Key Takeaways

In this case, the WASC has dismissed a plaintiff’s application for discovery of comparable insurance applications, which were sought by the plaintiff in order to challenge the insurer’s underwriting evidence following avoidance cover pursuant to s29(3) of the ICA.

The decision serves as a useful reminder that such requests can be successfully resisted when they are not relevantly or patently onerous.

Brief Facts

The plaintiff was a former laboratory analysist and took out Life, TPD and IP cover with the insurer in September 2013 (the Policies).

The plaintiff ceased employment in May 2015 after suffering a major depressive disorder following which he lodged a TPD and IP claim.

The insurer and trustee avoided the Policies pursuant to s29(3) of the ICA and declined the plaintiff’s claim on the grounds that he failed to comply with his duty of disclosure and alternatively, misrepresented his medical history prior to the policies being entered into.

The plaintiff issued proceedings against the insurer and trustee in December 2019, seeking payment of the TPD and IP claim, interest and costs. During the course of the proceeding, the plaintiff made an application to the Court for supplementary discovery alleging that the insurer was required to discover:

‘applications by other persons for comparable insurance policies (and documents accepting or refusing those applications) on the basis that they are relevant to whether or not the insurer would have entered into the insurance policies with the plaintiff on any terms’.

Specifically, the application for discovery sought insurance applications sought across a six month period in 2013/14 which:

1. disclosed the proposed life insured had used drugs or suffered depression, gambling addiction or personal, work related, emotional or financial stress; and
2. disclosed the insurer had discovered a proposed life insured applicant had made the disclosures in (1) above and all documents relating to the acceptance, or refusal thereof, avoidance, non-avoidance or variation of any resulting cover or policy.

The plaintiff argued that the documents sought were relevant to the issues in dispute as they went to what the insurer did in practice in relation to other applications similar to that of the plaintiff.

The insurer’s position was that whilst they accepted the documents sought were relevant to its practice in dealing with such applications, it had already discovered underwriting manuals and a mental health guiding principle. Additionally, the further applications sought were not relevant as they were not sufficiently similar to the plaintiff’s application for insurance.

Further, the issue in dispute in the main proceeding was whether the plaintiff ought to have disclosed all of the matters pleaded by the insurer, not some of them, and as such, discovery of applications that only disclosed one or some of the matters were not relevant to the issues in dispute.

In addition, the relevance of the documents sought was so limited that they would be overly burdened by providing that discovery.

Judgment

The Court accepted the insurer’s submissions and ordered that the plaintiff’s application be dismissed with the plaintiff to pay the insurer’s costs.

In doing so, the Court considered two main issues as follows:

1. whether the comparable insurance applications were relevant to the matters in issue, and if so;
2. whether the production of those documents would be oppressive.

As to the first issue, the Court agreed that applications which disclosed all alleged non-disclosed matters were relevant. However, the plaintiff‘s application went further than this by seeking applications which disclosed only some, but not all, of such matters (for example, only a mental health issue or only a gambling issue). As the insurer did not put in issue whether it would have been prepared to insure the plaintiff if he had disclosed one or some of the matters, those documents were deemed not relevant.

On the second issue, the Court found that even if the documents were relevant, the request for discovery was oppressive ‘given the number of policies the insurer has and the nature of the documents sought’.

The Court accepted affidavit evidence from the insurer in this regard which, amongst other matters, set out that the insurer would have received some 7,770 applications during the relevant period, which equated to one person taking between 278 and 370 days to complete the review. An equivalent amount of time would be required to consider the claims lodged during the relevant period. Time would also be incurred to redact personal information from the documentation.

The Court therefore found that discovery of the documents sought, even if they were of limited relevance, was oppressive and the utility of the documents did not justify the burden a discovery order would place on the insurer.

The Court also had regard to previous authority of Bauer Tonkin Insurance Brokers v CIC Insurance¹ (Bauer) which supports the proposition that an insurer’s past underwriting practices are relevant to the underwriting issue. However, unlike in Bauer where the documents sought disclosed matters similar to those not disclosed by the insured, the documents sought by the plaintiff in this matter were not similar as they did not disclose all matters relevant to the application by the plaintiff. As such, Bauer could be distinguished.

Implications

Often retro underwriting evidence given in s29 matters is treated with suspicion by opponents who feel these suspicions can be borne out by examining past accepted applications which show an inconsistent underwriting outcome to that proffered in the retro underwriting evidence. Hence the ubiquitous discovery request for past applications.

There is of course old authority which suggests that an insured is entitled to see such past applications, however, such requests are always subject to a common sense test of practicality. Here the insurer gave evidence that it would have to employ a person working full time for a year solely on this task, to meet this request. Patently such evidence is compelling and the Court did not find such an impost reasonable. Indeed, all courts would likely take a similar view.

The key takeaway here is that when faced with such a request for past applications, the first piece of evidence the insurer needs to collate is just how big a job it is to comply with the request. Once these facts are known and if the impost is clearly unreasonable, the insurer needs to let its opponent know and quote the authority of this decision.

¹ (1996) 9 ANZ Insurance Cases 61-298