Published 24 Apr 2018
Exclusions to insurance policies for pre-existing conditions are very common. However that does not mean they are uncontroversial, often insurers draft these to be vague and “open to interpretation”. Insurers hide behind these ambiguities to avoid payment.
This happened to our client, Mr G of Grafton, who was insured under an Income Replacement policy with an exclusion for a pre-existing injury of the right leg. The policy would otherwise pay in the event Mr G became too injury or sick to work in his job, as a storeman, for a payment period of up to 2 years
Mr G had a serious Motor Accident which resulted in the loss of both his legs. Aside from claiming personal injury, our client personally claimed the Income Policy – which didn’t have an offset clause for injury compensation – as the insurer had told him the claim would be easily paid out. This was untrue and the insurer declined the claim. The insurer relied on the exclusion saying that our client’s inability to work was contributed to by the excluded right leg - contributed being a very specific wording in the policy. The insurer additionally suggested Mr G can work if only considering the left leg loss.
Our firm was retained by Mr G, and we pressed his claim to court. We reasoned that if the claim was assessed with regards to the left leg only he would be shown to be too ill to work. As to this issue of contributed by the exclusion, we argued that it is not the appropriate interpretation that any disability contributed by the excluded part be denied, but rather that the disability cannot be considered on account of a contribution by the excluded part – a very technical dispute.
The insurer took a very strong stance on their technical arguments, until a court ordered mediation prior to hearing. At which time our client’s case, in presence of the mediator, was demonstrated to be very live, and meaning great risk to the insurer. A judgement would also create a precedent which the insurer which may not like. At that point the insurer quickly offered $80,000.00, representing 80% of the possible payments under the policy, to settle the case. Our client is greatly relieved by the settlement and the money is able to alleviate the financial and medical problems he has had to face.
Insurance companies would often suggest that TPD and Income Protection (IP) claims are simple. This is often far removed from the truth and many insurers rely on esoteric technical arguments – which are later rejected at court – to not pay a claim. At Gerard Malouf & Partners our lawyers have expertise in conducting TPD and IP claims. If you have a claim or dispute please don’t hesitate to contact us for a free consultation.