The dispute arose when the complainant made a claim on her total and permanent disability (TPD) policy for major depression. In response, MLC (the insurer) decided to amend the policy by adding an exclusion for mental illness, effectively denying the claim.
The insurer argued that it was within its right to add the exclusion because the complainant had misrepresented her mental health history when applying for the policy in March 2015.
Upon reviewing the application form, it was discovered that the complainant failed to disclose her use of anti-depressant medication and provided incorrect answers to questions regarding her mental health.
Misrepresentation of Mental Health
One of the questions on the application form asked whether the complainant had ever experienced or sought advice for anxiety, stress, or sleeplessness. The complainant answered "No," despite having a history of depression and taking medication for it.
The Australian Financial Complaints Authority (AFCA) determined that this answer was a misrepresentation.
The complainant also provided a false answer to another question regarding the use of medications in the last five years. Despite her two-year history of depression and recent medication use, she answered "No" to the question.
AFCA concluded that these misrepresentations were significant in the insurer's decision to add the exclusion for mental illness.
Ruling in Favor of the Insurer
The complainant argued that she was unaware of her depression diagnosis and believed her medication was intended to improve her mood, rather than treat depression.
However, AFCA rejected her explanation, noting that she had sought treatment for "anxiety-related condition" and had taken medication to improve her mood.
AFCA ruled in favor of MLC, stating that the insurer demonstrated the intent to add a mental illness exclusion even without the complainant's misrepresentations. The ombudsman also noted that other insurers would have made similar decisions.
