MLC has been ordered to settle a complainant’s disability claim after it was ruled to have been “unfair” to deny the woman the disablement benefits she was entitled to after undergoing breast surgery.

The insurer had denied the claim the complainant made under her consumer credit protection policy – which provides cover for life, critical illness, disablement and involuntary unemployment – on the basis that she did not meet the policy definition of “gainfully employed” and has not shown she is unable to do two or more of the Activities of Daily Living tasks.

MLC disputes the complainant was “gainfully employed” as defined by the policy before the current claim, which she lodged towards the end of 2020 after her breast surgery in February the year before. As a result, the insurer says she must show she cannot do two or more of the Activities of Daily Living tasks.

The complainant had insisted she met the criteria since she is receiving a carers allowance from Centrelink.

AFCA in its ruling of the dispute says it does not agree with the complainant that receiving a carers allowance meant she is employed by the Government or Centrelink, pointing out she is getting the payment because of her carer duties.

But the ombudsman says despite not meeting the “gainfully employed” definition, it does not consider it fair in all the circumstances for the complainant’s claim to be declined.

AFCA says it is unclear whether the policy definition for “gainfully employed” must be met for each and every claim; there is no dispute the complainant’s condition totally prevents her from engaging in her usual occupation; and it was impossible for the complainant, in her circumstances (which were known to the insurer), to meet the definition.

According to AFCA, the disablement provisions in the policy are “silent” on the requirements to be “gainfully employed” yet it is clearly stated that when it comes to involuntary unemployment benefit, a claimant can only make one claim a year and up to three claims over the life of the policy.

“Therefore, the panel is not persuaded this is a fair interpretation,” the AFCA ruling says. “In particular, the panel is not persuaded a person of average intelligence and education, having read the policy, would have readily understood the effect of this provision in context of subsequent disability claims.”

AFCA says it would be unfair for the complainant to be precluded from claiming disability benefits, pointing out the insurer had previously accepted a disability claim. The insurer paid her benefits for this particular claim from June 2017 until February 2019 regarding her mental health conditions following an assault at her workplace.

The ombudsman says it accepts the complainant met the first aspect of the policy definition of “disabled” between February 27 2019 and January 21 last year.

It ruled the insurer is to pay benefits for those periods as well as any additional fees and interest the complainant may have incurred on the loan account due to the insurer’s failure to pay these benefits.

For any subsequent benefits, AFCA says the complainant is to provide medical certificates from a treating doctor confirming she is continually and totally unable to carry out all the normal duties of her occupation due to this claimed condition.

“Once in receipt of those documents, the insurer is to pay benefits for the relevant periods as well as any fees and interest that were incurred,” AFCA says.

AFCA says there were aspects of the insurer’s conduct that could have been improved and ordered it to pay the complainant $1000 in non-financial loss.

The ombudsman also says the policy should be reinstated if the complainant wishes to do so, ruling she had cancelled it based on incorrect information provided by the insurer.

Click here for more from the ruling.