A life insurer has prevailed in a dispute over its decision to avoid a policy and deny a claim on grounds the insured “fraudulently misrepresented” his history of schizophrenia when he applied for the cover.

The Australian Financial Complaints Authority (AFCA) says TAL would not have entered into a contract to provide the life insurance had the insured, who suffered a heart attack on March 19 2020 and died on the same day, not answered “incorrectly” when he was asked if he had any mental health or nervous conditions in the three years before the policy commenced in December 2011.

“[He] denied a history of mental illness when applying for cover in 2011,” AFCA says in its ruling.

“That answer was a misrepresentation because [he] had by then been diagnosed and treated for schizophrenia. The misrepresentation was fraudulent.”

The complaint was lodged by the policy’s joint beneficiaries, who lodged a claim for payment of the death benefit.

TAL denied the claim and avoided the policy in February last year, saying the insured “fraudulently misrepresented” his history of mental illness.

The joint beneficiaries say the insured had been misdiagnosed with schizophrenia and relied on the opinion of a psychiatrist, who saw the deceased only once, on September 18 2012. This was months after the policy commenced in December 2011.

Available medical records provided by TAL show the insured had an “extensive” history of mental illness over several years up to the application for the insurance.

When he applied for the insurance over the phone, he was told about his duty of disclosure by the call consultant and he said that he understood and agreed to provide “true and accurate” answers.

He was then asked a series of questions, including questions about his health and medical history. He answered “no” to all 10 medical questions including whether he had had any mental health or nervous condition, depression, anxiety or attempted suicide in the past three years.

“The answers he gave to these questions were untrue because he had a long history of treatment for schizophrenia,” AFCA says.

“Even though the available medical information suggests that that [he] was fairly well in the months leading up to his application for insurance, the questions are clearly directed not only to current problems, but previous problems.”

Click here for the ruling.