Life insurance update: Fraudulent non-disclosure

RELEVANT BACKGROUND

In March 2010, the plaintiff’s de facto partner (the deceased) applied for life insurance with the insurer defendant. During the application process, the deceased was asked a series of underwriting questions regarding his health and lifestyle to determine his eligibility for cover including his height and weight.

The deceased stated his height and relevantly stated that his weight was between 109 and 110 kilograms. At the end of answering these questions, the deceased was informed of his duty of disclosure and that the defendant would rely on his answers when determining whether to grant him insurance. Based on the answers provided to the health and lifestyle questions, the deceased’s application was accepted and an insurance policy was issued.

In June 2013, the deceased died by his own hand. The autopsy recorded the deceased’s weight as 183 kilograms.

Following the deceased's death, the plaintiff made a claim for the proceeds of the life insurance policy. The claim was denied by the defendant pursuant to section 29(2) of the Insurance Contracts Act 1984 (Cth), which entitles an insurer to deny a policy if the life insured made a false representation to the insurer. Section 29(2) provides that "If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract".

Evidence was obtained by the defendant that the deceased, on 22 December 2008, attended a hospital complaining of severe lower back pain. The deceased’s weight was recorded on two records as approximately 180 kilograms and greater than 200 kilograms.

Following the issuing of subpoenas, photographs were obtained of the deceased which all showed him to be a very large man. The plaintiff produced a number of photos of the deceased which all showed the deceased to have been a very large man. No photographs were produced by the plaintiff which showed the deceased looking markedly slimmer during the period between 2009 and 2010.

Various invoices by way of subpoena, were obtained from Kingsize Big and Tall relating to clothing purchases made by the deceased and the plaintiff on behalf of the deceased. The purchases made between 2010 and 2012 were for clothing which was significantly larger than a gentleman who weighs between 109 and 110 kilograms would wear.

The defendant alleged that at the time of the inception of the policy, the deceased made a fraudulent misrepresentation as to his weight and accordingly it may avoid the contract. The alleged fraudulent misrepresentation made by the deceased was his statement in March 2010 to an employee of the defendant that he weighed about 109 or 110 kilograms.

HEARING

At the hearing, the plaintiff's case was that the deceased underwent a major lifestyle change, without medical intervention, after his admission to hospital in December 2008. In particular, the plaintiff gave evidence that the deceased changed his diet and commenced a regime of exercise that purportedly resulted in the loss of a great deal of weight. The plaintiff gave evidence that the deceased had lost a lot of weight after December 2008, but she was not aware of exactly how much weight had been lost. The plaintiff admitted that, by 2010, the diet and exercise regime was not maintainable and the deceased reverted to his old habits which in turn resulted in a weight increase.

The plaintiff alleged that the defendant could not prove a fraudulent misrepresentation by the deceased as the defendant was required to prove two allegations:

(a)     that the deceased, with an absence of actual and honest belief in the truth of his representation about his weight, made a deliberate decision to mislead or conceal that weight from the defendant by knowingly misrepresenting his weight; and

(b)     that the deceased did so because he knew that if he disclosed his true weight, he may not have been offered cover at all or only on special terms.

The plaintiff had a Facebook account which was reviewed by the defendant. The Facebook account contained entries from 2007 to 2015 but none for 2010, which was the year when the policy was incepted. The defence sought the production of the plaintiff's mobile phone to enable a computer expert to analyse the plaintiff's Facebook account to determine if the Facebook entries for 2010 could be retrieved. These entries appeared to be missing and the plaintiff could not provide any explanation for this omission. In cross‑examination, the defendant's counsel put to the plaintiff that she had intentionally deleted all Facebook posts for 2010. The plaintiff denied this allegation. The defence sought to obtain photographs of the deceased in 2010 and it sought to identify the dates of various photographs of the deceased.

The defendant sought and was granted an order pursuant to rule 37.01 of the County Court Civil Procedure Rules 2008 (Vic) for the inspection, detection, custody or preservation of property in the possession, custody or power of the plaintiff, namely:

(a)     mobile telephone;

(b)     digital camera;

(c)     laptop computer;

(d)     PIN numbers for mobile telephones;

(e)     electronic storage memory sticks, memory card for digital camera; and

(f)      user credentials including user name and password for any iCloud, Dropbox, Google or Facebook accounts.

The forensic analysis of the plaintiff’s Facebook page revealed photographs of the deceased and the plaintiff. In particular, dates could be placed on various photographs of the deceased. One of the photographs obtained from the plaintiff’s Facebook account was from 25 December 2009, approximately 3 months before the inception of the policy.

Coish J accepted evidence given by an advanced accredited practising dietician in relation to the weight of the deceased in various photographs and the likelihood of the deceased reducing his weight between December 2008 and March 2010, by in excess of 90 kilograms, without medical intervention.

His Honour referred to the duty of disclosure read to the deceased at the end of the application process. Coish J stated that the deceased was told by a representative of the defendant that any personal statement he made would form the basis of the contract of insurance and he was told that he must be honest when providing information. His Honour stated that whilst the deceased was not specifically told of the defendant’s policies in respect of weight and BMI, the deceased knew he had to answer all questions honestly.

Coish J stated that “having regard to the enormous disparity between the deceased's stated weight of 109, 110 kilograms and actual weight of approximately 180 to 200 kilograms and knowing that this was an application for life insurance I am satisfied on the balance of probabilities that the deceased made the misrepresentation and did so because he knew that if he disclosed his true weight he may not have been offered cover at all or only on special terms. I am also satisfied that the conduct of the deceased in misstating his weight did carry with it the requisite degree of dishonesty or moral turpitude”.

Coish J found that the defendant had proven the defence of fraudulent misrepresentation and accordingly, the proceeding was dismissed with costs.

William Roberts acted for the defendant insurer in these proceedings.