A life insurer has been ordered to pay $4000 to an income protection policyholder after telling him his PTSD was covered, only to reverse its position six weeks later and reject his claim. 

The Australian Financial Complaints Authority (AFCA) found Resolution Life Australasia was entitled to rely on a longstanding exclusion for mental disorders and reject the claim, but said its incorrect advice had caused unnecessary and avoidable distress, delay and confusion. 

The policyholder applied for his income protection policy in 2000, disclosing a history of mental illness including a period of hospitalisation for depression. Resolution Life offered cover subject to an exclusion for disability caused or contributed to by “any mental disorder”. 

The man stopped working in November 2024 and lodged a claim in April 2025 for “PTSD with chronic and complex features”. His treating psychiatrist and other doctors diagnosed him with PTSD. 

In March 2025, before he lodged the claim, the man had several conversations with Resolution Life staff which gave him the impression that PTSD was not caught by the exclusion because it was not specifically listed. 

The insurer then confirmed that position in writing, telling him: “PTSD and C-PTSD are coverable conditions under your policy.” 

On May 1, however, Resolution Life reversed its position, telling the policyholder the information provided to him had been incorrect and that the broad mental disorder exclusion applied to PTSD. It apologised for the error and rejected his claim. 

AFCA found the insurer’s original advice was misleading but did not prevent it relying on the exclusion. 

The policyholder had already stopped work before receiving the incorrect advice, meaning he had not lost an opportunity to continue working or obtain alternative cover as a result of being misled. 

AFCA also found Resolution Life had not breached its duty of utmost good faith, taking into account the relatively short period involved, the employee’s junior position and the insurer’s subsequent correction and apology. 

However, the misleading advice had real consequences. The policyholder believed he could claim, spent time and effort pursuing the claim and obtaining a medical certificate, and was upset when the insurer subsequently told him the opposite. 

AFCA said: “All of this was unnecessary, avoidable, and caused by the insurer’s misleading conduct. The complainant was already very unwell and I accept the insurer’s actions caused him significant distress.” 

AFCA said the loss was significant but relatively short-lived and awarded $4000 for non-financial loss. The insurer had already apologised. 

The determination was otherwise mostly in favour of Resolution Life.

Click here for the full ruling.