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Insurer liable for bank’s misleading explanation of policy to elderly traveller

An elderly man who lodged a claim for severe injuries suffered by his wife during a vacation has won his dispute against his insurer after the Australian Financial Complaints Authority (AFCA) found he had been misled into believing he was covered.

The complainant, referred to as Mr E, filed the claim after his wife fell down stairs during a trip to Thailand. 

The woman suffered serious injuries, including a fractured hip and damage to her head, forcing her to stay at a local hospital for more than three weeks. The claimant was also required to purchase a business class flight back to Melbourne for his wife to ensure she could lie flat and reduce the risk of complications during her journey.

Zurich Australia declined the claim because the policy did not cover overseas medical expenses for people over 80. The insurer says it did offer medical cover for people over 80 as an “upgrade” to the original policy but that Mr E had not bought this. 

The claimant purchased the policy through the local branch of his bank, referred to as CB, which offered the policy as a benefit for specific credit card holders. At the time of the policy’s inception, Mr E and his wife were 81 and 80 years old, respectively.

Mr E says he attended the local CB branch on June 30 to help ensure he “followed the correct procedure when applying for the policy,” as he had not been confident using computers. 

The complainant says the staff failed to inform him about the need to “upgrade” the policy to ensure that he and his wife were covered for medical expenses. The man says he left the bank believing he was appropriately insured, noting an email from the insurer that confirmed he “activated” the policy.

AFCA heard that the man had been assisted with the application process by a bank teller, referred to as SH. Zurich protested that SH did not help activate the policy, but the ruling ombudsman disagreed. 

The ruling accepted that SH failed to inform the complainant about the policy “upgrade”, which was required for the man to be covered, despite the bank being aware of his age. It says while SH’s actions were “unintentional”, CB misled the insured into believing he was appropriately insured.

“This should have been disclosed, especially in light of CB’s knowledge of the complainants' age,” AFCA said. 

“SH’s omission significantly contributed to Mr E’s inadvertent failure to apply to ‘upgrade’ the policy.

“Moreover, that omission induced Mr E to enter into an insurance contract that he believed provided adequate coverage.

“However, unbeknown to Mr E, the policy was essentially useless to him and to Mrs E insofar as coverage for overseas medical expenses was concerned.”

Zurich argues that CB employees were not authorised representatives and were not in a position to “provide any advice on the credit card insurance offered”. 

But AFCA says the insurer’s submission was an attempt to “absolve itself” of CB’s failings, saying that the bank had acted “at least in part” in the insurer’s interest. 

“The nature of the relationship between CB and the insurer means it would be unfair in this particular matter for the insurer to ‘wash its hands’ completely regarding any loss which resulted from CB’s misleading conduct.”

The decision requires Zurich to accept the claim, and awarded the complainants $4000 ($2000 per complainant) for non-financial losses caused by the insurer’s claim denial and subsequent challenges.

“The position taken by the insurer throughout the claims process has unfortunately led to a situation whereby the complainants, especially Mr E, feel as though they have been accused of not telling the truth,” AFCA said.

“They also feel as though their memories have been questioned. Moreover, the stance taken by the insurer during this claim has been based upon evidence which lacks substance.”

Click here for the ruling.