The recent ruling by the Full Federal Court in relation to fraudulent misrepresentation in a group insurance dispute has been interpreted as a positive outcome for life insurers who provide cover through agreements with super funds. 
 
Law firms Allens and King & Wood Mallesons say the court decision in March ruling CommInsure could rely on section 29 of the Insurance Contracts Act (ICA) to avoid cover since the insured, a doctor, provided false details about his health history, brings “comfort” for group life insurers who become a fund’s new insurance providers. 
 
The March decision overturned a previous ruling by the Federal Court, following a protracted dispute that started before the Australian Financial Complaints Authority (AFCA). 
 
The Federal Court and AFCA had ruled CommInsure – owned by AIA since 2021 – could not rely on the ICA provision to avoid cover despite fraudulent conduct by the doctor. 
 
The doctor lodged a terminal illness claim in March 2017 and died the following month from heart failure. 
 
At that time CommInsure via Colonial Mutual Life Assurance Society had become the group life and group income protection insurer for his fund, H.E.S.T. Australia Superannuation Fund, replacing OnePath. 
 
CommInsure accepted the default cover portion of the terminal illness claim and paid the relevant amount to HESTA. However in August 2017, CommInsure made a decision to avoid the additional cover – citing section 29 – on the basis that the late doctor engaged in fraudulent misrepresentations to obtain that cover. 
 
In his original OnePath application form for the additional cover the doctor falsely answered “no” to a question on whether he had ever been diagnosed with, or sought medical treatment for, heart problems.  
 
Allens says the Full Federal Court’s decision “will bring welcome comfort to group life insurers that provide cover in a superannuation context”. 
 
“If insurers could not rely on section 29 in these circumstances, the takeover of such cover (ie without underwriting) would have increased risks for incoming insurers, which could result in increased insurance costs and changes to processes, including re-underwriting of voluntary cover on takeover,” Allens says. 
 
King & Wood Mallesons calls the Full Federal Court ruling a “positive development”. 
 
“This decision should provide comfort to life insurers that issue group life cover for superannuation fund members and superannuation trustees in matters such as assessing claims and pricing the cover,” the law firm says.