3.3 What the case study showed

3.3.1Heart attackdefinition and advertising

Both CBA and Ms Troup rightly acknowledged that, by failing to update itsheart attackdefinition in 2012 and in 2014 to accord with the medical definition that was accepted at that time, CommInsure engaged in conduct that fell below community standards and expectations.[1]

The evidence demonstrated that this conduct was attributable, at least in part, to CommInsure not adequately taking into account the interests of customers in making those decisions, and instead being motivated by commercial considerations. Ms Troup acknowledged this to be the case.[2]

As noted above, Ms Troup accepted that the two web pages and two brochures made available by CommInsure concerning its trauma policies were misleading.[3] In its submissions, CBA rightly accepted that, by publishing these documents without any prominent qualification that only heart attacks of specified severity were covered by CommInsure’s trauma policies, CommInsure contravened section 12DA of the ASIC Act, and therefore engaged in misconduct.[4] CBA also rightly accepted that, by publishing the web pages and brochures, it may have contravened section 12DB of the ASIC Act.[5]

The matter having already been investigated by ASIC, it is not necessary for me to make any referral.

3.3.2Individual cases

In relation to the insured who suffered a heart attack, both Ms Troup and CBA rightly accepted that CBA’s conduct in withholding part of Dr Carless’s medical opinion from FOS, and saying that it declined to obtain or provide such an opinion, misled FOS.[6] CBA acknowledged that this constituted misconduct.[7] Ms Troup conceded that, by engaging in this conduct, CBA had failed to be open and transparent in its dealings with FOS and had acted inconsistently both with ASIC Regulatory Guide 139 and with FOS’s terms of reference.[8]

Both Ms Troup and CBA also rightly accepted that CBA contravened clause 7.2 of FOS’s Terms of Reference by declining to provide information to FOS about CBA’s decision to backdate the updatedheart attackdefinition to May 2014.[9] CBA acknowledged that this constituted misconduct.[10]

These matters having already been investigated by FOS and ASIC, it is not necessary for me to make any referral.

In relation to the insured who suffered from breast cancer, CBA accepted that, in failing to give adequate consideration to the differences in medical opinions concerning the nature of the insured’s surgery, and failing to escalate her claim for review, CBA’s conduct fell below community standards and expectations.[11]

In her evidence, Ms Troup went further, and – as noted above –acknowledged that CommInsure had breached its duty to act towards the insured with the utmost good faith, by denying her claim in circumstances where CommInsure:[12]

  • relied on a definition of cancer that was, at the relevant time, about 18 years old;
  • imposed limitations on that definition that were not expressed in the policy documents; and
  • did not account for the way in which the insured had been treated by her doctors and the opinion expressed by those doctors.

Despite Ms Troup’s acknowledgment, CBA did not accept in its submissions that CommInsure had breached its duty of utmost good faith in handling the insured’s claim.[13] CBA contended that, to establish a breach of that duty, it was necessary to demonstrate that CommInsure had engaged in conduct that was capricious or unreasonable.[14] It went on to say that there was no evidence that CommInsure acted capriciously, unreasonably, or less than honestly towards the insured.[15]

It has been said that the touchstone of the duty of utmost good faith is to act, consistently with commercial standards of fairness and decency, with due regard to the interests of the insured.[16] By declining the insured’s claim in the circumstances referred to above, it is arguable that CommInsure failed to act with due regard to the interests of the insured. It is also arguable that CommInsure failed to act reasonably. Accordingly, I consider that CommInsure may have breached its obligation under section 13 of the Insurance Contracts Act 1984 (Cth) (the Insurance Contracts Act) to act towards the insured with the utmost good faith.

I refer CommInsure’s conduct to ASIC, pursuant to paragraph (a) of the Commission’s Terms of Reference, for ASIC to consider what action it can and should take.

In relation to this insured, CBA also rightly accepted that its failure to respond to FOS within the required time or request an extension of time in connection with the dispute was conduct that fell below community standards and expectations.[17]

3.3.3Effectiveness of mechanisms for redress

In both of the specific cases considered in this case study, there were aspects of CBA’s dealings with FOS that were concerning.

In the case of the first insured, who suffered from a heart attack, Ms Troup accepted that CBA misled FOS, made inappropriate challenges to its jurisdiction, and failed to provide information requested by FOS in breach of FOS’s Terms of Reference. In the case of the second insured, who suffered from breast cancer, CBA failed to respond to FOS within the required time, without providing an explanation or requesting an extension of time.

External dispute resolution (EDR) schemes like FOS are an important mechanism for redress for consumers in their dealings with insurance companies. When insurance companies fail to be open, transparent and responsive in their dealings with FOS, it undermines the effectiveness of EDR mechanisms as a mechanism for redress.


[1] CBA, Module 6 Case Study Submission, 10 [36]; Transcript, Helen Troup, 12 September 2018, 55934.

[2] Transcript, Helen Troup, 12 September 2018, 5605, 5609.

[3] Transcript, Helen Troup, 13 September 2018, 5621–4.

[4] CBA, Module 6 Case Study Submission, 6 [20].

[5] CBA, Module 6 Case Study Submission, 7 [23].

[6] CBA, Module 6 Case Study Submission, 5 [13]; Transcript, Helen Troup, 12 September 2018, 55645.

[7] CBA, Module 6 Case Study Submission, 5 [13].

[8] Transcript, Helen Troup, 12 September 2018, 5570.

[9] CBA, Module 6 Case Study Submission, 5 [16]; Transcript, Helen Troup, 12 September 2018, 5575.

[10] CBA, Module 6 Case Study Submission, 5 [16].

[11] CBA, Module 6 Case Study Submission, 9 [31].

[12] Transcript, Helen Troup, 13 September 2018, 56456.

[13] CBA, Module 6 Case Study Submission, 9 [32]–[33].

[14] CBA, Module 6 Case Study Submission, 9 [32]. See TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439, 452 [49] (Leeming JA).

[15] CBA, Module 6 Case Study Submission, 9 [33].

[16] See CGU Insurance Ltd v AMP Financial Planning Pty Ltd (2007) 235 CLR 1, 12 [15] (Gleeson CJ and Crennan J).

[17] CBA, Module 6 Case Study Submission, 11 [43].

79 thoughts on “3.3 What the case study showed”

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