Noel Stevens made a claim against CFP after being diagnosed with
pancreatic cancer and having a claim under his life and trauma
policy denied by CommInsure. The denial of the claim was on the
basis that Mr Stevens had not disclosed various things in his
application – including the amount that he drank. Section
29(3) of the Insurance Contracts Act 1984 allows an
insurer to avoid a policy for non-fraudulent non-disclosure for up
to three years after it is entered into if the insurer can show it
would not have entered into the contract had the disclosures been
made. Mr Stevens had changed from a Westpac policy on advice from
CFP adviser Andrew Galloway. Mr Stevens' Westpac policy had
been on foot for longer than three years when Mr Galloway's
advice was given.
The original Court found that CFP had engaged in misleading and
deceptive conduct. The appeal argued that there was not sufficient
evidence to support a finding of misleading and deceptive conduct
on the part of CFP.
The Court of Appeal found that there was sufficient evidence to
support a finding of misleading and deceptive conduct, on a number
The advice given by Mr Galloway wrongly supposed that a
comparison could be made between the CommInsure and Westpac
policies when it was not yet known whether CommInsure would insure
Mr Stevens and on what terms.
CFP did not allow Mr Galloway to recommend that Mr Stevens
retain his existing Westpac policy as the Westpac policy was not on
CFP's approved product list. Therefore it was misleading for
the advice to say that all considerations pointed to cancelling the
Westpac policy and taking out the CommInsure one.
Such comparison as existed between the policies in the advice
given was incomplete. For example, the SoA omitted a consideration
of level premiums under the CommInsure policy and considered only
stepped premiums, confining its consideration to the first year of
the policy rather than the longer term.
The advice failed to disclose the effect of section 29(3) of
the Insurance Contracts Act 1984. The adviser was unaware
of the existence and effect of this provision and the SoA, prepared
from a template by a paraplanning team, did not refer to it
The finding of misleading and deceptive conduct entitled Mr
Stevens (or, in this case, his estate, as he had died by the time
of the appeal) to compensation from CFP.
This case raises a number of issues and talking points.
One obvious practical take-out is to consider how your advisers
are trained on the effect of section 29(3) of the Insurance
Contracts Act 1984 and how your SoA templates reflect the
existence of this provision. Your advisers should consider the fact
that this three year period is "re-set" when they
recommend a new policy to a client, meaning that any inadvertent
non-disclosure by their client could lead to denial of a claim
anytime in the next three years. Your advisers also need to make
clear to the client the existence and effect of this section when
recommending a new policy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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