Zurich has been ordered to assess an income protection (IP) claim from 2013 after the Australian Financial Complaints Authority (AFCA) ruled the insurer had wrongly avoided the policy.

The insured took out an IP policy in July 2012, and made a claim in November the following year after suffering a lower back injury.

When reviewing the claim, Zurich says it found three instances of non-disclosure, and if it had been given the full picture it would not have issued the policy.

The insurer was not told about conditions concerning the complainant’s back, right thumb, and mental health.

It says it would have had to include exclusions for all three conditions, and this would have exceeded the limit for the number of exclusions allowed. Therefore the policy would not have been issued.

But AFCA says the complainant was not obliged to disclose his “very limited” depression.

“The insurer was only entitled to avoid the policy if it could establish that, if the complainant disclosed everything he was obliged to disclose, it would not have insured the complainant on any terms,” the determination says.

“The doctor recorded ‘depression’ only once, three years before the policy began, and in the context of a divorce. The complainant did not take the medicine prescribed, and saw a psychologist only once.

“In those circumstances, he was not obliged to disclose depression and did not make a misrepresentation in relation to it.

“If the complainant disclosed everything he was obliged to disclose, the insurer would have issued the policy with two exclusions. The insurer was not entitled to avoid the policy.”

Click here to read the full ruling.