Civil and political rights – discrimination – Equal Opportunity Act (Victoria) – unlawful discrimination on the basis of a disability – mental health exclusion in travel insurance policy – exclusion and denial of claim based on exclusion is discriminatory – insufficient evidence to prove insurer can rely on statutory exemption
- On 27 October 2015, Ella Ingram commenced a claim against QBE Insurance (Australia) Ltd (QBE) in the Victorian Civil and Administrative Tribunal, Human Rights Division (VCAT) in respect of QBE's denial of her claim for reimbursement of costs under a travel insurance policy, which excluded claims related to mental health.
- In what is being hailed as a 'landmark' decision, the VCAT held that QBE discriminated against Ms Ingram when it issued her with a policy which included a mental health exclusion and when it relied on that exclusion to refuse indemnity. It also held that QBE could not rely on the statutory exceptions to justify the discrimination, as it produced no evidence to prove the exclusion was based on actuarial or statistical data or that it would have suffered unjustifiable hardship had it not included the exclusion. The VCAT ordered QBE to pay Ms Ingram approximately $4,000, being the value of her cancelled trip, and $15,000 for hurt and humiliation.
- While the decision turns on its own facts, the case touches on issues which go to the heart of how insurers assess and manage risk and the decision will likely prompt insurers to re-assess how they use exclusions. In particular, it may prompt them to reconsider whether particular policy exclusions run the risk of being discriminatory and, if so, whether they have sufficient evidence to meet the reasonableness tests in the relevant anti-discrimination laws.
- Apart from this, where commercial pressures allow, insurers may need to consider other ways of managing risk in relation to particular products, such as by reducing the amount of cover available or increasing premiums.
In late 2011, 17-year-old Ella Ingram booked a school trip to New York and purchased a trip cancellation insurance policy with QBE. In January 2012, Ms Ingram, for the first time, experienced symptoms of depression. She was later diagnosed with severe depression for which she received treatment. On her doctor's advice, she cancelled her trip. Subsequently, she claimed compensation from her travel insurer, QBE, who rejected the claim on the basis that the travel insurance policy, which had been issued in December 2011, excluded coverage for claims related to mental illness.
Claims of discrimination and QBE's defences
Ms Ingram claimed that:
- by including the mental health illness exclusion in the policy, QBE treated her unfairly because of her disability, contrary to s 44(1)(b) of the Equal Opportunity Act 2010 (Vic) (EOA); and
- by refusing to indemnify her on the basis of the policy, QBE treated her unfavourably because of her disability contrary to s 44(1)(a) of the EOA.
In response, QBE said:
- on a proper reading of the definition of 'disability' in the EOA, Ms Ingram did not have an 'attribute' for the purposes of the EOA at the time she purchased the policy and therefore her claim must fail;
- alternatively, if it did discriminate against Ms Ingram in either of the ways alleged, the discrimination was lawful because the exemptions under the EOA and/or the Disability Discrimination Act 2004 (Cth) applied.
Meaning of 'disability' in the EOA
The EOA defines 'disability' as including 'a disability that may exist in the future (including because of a genetic predisposition to that disability)'. QBE submitted that the words were intended to capture persons who already had a disability but whose disability was not yet manifest, so that Ms Ingram would be required to provide medical evidence demonstrating that she was suffering from an undiagnosed illness at the time the policy was issued, in order to show she had a 'disability' as defined in the EOA.
Ms Ingram submitted that the definition applied notwithstanding that a person's disability may not be apparent at the time the policy was issued and that future disabilities are not limited to those to which persons are genetically predisposed.
In determining the proper construction of the statutory definition, the VCAT considered various extrinsic materials including the Explanatory Memorandum for the 2010 Bill, as well as s 32 of the Charter of Human Rights and Responsibilities Act 2006 (Vic). The VCAT held that the extrinsic materials did not aid in the interpretation of the definition and that a Charter-consistent interpretation would require that the definition be interpreted widely and without limitation. The VCAT held that at a December 2011, Ms Ingram was a person for whom a disability may exist in the future and, therefore, she had an 'attribute' for the purposes of the EOA at the time she purchased the policy.
Claim of discrimination
The VCAT held that the inclusion of the mental health exclusion was an act of discrimination contrary to s 44(1)(b) of the EOA as it was proposed unfavourable treatment on account of an attribute that may exist in the future. QBE accepted that when it declined indemnity it refused to provide a service and treated Ms Ingram unfavourably. The VCAT therefore held that QBE engaged in direct discrimination contrary to s 44(1)(a) of the EOA.
Exemptions under the EOE and DDA
Section 47 of the EOA and s 46 of the DDA make it lawful for an insurer to discriminate by refusing to provide insurance or in the terms in which the insurance is provided, if certain conditions are met. As QBE did not refuse to provide insurance, the first part of the exemption was not relevant. The relevant exclusions in the EOA and DDA are largely the same and provide that discrimination is permitted if it is based on actuarial or statistical data on which it is reasonable for the insurer to rely and is reasonable having regard to the data and any other relevant factors.
Use of actuarial or statistical data
QBE submitted that the exemptions are informed by the legislative policy underpinning insurance, as set out by the High Court in Australian Mutual Provident Society v Goulden and Ors  HCA 24 (a case dealing with life insurance); namely, life insurance business is more likely to prosper and the interests of policy holders are more likely to be protected if the insurance company is permitted to clarify risks and fix rates of premium in that business in accordance with its own judgment founded upon the advice of actuaries and the practice of prudent insurers. The VCAT accepted that the High Court's observations in Goulden were consistent with the relevant exemptions in the EOA and DDA.
QBE produced an actuarial report dated 31 August 2015 (the Pitt/Kyng Report), prepared for the purposes of the litigation, and relied on statistical and other reports of various dates between 2007 and 2013, some of which were appended to the Pitt/Kyng report. QBE acknowledged that there was a paucity of evidence of a direct or specific link between its decision to incorporate a general exclusion for mental illness and the statistical data, and it acknowledged that there was no evidence that it incorporated the mental illness exclusion on the basis of contemporaneous actuarial data. Despite this, it invited the VCAT to infer that it had taken the statistical evidence into account.
While the VCAT was willing to infer that QBE considered the mental illness exclusion prom the time of the policy wording in March 2010 and had a reason for including the exclusion, it was not willing to infer that QBE took the statistical evidence into account when drafting the exclusion or when deciding to refuse to indemnify Ms Ingram. It therefore held that neither the EOA exemption nor the DDA exemption applied:
The VCAT went on to consider at length whether the 'unjustifiable hardship' exemption in s 29A of the DDA, via s 47(1)(a)(ii) of the EOA, applied.
The parties approached the questions from different angles. Relying on the Pitt/Kyng Report, QBE submitted that it would suffer an unjustifiable hardship if it was unable to rely on the mental illness exclusion. Ms Ingram submitted that s 29A requires looking at the actual discrimination and asking whether QBE would have suffered unjustifiable hardship had it paid Ms Ingram's claim.
VCAT approached the question of unjustifiable hardship on the basis of the exclusion, not on the basis of the actual discrimination, but held that on either approach the outcome of the claim would be the same. The essential point was that the Pitt/Kyng Report did not prove that it was reasonable for insurers to exclude mental illness claims from travel insurance policies or that insurers would have to increase premiums or bear losses for offering coverage for mental illness claims. QBE submitted that it would have to increase premiums but produced no evidence to substantiate this claim.
Further, while the VCAT accepted that, under the approach taken by the Federal Court in King v Jetstar Airways Pty Ltd (No 2)  FCA 8, a reduction in profits might be sufficient to amount to an unjustifiable hardship, there was no reliable evidence on which it could safely find that there would be a reduction in profits.
VCAT therefore concluded that the unjustifiable hardship exclusion in s 29A of the DDA did not apply and QBE's discrimination was unlawful.
Ms Ingram sought declarations that QBE unlawfully discriminated against her in respect of the two claims made, compensation for economic loss or approximately $4,000, compensation for non-economic loss of $20,000 and costs.
QBE submitted that as Ms Ingram had sought a declaration under s 124 of the VCAT Act and not a finding under s 125(a) of the EOA, she had no entitlement to orders for further action or for compensation for economic or non-economic loss.
The VCAT concluded that as it was not a court of pleadings and QBE had conceded that the case was fought on the question of whether it breached s 44 of the EOA, it went without saying that Ms Ingram was seeking a finding under s 125 of the EOA. However, as the finding of unlawful discrimination turned on the way QBE had prepared for and run its case, the VCAT would not make the declaration sought, so as to ensure that an impression was not given that the decision automatically extended beyond the dispute between the parties and, in particular, to avoid an impression that it applied to all insurers. In short, it sought to confine the decision to its facts.
There was no dispute as to the quantum of Ms Ingram's economic loss, and the VCAT made an award for the amount claimed.
As to the claim for non-economic loss, QBE relied on QBE Travel Insurance v Bassanelli  FCA 396 and submitted that the quantum should be limited to $5,000 and the award should not include an element which reflected Ms Ingram's very public efforts to raise the profile of her claim. The VCAT considered Bassanelli and other cases and the circumstances of the case before it, including Ms Ingram's closing submissions and her evidence that she had felt the refusal of indemnity to be stigmatising, and awarded her $15,000.
On the question of costs, the VCAT held that there was no basis to depart from the usual position under s109 of the VCAT Act that the parties bear their own costs, save in respect of some costs incurred by Ms Ingram as a result of the late tender of evidence by QBE.
1 QSC 215.
2Zurich Australia Insurance Ltd v Metals & Minerals Insurance Pte Ltd (2009) 240 CLR 391.
3ABN AMRO Bank NV and Others v Bathurst Regional Council and Others (2014) 224 FCR 1.
4Lambert Leasing Inc and Another v QBE Insurance Ltd and Others  NSWSC 750 at .
5Insurance Contracts Act 1984 (Cth), s 45(1).
6Nicholas v Wesfarmers Curragh Pty Ltd & Ors (2010) 16 ANZ Insurance Cases 61-87 at 9-61.
7Lambert Leasing Inc and Another v QBE Insurance Ltd and Others  NSWSC 750 at , , .
8Ibid at .
9Ibid at .
10Ibid at .
11Ibid at .
14 QCA 106.