practising at the Cabrini Hospital.
Court of Appeal agrees with first instance decision
In October 2011, Ms Guirgis made a claim upon her policy which was ultimately denied by Westpac in April 2012. The claim was denied on the basis that Ms Guirgis had failed to comply with her duty of disclosure under section 21 of the ICA.
The primary decision was handed down in Ms Guirgis' favour, which was then appealed.
Ultimately, the Court of Appeal agreed with the primary judge, who concluded that while it was accepted that fibromyalgia was mentioned by Dr Feletar (described as a "local" rheumatologist) and Dr Gibson to Ms Guirgis, the primary judge could not conclude that the respondent "was aware of the fibromyalgia diagnosis in August 2007".
The Court of Appeal also found that Ms Guirgis would not have disclosed that she had recently seen Dr Gibson if she wished to mislead the insurer as to the existence of fibromyalgia.
Lack of written guidelines regarding availability of insurance if fibromyalgia disclosed
With respect to the question of whether Westpac would have entered into the contract even if Ms Guirgis had not failed to comply with the duty of disclosure (as required by section 29(1)(c) of the ICA), the Court of Appeal concluded that although Westpac gave evidence that if Ms Guirgis had disclosed her fibromyalgia, no policy would have been issued, this evidence was based upon a written guideline that was never produced.
This was a gap in the applicant’s proof and found by the Court of Appeal to be "a failure by [Westpac] to prove the very thing [it] sought to prove - namely, that its written guidelines would have prevented the writing of the policy" [at (56)].
No specific question regarding fibromyalgia in questionnaire sent to general practitioner
The Court of Appeal also noted that the "personal medical attendant report" form that the applicant sent to Ms Guirgis' general practitioner before the policy was issued, did not make reference to fibromyalgia.
The court went on to say that if fibromyalgia was so serious as to mandate no policy being written, then there should be a question dealing with fibromyalgia in the questionnaire.
The absence of such a question, coupled with Westpac's failure to produce the underwriting guidelines, "almost mandated a finding unfavourable to [Westpac] on the issue of whether it had established that it would not have entered into the policy had fibromyalgia been disclosed" [at (58)].
Lessons for life insurers seeking to avoid a policy for fraudulent non-disclosure
This case serves as a useful reminder for life insurers that when seeking to rely on section 29(2) to avoid a policy for fraudulent non-disclosure, an insurer needs to:
- prove that the insured actually knew, or ought to have been aware, of the matters that the insurer says should have been disclosed
- prove what it would have done if the matters had been disclosed, including being able to provide written evidence to demonstrate how the insurer's underwriting practices and guidelines would have operated had the non-disclosure or misrepresentation not occurred
- consider that if certain matters (e.g. a medical diagnosis) are serious enough to warrant insurers not accepting a risk, whether these matters should be specifically included in the standard medical and/or general questionnaire
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.