4.2.1The first insured
The first insured applied for an income protection policy from TAL in February 2009.[1] In the online application form that she completed, she was asked a number of questions about her personal history. One of those questions asked whether she had, or had ever had, ‘depression, anxiety, panic attacks, stress, psychosis, schizophrenia, bipolar disorder, attempted suicide, chronic fatigue, postnatal depression or any other mental or nervous disorder’.[2] She answered ‘no’.[3] TAL offered the insured income protection cover, which she accepted.[4]
In May 2010, the insured made a claim under her policy for stress-induced depression and anxiety, which was tied to circumstances at her workplace.[5] Along with her claim form, the insured provided TAL with a letter from her GP, which explained that she had a generalised anxiety disorder that prevented her from working, and indicated that her condition was a ‘new onset illness’.[6]
Pursuant to an authority provided by the insured, TAL began bringing in her medical records, and records about a related workers’ compensation claim.[7] Ms van Eeden accepted that until 2013, it was TAL’s practice to bring in extensive medical information about a claimant for the purpose of determining whether the policy could be avoided on the basis of non-disclosure.[8] She agreed that this practice was not acceptable.[9] In September 2016, TAL had introduced a formal guideline relating to investigations. Under this guideline, TAL authorised case managers to undertake a ‘general review’ even where there were ‘no inconsistencies identified’ between the underwriting disclosures and the claim information, ‘to ensure there [was] no adverse non-disclosure’.[10] Ms van Eeden conceded that these reviews amounted to ‘fishing expeditions’ by case managers,[11] and that TAL had engaged in a ‘fishing expedition’ in relation to this insured’s claim.[12]
Based on the information obtained by the case manager, the case manager formed the view that the insured may have failed to disclose a pre-existing history of ‘work-related stress’ when applying for her policy, and answered the ‘mental health’ question inaccurately.[13] Ms van Eeden did not agree with this assessment.[14] Despite the insured’s attempts to address TAL’s concerns,[15] TAL relied on section 29(3) of the Insurance Contracts Act to avoid the policy, on the basis that the insured had breached her duty of disclosure and had made a misrepresentation.[16]
The insured applied to TAL for internal review of the decision.[17] In November 2010, TAL’s internal dispute resolution (IDR) team confirmed the initial decision.[18] Upon reviewing the letter that TAL’s IDR team sent to the insured, Ms van Eeden agreed that the IDR team had not seriously engaged with the insured’s request for internal review, and that the letter merely reiterated the claims team’s decision.[19]
In February 2011, the insured lodged a complaint with FOS about the avoidance of her policy.[20] As part of this process, the insured provided extensive medical material to TAL.[21] Ms van Eeden accepted that this material provided a comprehensive response to the allegations being put by TAL against the insured.[22] Despite this, TAL continued to defend the FOS dispute.[23]
On 5 October 2012, more than two years after the insured had made her claim to TAL, FOS delivered a recommendation in favour of the insured, finding that TAL was not entitled to avoid her policy.[24] TAL rejected the Recommendation.[25] Ms van Eeden conceded that this decision was inappropriate.[26] FOS later delivered a determination in favour of the insured,[27] directing TAL to reinstate her policy and to pay her benefits, with interest.[28]
Following this, TAL did a number of things that were inconsistent with the determination, including:
- requesting that the insured repay premiums that TAL had previously refunded in order for her claim to be assessed;[29]
- failing to promptly assess all aspects of her claim;[30] and
- failing to pay interest in the correct sum and for the full period.[31]
Ms van Eeden agreed that TAL should have moved more quickly to put the insured in the position that she would have been in had TAL assessed her claim correctly three years earlier.[32]
In November 2013, about eight months after the FOS determination, TAL began to conduct surveillance of the insured. The surveillance lasted for at least four months,[33] and included both ‘desktop’ and physical surveillance.[34] Ms van Eeden accepted that the surveillance authorised by TAL in this case was ‘deeply inappropriate’,[35] and that the material reported to TAL was ‘very personal and highly intrusive’ on the insured’s privacy.[36]
In December 2013, while the surveillance was continuing, TAL asked the insured to complete a daily activity diary, commencing from 4 November 2013.[37] Ms van Eeden accepted that this was another attempt by TAL to disprove the insured’s entitlement to benefits.[38] Despite the insured having provided TAL with medical evidence that the daily diary was exacerbating her state of anxiety and was probably having a negative impact on her health,[39] TAL continued to insist on completion of the diary.[40]
Ms van Eeden accepted that this resulted in harm to the insured,[41] and accepted that some of the case manager’s communications with the insured about the diary amounted to bullying.[42] Ms van Eeden also accepted that the case manager misrepresented to the insured that completion of the diary was a term of her policy.[43]
The insured made a further complaint to FOS about TAL’s insistence that she complete a daily diary.[44] TAL told FOS that it was standard practice in the industry to require the completion of a diary.[45] Ms van Eeden accepted that it was not, and was unable to say why TAL had misrepresented the position to FOS.[46]
In March 2014, while the second FOS dispute was continuing, TAL informed the insured that she no longer met the definition of ‘total disablement’, that it would cease paying benefits to her, and that she would be required to repay $69,000 in benefits that she had been paid to date.[47] In support of its decision, TAL relied upon section 56(1) of the Insurance Contracts Act, which applies to fraudulent claims.[48]
Ms van Eeden accepted that the insured’s claim had not been made fraudulently,[49] and that the communication of these matters would have caused ‘considerable distress’ to the insured.[50] Ms van Eeden also agreed that by this time, the case manager managing the insured’s case had no regard for the wellbeing of the insured, and was on a mission to stop her from receiving benefits under the policy.[51]
In April 2014, TAL declined an invitation from FOS to participate in a conciliation conference with a view to resolving the insured’s claim.[52] In November 2014, FOS delivered its Recommendation in the second dispute. FOS found that the insured had not made a fraudulent claim, that it was not fair and reasonable to require her to complete the diary, and that she remained entitled to benefits.[53] TAL challenged the Recommendation insofar as it related to the diary.[54] The matter proceeded to a determination, where FOS again found in favour of the insured.[55] After the determination, TAL again failed to calculate the payment of interest correctly.[56]
Since the determination, TAL has continued to engage in heavy-handed tactics in relation to the insured’s claim,[57] and has continued to make several mis-steps in relation to the insured that it attributes to systems or administrative issues.[58] These have included failing to provide the insured with monthly statements, failing to pay the insured her benefits in a timely manner, and informing the insured that she was required to pay her premiums, despite being on claim.[59] Perhaps most worryingly, shortly after Ms van Eeden gave evidence, TAL wrote to the insured, advising her that she had failed to pay her quarterly premium by the due date, and saying that if she did not remedy this by 23 November 2018, she would ‘no longer be covered’ under her policy, and ‘[a]ny claims made after this date cannot be paid’.[60]
Overall, Ms van Eeden accepted that TAL’s conduct was a ‘deeply troubling response to a legitimate mental health claim’, and that it involved ‘a series of wrong decisions’ and ‘very troubling breaches of the insured’s privacy’.[61] Ms van Eeden accepted that the poor conduct extended ‘over a significant number of years’ and involved ‘numerous TAL employees’.[62] She also accepted that TAL did not impose disciplinary consequences on the case manager who had authorised and overseen the surveillance of the insured, misrepresented terms of the insured’s policy, insisted upon use of the daily diary and used bullying tactics against the insured,[63] nor on a subsequent case manager who had managed the file and other files in a way that was of concern to her superiors.[64]
4.2.2The second insured
The second insured took out a TAL income protection policy in October 2013.[65] At the time that she obtained the policy, she was asked whether she had ‘ever had or received medical advice or treatment’ for a significant number of health conditions, including ‘depression, anxiety, panic attacks … or any other mental or nervous condition’.[66] She answered ‘no’.[67]
In mid-December 2013, the insured was diagnosed with cervical cancer.[68] She made a claim on her policy in January 2014.[69] From January to May 2014, TAL paid the claim.[70] Throughout this period, TAL brought in and reviewed information about the insured’s medical history.[71] TAL ostensibly did this because the insured’s claim was made in close proximity to the risk commencement date.[72] However, Ms van Eeden accepted that this was another general review, or ‘fishing expedition’, conducted by the case manager.[73] That this is the proper characterisation of what was done was reinforced by the fact that the medical information brought in was not confined to information relevant to the claimed condition.[74] TAL did not tell the insured that it was conducting these investigations.[75]
At the end of June 2014, without giving the insured notice, TAL avoided her contract of insurance on the basis that she had failed to disclose a prior history of depression.[76] Ms van Eeden accepted that at this time, TAL generally did not give policyholders an opportunity to provide information prior to their policy being avoided for non-disclosure, and that this was a systemic deficiency within TAL.[77]
TAL first communicated this decision to the insured by phone.[78] After listening to a recording of the call, Ms van Eeden acknowledged that:
- TAL had not informed the insured of its decision in an appropriate way;[79]
- there had been a lack of empathy and lack of sensitivity towards the insured’s situation;[80]
- the situation was compounded by the insured’s case manager having left her with the impression that she might need to pay back the benefits that she had received from TAL under the policy;[81] and
- overall, the way in which the phone call was handled fell below community standards and expectations.[82]
TAL subsequently sent a letter to the insured confirming that her policy would be avoided.[83] In that letter, TAL asserted that the insured had breached her duty of good faith under section 13 of the Insurance Contracts Act.[84]
Ms van Eeden acknowledged that this assertion was itself a breach by TAL of its duty of utmost good faith.[85] Ms van Eeden also acknowledged that until recently, if TAL declined a claim for non-disclosure, its communications to the policyholder would generally allege that they had breached their duty of good faith.[86] Ms van Eeden conceded that there would have been many cases of innocent non-disclosure in which this allegation was made, and which would have been very unfair to the policyholder.[87]
The letter to the insured emphasised that TAL reserved its right to recover the payments it had made to her.[88] Until about 2017, it had been TAL’s practice to reserve its right to repayment of benefits where it avoided a policy for non-disclosure.[89]
The insured challenged TAL’s decision to avoid the policy in FOS.[90] While the FOS dispute was continuing, TAL undertook further investigations into the insured’s disclosures.[91] Ms van Eeden accepted that TAL did so to try to find a basis for avoidance that was directly related to the claimed condition.[92]
In particular, TAL sought a further retrospective underwriting opinion in relation to some symptoms experienced by the insured prior to entering into the policy, which TAL considered may have been indicative of cervical cancer.[93] The underwriter advised that if those symptoms had been disclosed, the insured’s application for a policy would have been refused on that basis,[94] potentially providing TAL with an alternative basis for avoiding the contract of insurance.[95] Upon receiving the opinion, TAL’s General Manager of Claims expressed some concern about TAL ‘trying to make retrospective decisions when the facts at the time were different’.[96]
In April 2015, TAL and the insured attended a FOS conciliation conference.[97] Despite having known of the proposed additional basis for avoidance for at least two weeks, TAL only told the insured of it on the day before the conference.[98] Ms van Eeden did not know whether this was a strategic decision by TAL, but accepted that it was part of a broader pattern of delay in TAL’s dealings with FOS in this matter.[99] Following the conciliation conference, TAL and the insured settled the dispute by TAL waiving its right to recover the $25,000 paid to the insured, and paying her a further $25,000.[100]
4.2.3The third insured
As I have already mentioned, no statement was tendered in respect of the third insured’s case. Accordingly, the cross-examination in this part of the case study focused upon a number of acknowledgments made by TAL in a signed, but untendered, statement.
First, TAL’s Claims Decision Committee had determined to avoid the insured’s policy, but before that decision was communicated to the insured, the case manager added some additional grounds for avoidance, namely an alleged non-disclosure of a mental health condition.[101] This additional information was derived from the contents of an underwriting opinion obtained by the case manager, which was inconsistent with the Committee’s decision.[102] The case manager then communicated that revised position to the insured.[103]
Ms van Eeden accepted that the case manager should not have communicated the content of the underwriting decision, rather than the decision of the Committee, to the insured, and that this fell below what the community would expect.[104] Ms van Eeden attributed this to a lack of oversight of, and rigour in, the case manager’s decision-making process.[105]
Second, following TAL’s decision to avoid the insured’s policy, the insured applied for internal review of that decision.[106] Following that internal review, the file was returned to the original case manager.[107] That case manager undertook a review of the file that extended beyond the recommendation made by TAL’s IDR team.[108] Ms van Eeden accepted that the case manager’s failure to conduct a review in accordance with the IDR team’s recommendation fell below what the community would expect.[109] She said that TAL was revising its processes to ensure that claims are no longer remitted from its IDR team back to the original case manager, to improve independence in the decision-making process.[110]
Third, Ms van Eeden acknowledged that, in light of both of these matters, TAL’s decision to defend the insured’s matter in FOS fell below community standards and expectations.[111]
Fourth, similarly to the case of the first insured, Ms van Eeden accepted that TAL knew about, but did nothing to stop, the inappropriate approach that had been adopted by TAL in response to the insured’s claim.[112]
Fifth, similarly to the case of the second insured, Ms van Eeden accepted that TAL should have handled the insured’s claim with greater sensitivity and empathy.[113]
4.2.4The audit of declined mental health claims
As a result of the issues raised in these case studies, Ms van Eeden said that she will review all mental health claims that TAL declined for non-disclosure between 2013 and 2016 to ensure that appropriate processes were followed.[114]
[1]Transcript, Loraine van Eeden, 13 September 2018, 5672.
[2]Transcript, Loraine van Eeden, 13 September 2018, 5673.
[3]Transcript, Loraine van Eeden, 13 September 2018, 5673.
[4]Transcript, Loraine van Eeden, 13 September 2018, 5675.
[5]Transcript, Loraine van Eeden, 13 September 2018, 5675.
[6]Transcript, Loraine van Eeden, 13 September 2018, 5677.
[7]Transcript, Loraine van Eeden, 13 September 2018, 5677.
[8]Transcript, Loraine van Eeden, 13 September 2018, 5667.
[9]Transcript, Loraine van Eeden, 13 September 2018, 5668.
[10]Transcript, Loraine van Eeden, 13 September 2018, 5680.
[11]Transcript, Loraine van Eeden, 13 September 2018, 5681; cf TAL, Module 6 Case Study Submission, 5–7 [14]–[20].
[12]Transcript, Loraine van Eeden, 13 September 2018, 5682.
[13]Transcript, Loraine van Eeden, 13 September 2018, 5682, 5688.
[14]Transcript, Loraine van Eeden, 13 September 2018, 5688.
[15]Transcript, Loraine van Eeden, 13 September 2018, 5685–6.
[16]Transcript, Loraine van Eeden, 13 September 2018, 5689.
[17]Transcript, Loraine van Eeden, 13 September 2018, 5690.
[18]Transcript, Loraine van Eeden, 13 September 2018, 5690.
[19]Transcript, Loraine van Eeden, 13 September 2018, 5690.
[20]Transcript, Loraine van Eeden, 13 September 2018, 5691.
[21]Transcript, Loraine van Eeden, 13 September 2018, 5692–3.
[22]Transcript, Loraine van Eeden, 13 September 2018, 5693.
[23]Transcript, Loraine van Eeden, 13 September 2018, 5693.
[24]Transcript, Loraine van Eeden, 13 September 2018, 5695–6.
[25]Transcript, Loraine van Eeden, 13 September 2018, 5697.
[26]Transcript, Loraine van Eeden, 13 September 2018, 5698.
[27]Transcript, Loraine van Eeden, 13 September 2018, 5698.
[28]Transcript, Loraine van Eeden, 13 September 2018, 5698.
[29]Transcript, Loraine van Eeden, 13 September 2018, 5699.
[30]Transcript, Loraine van Eeden, 13 September 2018, 5701.
[31]Transcript, Loraine van Eeden, 13 September 2018, 5702.
[32]Transcript, Loraine van Eeden, 13 September 2018, 5703.
[33]Transcript, Loraine van Eeden, 13 September 2018, 5707.
[34]Transcript, Loraine van Eeden, 13 September 2018, 5708–11.
[35]Transcript, Loraine van Eeden, 13 September 2018, 5711.
[36]Transcript, Loraine van Eeden, 13 September 2018, 5710.
[37]Transcript, Loraine van Eeden, 13 September 2018, 5711.
[38]Transcript, Loraine van Eeden, 13 September 2018, 5714.
[39]Transcript, Loraine van Eeden, 13 September 2018, 5714.
[40]Transcript, Loraine van Eeden, 13 September 2018, 5717.
[41]Transcript, Loraine van Eeden, 13 September 2018, 5719.
[42]Transcript, Loraine van Eeden, 13 September 2018, 5717.
[43]Transcript, Loraine van Eeden, 13 September 2018, 5718.
[44]Transcript, Loraine van Eeden, 13 September 2018, 5717.
[45]Transcript, Loraine van Eeden, 13 September 2018, 5721.
[46]Transcript, Loraine van Eeden, 13 September 2018, 5721.
[47]Transcript, Loraine van Eeden, 14 September 2018, 5732.
[48]Transcript, Loraine van Eeden, 13 September 2018, 5724.
[49]Transcript, Loraine van Eeden, 13 September 2018, 5724.
[50]Transcript, Loraine van Eeden, 13 September 2018, 5726.
[51]Transcript, Loraine van Eeden, 14 September 2018, 5734–5.
[52]Transcript, Loraine van Eeden, 14 September 2018, 5741.
[53]Transcript, Loraine van Eeden, 14 September 2018, 5742.
[54]Transcript, Loraine van Eeden, 14 September 2018, 5745.
[55]Transcript, Loraine van Eeden, 14 September 2018, 5747.
[56]Transcript, Loraine van Eeden, 14 September 2018, 5749.
[57]Cf Transcript, Loraine van Eeden, 14 September 2018, 5751.
[58]Transcript, Loraine van Eeden, 14 September 2018, 5757.
[59] Transcript, Loraine van Eeden, 14 September 2018, 5757.
[60] Exhibit 6.483, 23 October 2018, Letter TAL Missed Premium Payments 19092018.pdf.
[61]Transcript, Loraine van Eeden, 14 September 2018, 5758.
[62]Transcript, Loraine van Eeden, 14 September 2018, 5758.
[63]Transcript, Loraine van Eeden, 14 September 2018, 5746, 5754; see also Exhibit 6.180, Witness statement of Loraine van Eeden, 5 September 2018, 27–8 [189(a)], 30 [193].
[64]Transcript, Loraine van Eeden, 14 September 2018, 5752–4.
[65]Transcript, Loraine van Eeden, 14 September 2018, 5763.
[66]Transcript, Loraine van Eeden, 14 September 2018, 5764.
[67]Transcript, Loraine van Eeden, 14 September 2018, 5764.
[68]Transcript, Loraine van Eeden, 14 September 2018, 5763.
[69]Transcript, Loraine van Eeden, 14 September 2018, 5763.
[70]Transcript, Loraine van Eeden, 14 September 2018, 5763.
[71]Transcript, Loraine van Eeden, 14 September 2018, 5766.
[72]Transcript, Loraine van Eeden, 14 September 2018, 5766.
[73]Transcript, Loraine van Eeden, 14 September 2018, 5766.
[74]Transcript, Loraine van Eeden, 14 September 2018, 5766.
[75]Transcript, Loraine van Eeden, 14 September 2018, 5766.
[76]Transcript, Loraine van Eeden, 14 September 2018, 5763.
[77]Transcript, Loraine van Eeden, 14 September 2018, 5770.
[78]Transcript, Loraine van Eeden, 14 September 2018, 5769.
[79]Transcript, Loraine van Eeden, 14 September 2018, 5769.
[80]Transcript, Loraine van Eeden, 14 September 2018, 5770.
[81]Transcript, Loraine van Eeden, 14 September 2018, 5770.
[82]Transcript, Loraine van Eeden, 14 September 2018, 5770.
[83]Transcript, Loraine van Eeden, 14 September 2018, 5771.
[84]Transcript, Loraine van Eeden, 14 September 2018, 5771.
[85]Transcript, Loraine van Eeden, 14 September 2018, 5772.
[86]Transcript, Loraine van Eeden, 14 September 2018, 5772.
[87]Transcript, Loraine van Eeden, 14 September 2018, 5772.
[88]Transcript, Loraine van Eeden, 14 September 2018, 5772.
[89]Transcript, Loraine van Eeden, 14 September 2018, 5773.
[90]Transcript, Loraine van Eeden, 14 September 2018, 5763.
[91]Transcript, Loraine van Eeden, 14 September 2018, 5776.
[92]Transcript, Loraine van Eeden, 14 September 2018, 5776.
[93]Transcript, Loraine van Eeden, 14 September 2018, 5777.
[94]Transcript, Loraine van Eeden, 14 September 2018, 5777.
[95]Transcript, Loraine van Eeden, 14 September 2018, 5777.
[96]Transcript, Loraine van Eeden, 14 September 2018, 5777.
[97]Exhibit 6.179, Witness statement of Loraine van Eeden, 31 August 2018, 26 [96].
[98]Transcript, Loraine van Eeden, 14 September 2018, 5778.
[99]Transcript, Loraine van Eeden, 14 September 2018, 5778.
[100]Transcript, Loraine van Eeden, 14 September 2018, 5778.
[101]Transcript, Loraine van Eeden, 14 September 2018, 5780.
[102]Transcript, Loraine van Eeden, 14 September 2018, 5780.
[103]Transcript, Loraine van Eeden, 14 September 2018, 5781.
[104]Transcript, Loraine van Eeden, 14 September 2018, 5780–1.
[105]Transcript, Loraine van Eeden, 14 September 2018, 5780.
[106]Transcript, Loraine van Eeden, 14 September 2018, 5781.
[107]Transcript, Loraine van Eeden, 14 September 2018, 5781.
[108]Transcript, Loraine van Eeden, 14 September 2018, 5781.
[109]Transcript, Loraine van Eeden, 14 September 2018, 5781.
[110]Transcript, Loraine van Eeden, 14 September 2018, 5781–2.
[111]Transcript, Loraine van Eeden, 14 September 2018, 5783.
[112]Transcript, Loraine van Eeden, 14 September 2018, 5783.
[113]Transcript, Loraine van Eeden, 14 September 2018, 5784.
[114]Transcript, Loraine van Eeden, 14 September 2018, 5783.