ASIC has announced that it has commenced civil proceedings in the Federal Court alleging that three types of insurance policies issued by HCF Life Insurance Company Pty Limited (HCF Life) contain unfair contract terms and could mislead the public.

The case involves standard form contracts issued under HCF Life’s ‘Recover’ range of insurance products.

Each of the policies contains an exclusion in respect of “Pre-Existing Conditions”. ASIC alleges that each of those exclusions is drafted in such a manner that, by reason of section 47 of the Insurance Contracts Act 1984 (Cth) (ICA), it is partially unenforceable. This is because “Pre-Existing Condition” is defined in each policy in a manner which may include a sickness or disability that, at the time each 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.

ASIC contends that the inclusion of the partially unenforceable exclusions in the policy terms (in circumstances where HCF Life fails to advert to, or explain, the existence or effect of s 47 of the ICA or the extent to which the term is unenforceable):
a. is liable to mislead the public in contravention of s 12DF of the Australian Securities and Investments Commissions Act 2001 (ASIC Act); and
b. renders the exclusion terms unfair within the meaning of s 12BG of the ASIC Act and void by reason of s12BF of the ASIC Act.

ASIC alleges that the ‘pre-existing condition’ term in the contracts is an unfair contract term and could mislead the public because:

• the term purports to deny coverage if a customer did not disclose a pre-existing condition before entering the contract, and a medical practitioner forms an opinion that symptoms of the condition existed prior to the customer entering into the contract, even if a diagnosis had not been made;
  the term suggests that HCF Life can deny coverage even if the customer was not aware of the pre-existing condition; and
• s47 of the Insurance Contacts Act prevents insurers from excluding coverage for non-disclosure of a pre-existing condition where the customer was unaware of the condition when taking out the insurance, and a reasonable person in the circumstances could not be expected to have been aware of the condition.

ASIC is seeking declarations that the term is void. ASIC will also seek injunctions and corrective orders. Further, ASIC is seeking a penalty regarding the allegation that HCF Life’s contracts are liable to mislead the public.

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