Published 03 Apr 2018
An insurance policy is a contract. The law requires disclosure of key information for a contract to be valid, often called “meeting of the minds”. Not disclosing information is a serious breach and the courts have a history of fixing such situations on the basis of Equity. This applies to insurance policies, such as TPD and income protection, and when taking out insurance key information needs to be disclosed, such as past medical history.
This principle has been codified by the government in form of the Insurance Contract Act 1984 (C‘th). This Law requires a person to disclose any information that could reasonably be considered relevant, set out in sections 21 and 31A. It is important to remember that this Law replicates mostly what has been decided in the past by the Courts, and this includes the remedies for non-disclosure - set out in Section 29.
One of the remedies is that an insurer can void the policy (cancel as if it didn’t ever exist) if there is non-disclosure (sub-s3). If that non-disclosure was not a fraud then there is limitation of 3 years, meaning after 3 years an insurer cannot void the policy. There are people who mistakenly rely on this, and don’t take care to provide all information when starting the policy and thinking that it doesn’t matter as since there was no fraud the policy can be claimed after 3 years in any case.
This is a misreading as there are sections which follows (particularly sub-s6) which allows an insurer to vary (change) the policy – not limited by time or fraud. What would occur is even if there was a careless non-disclosure an insurer can re-write the policy to take into account the information not disclosed – by adding exclusions. The insured person has the duty to reasonably give all key information to the insurer, and only if the insurer was aware but did nothing would it then be their problem.
Whilst what is reasonable and what is not maybe open to argument, when someone does not disclosure information because they suspect the information would cause an exclusion - the court will almost always determine that to be unreasonable.  Thus it is vital when applying for insurance to seek advice and it be well documented. Non-disclosure would cause exclusions that often renders a claim completely untenable and unfixable after the fact.
Should you have an insurance claim of TPD or income protection, please feel free to contact Gerard Malouf & Partners and speak with our compensation, insurance, and superannuation lawyers for expert advice.
 c.f. Advance (NSW) Insurance Agencies Pty Ltd v Matthews  HCA 22; (1989) 166 CLR 606 (2 May 1989) at 22
 e.g. Davis v Westpac Life Insurance Services Ltd  NSWCA 175 (24 July 2007)