A mutual fund that said it was “clarifying” a list of excluded medical conditions misled members, the complaints authority says.

An Australian Air Pilots Mutual Benefit Fund member had his claim for a capital benefit rejected when he developed Meniere’s disease and lost his flying licence.

He found fund rules had been changed to exclude the condition a few months before his diagnosis.

The pilot told the Australian Financial Complaints Authority the fund misled him about the change and he wanted the benefit paid.

AFCA agrees with the complainant, noting the fund said rules about excluded conditions were being clarified when they were expanding.

The changes were not trivial or marginal, the authority says.  

Although fund operator Austair Pilots sent members emails, a summary and a full copy of the rule changes, AFCA says a reasonable person reading the emails and summary would be reassured the exclusion changes would not make them worse off. That reassurance would discourage a person from reading the fine print.

The complainant argued he could have sought alternative cover if he had been aware of the changes.  

The ombudsman agrees but says he has not shown he would have secured alternative cover, and therefore the fund does not have to pay the benefit. However, it rules the fund should pay $3500 compensation for non-financial loss.

See the ruling here.