The Federal Court has found that Zurich Australia did not breach its duty of utmost good faith when OnePath Life, the previous owner of Zurich’s life insurance business, avoided an income protection policy because the insured failed to disclose a prior history of hospitalisation for serious mental health issues.

In an update from ASIC, the regulator said it would review the decision. The case was taken to court just over a year ago where ASIC claimed advice from an ANZ financial adviser was a “breach of good faith”.

In 2018, OnePath rejected the income protection claim of a customer who had injured her shoulder while working as a nurse. OnePath formed the view that the customer’s failure to disclose her hospital admissions for serious unrelated mental health issues between 1999 and 2005 was fraudulent, and that OnePath would not have issued the policy had they been disclosed.

ASIC had argued that Zurich, who replaced OnePath as the respondent in the proceedings, breached its duty of utmost good faith when avoiding the policy because:

  • OnePath avoided the policy without first making enquiries with the financial adviser who had assisted the customer in applying for the policy regarding the explanation for the non-disclosure;
  • OnePath decided to avoid the policy without adequately notifying the customer of its intention to avoid the policy on the basis of fraud; and
  • OnePath failed to inform the customer of her right to dispute or appeal OnePath’s decision to avoid the policy.

OnePath was a subsidiary of ANZ until 31 May 2019, when it was acquired by Zurich. Under a Scheme of Arrangement, OnePath’s life insurance business was transferred to Zurich on 1 August 2022.

On 28 June 2023, by order of the Federal Court, Zurich replaced OnePath as the respondent to these proceedings.