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Insurance – disability cover – non-disclosure of ACC claims – failure to follow up disclosure of information
In February 2005 Mr C fell from a balcony, fracturing his right ankle and dislocating his right shoulder. His injuries prevented him returning to his work as a skilled tradesman for about three and a half months.
Shortly after his discharge from hospital, Mr C contacted his bank to make a claim under his loan protection insurance policy for a temporary disability benefit. He assumed that, after a 30 day stand-down period, his insurance cover would pay his loan payments of just over $1,000 per month.
However, a few weeks later, the bank advised Mr C that it was declining his claim because, in its estimation, he had not disclosed previous ACC claims of relevance to his current situation. The bank also advised Mr C that his insurance cover had been reassessed, and that it was now removing the disability benefit from his policy. Mr C complained to my office.
It became apparent that Mr C had made approximately 34 ACC claims since 1992, the majority of which were for minor injuries such as a foreign body in the eye or ear and infected scratches. With the exception of a shoulder injury in 1998, none of these incidents had resulted in Mr C having to take time off work. Mr C was also an active sportsman, with many of his minor injuries having been sustained while playing sport. It seems they were recorded as claims solely because he had received medical attention.
Mr C said he had not thought to mention these minor claims either when applying for insurance, or when recently completing an updated health questionnaire, because he had interpreted the question in the bank’s proposal form, enquiring whether he had ever made or was intending to make a claim against the ACC, as asking whether he had ever had to take a case against the ACC for a declined claim.
For its part, the bank maintained that, if Mr C had disclosed all his ACC claims, it would have been particularly concerned about the 1998 shoulder injury, as well as about a knee injury in 2000. The bank stated that, given Mr C’s occupation, it would no longer have been able to offer him disability cover under such circumstances.
However, evidence emerged which showed that, in the context of a conversation between Mr C and a bank staff member during which Mr C had been asked a series of questions about his health (recorded in the questionnaire mentioned above), Mr C had mentioned the knee injury suffered in 2000. This raised the question of whether the bank staff member should then have questioned Mr C more carefully and in more detail about his “no” response to the question about earlier ACC claims.
Thus, whilst the law is clear that the non-disclosure (however innocent) of relevant information is almost always a valid reason for declining an insurance claim, this case was not quite so straightforward. The relevance of the undisclosed information to the claim in question required further examination, as did the question of whether the bank should have made further enquiries of Mr C, given that it had been informed of at least one earlier ACC claim.
My investigator raised these questions with the bank, inviting it to reconsider its position on this case. After careful consideration, the bank agreed to offer Mr C a sum of $2,000 in settlement of his complaint. About $650 of this amount was a refund of the disability portion of the insurance premiums he had paid over the years, with the balance being an ex gratia or goodwill payment. After consulting with my office, Mr C agreed to accept the bank’s offer, and the complaint was settled.