Life Insurance policies routinely exclude pre-existing conditions from coverage, but s 47 of the Insurance Contracts Act 1984 ( Cth) provides that insurers cannot rely on those exclusions where, “at the time when the policy was entered into, the insured was not aware of, and a reasonable person in the circumstances could not be expected to have been aware of, the sickness or disability”.
Until August 2019, HCF adopted definitions of pre-existing condition that reflected the language of s 47, but internal HCF research and ostensibly striving for a “plain English” version of the definition intervened1. HCF adopted at that time a definition that excluded cover where a medical practitioner is of the opinion that signs or symptoms of the relevant condition existed before policy inception. HCF did not make any reference to or explain the existence or effect of s 47.
Section 47 “harks from the lost golden era in which Commonwealth statutes were still written in English”2. It was (and is) clear in meaning and effect. It. HCF’s new definition was not. It suggested that a post policy inception medical opinion, that signs or symptoms of the relevant condition existed pre-policy, excluded cover. In fact cover can only be excluded under s 47 where the insured was not aware of, and a reasonable person in the circumstances could not be expected to have been aware of, the condition. The existence of a symptom does not equate to the existence of a condition3.
On 28 October 2024, Justice Jackman in the Federal Court unsurprisingly held in ASIC v HCF Life Insurance Company Pty Limited [20 24] F CA 1240 that, by distributing product disclosure statements and entering into policies with the new pre-existing condition terms, HCF engaged in conduct that was liable to mislead the public as to the nature, characteristics and suitability of financial services in contravention of s 12DF of the Australian Securities and Investments Commission Act 2001 ( Cth). At the heart of his Honour’s judgment was the following:
“95. Consider the following example provided by Fletcher Moulton LJ in Joel v Law Union and Crown Insurance Company [1980] 2 KB 863 at 884: Let me take an example. I will suppose that a man has, as is the case with most of us, occasionally had a headache. It may be that a particular one of those headaches would have told a brain specialist of hidden mischief. But to the man it was an ordinary headache undistinguishable from the rest.
96 Suppose that a registered medical practitioner reasonably forms and states an opinion that headaches experienced by an insured in March were symptoms of a cancer subsequently diagnosed in May. If the insured purchased a Recover Cover Product in April, the cancer would be a Pre-Existing Condition as defined — a registered medical practitioner is of the opinion that symptoms of the illness existed before the Cover Commencement Date. But unless the insured was aware (or a reasonable person in his or her circumstances could be expected to have been aware) of the cancer at the time of contracting in April, s 47 would preclude HCF Life from relying upon the Pre-Existing Condition Term to deny a claim. The term is partially unenforceable.”
HCF had a small pyrrhic victory in resisting an additional finding that the offending terms were also unfair contract terms within the meaning of s 12BF of the ASIC Act , but that was only because the ameliorating effect of s 47 was (and is) that the offending term did not in fact “cause a significant imbalance in the parties’ rights and obligations”4.
1 ASIC v HCF Life Insurance Company Pty Limited [2024] FCA 1240, Jackman J at [28]-[29]
2 Edser v QSuper Board [2021] FCA 1437, Perram J at [74]
3 Australian Casualty and Life Ltd v Hall (1999) 151 FLR 360 at [73] Shepherdson J, McMurdo P & Thomas JA
4 ASIC v HCF Life Insurance Company Pty Limited [2024] FCA 1240, Jackman J at [144]
