The Federal Court has found that a ‘pre-existing condition’ term in certain HCF Life Insurance Company Pty Ltd (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 because:

it purported to allow HCF Life to deny 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 into the contract, even if a diagnosis had not been made
it suggested that HCF Life could deny coverage even if the customer was not aware of the pre-existing condition when entering into the ‘insurance contract and a reasonable person in the circumstances would not have been aware of the condition, and
section 47 of the Insurance Contacts Act prevents insurers from excluding coverage for non-disclosure of a pre-existing condition where the customer was unaware of the condition when taking out the insurance, and a reasonable person in the circumstances could not be expected to have been aware of the condition.
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 said, ‘Consumers rightly expect that 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.’

ASIC also alleged that the term was an unfair contract term under the Australian Securities and Investments Commission Act 2001, with Justice Jackman dismissing that part of ASIC’s case.

ASIC will consider the Court’s decision.

ASIC will seek penalties for misleading conduct. The matter will return to Court for case management on 8 November 2024.