A complainant who did not disclose he had previously used cocaine during a “boys' weekend” trip to Las Vegas in his application form for life insurance has lost his claims dispute.

The complainant answered “no” to a question on the application form asking if he has “ever” injected, smoked or otherwise taken recreational or non-prescription drugs, or any drug other than as medically directed.

TAL referenced the complainant’s use of cocaine in a medical report from his ear, nose and throat specialist as grounds for declining the claim and to avoid all insurance cover from the policy’s inception date.

The complainant made the claim for income protection benefits in January 2019 for vertigo, dizziness and chronic fatigue syndrome and had consulted his specialist to ascertain the potential cause of his claimed condition. The specialist confirmed in a 2019 report that the “small” use of cocaine was not linked to the onset of symptoms.

The Australian Financial Complaints Authority (AFCA) says the question, listed under the overall heading “Health and Lifestyle” details, was not ambiguous and that it was “clear” in requiring the complainant to truthfully answer if he had ever taken “recreational or non-prescription” drugs.

AFCA says the question was not framed to assess the nature of and/or frequency of drug use by the complainant, only if recreational or non-prescription drug use “ever” occurred.

“As the question was on the application form, the complainant should have known it was relevant to the risk and the terms on which the insurer was prepared to accept the risk,” AFCA says.

“A reasonable person in the circumstances could be expected to have known that only questions of relevance would be asked.”

AFCA says the complainant did not comply with his duty of disclosure and that even if it was his father who had provided the answers on the application form on his behalf, the complainant “still signed” that he agreed the answers were true, accurate and complete.

The ombudsman says the evidence provided by TAL showed the insurer would not have provided the cover if it knew the complainant had used cocaine in the previous three years before his application.

A retrospective underwriting opinion, based on TAL’s reinsurer’s underwriting guidelines and completed drug questionnaire, states if underwriters were aware the client had used cocaine within two years of the application no benefits would have been available, and the application declined.

“The underwriting guidelines are specific to drug use as set out in the heading of the guideline,” AFCA says.

“For cocaine use, the guideline for a claimant who had used cocaine within 3 years, with no unfavourable risk factors, was to postpone granting cover, across all cover types.”

His policy – which also provided for death, total and permanent disablement and is held under a trustee – commenced in November 2016 and was arranged by his adviser, who is also his father.

AFCA says even if it was his father who filled up the application form, the complainant must be taken to have given those answers to the insurer.

“This is because the complainant still signed that he agreed the answers were true, accurate and complete, regardless if answered by him personally, or his adviser,” AFCA says.

Click here for the ruling.