While the issue of discrimination in insurance is not new, since the decision of the Victorian Civil and Administrative Tribunal in Ingram v QBE Insurance (Australia) Limited (2015) there has, in recent times, been an increase in interest as to whether insurers are entitled to rely on general exclusions for claims arising from mental illness to refuse payment of a claim.
The potential for discrimination arises first by issuing a policy which incorporates a blanket mental illness exclusion and, secondly, relying on the exclusion to deny a claim arising from, for example, depression, anxiety, stress, mental or nervous conditions.
In the context of travel insurance, the type of cover contemplated under a policy may include cover for injury and sickness resulting in overseas emergency medical and hospital expenses and travel expenses, cancellation fees and lost deposits. Compensation for personal liability in respect of physical loss or damage to property as a result of an accident may also be provided.
An example of a general exclusion for mental illness is:
‘We will not pay under any circumstances if …
Your claim arises from or is any way related to depression, anxiety, stress, mental or nervous conditions’.
The question that arises is whether a general exclusion such as this is contrary to anti-discrimination legislation. In general, ‘discrimination’ occurs when a person with a disability is treated differently to a person without a disability and this can be direct or indirect discrimination.
In respect of mental illness as a disability, a distinction is to be made between a prior history of depression, anxiety, stress, mental or nervous conditions and what has been described as a ‘first presentation’ mental illness.
In the provision of services relating to insurance, it is unlawful to discriminate on the grounds of disability by refusing to provide a person with goods or services, or on the terms and conditions on which those goods and services are provided, or the manner in which goods and services are made available.
Arguably a general exclusion for mental illness is discriminatory because its effect is to treat a person who develops a mental illness during the period of insurance differently (or less favourably), to a person without a mental illness. There is also a risk that a blanket general exclusion for mental illness claims could be considered discriminatory in respect of the terms and conditions on which insurance goods and services are made available and may therefore be unlawful.
There are, however, a number of exceptions under the anti-discrimination legislation which provide that it is not unlawful to discriminate on the grounds of:
- Unjustifiable hardship arising from the effect of removing the mental illness exclusion from all policies;
- Actuarial or statistical data on which it is reasonable to rely; and
- No actuarial or statistical data is available and could not be reasonably obtained, there is an exemption on the basis that the discrimination is reasonable having regard to other factors.
Conclusions
The circumstances in which blanket mental illness exclusions are considered are often resolved in favour of the insured because submissions raised by insurers in respect of unjustifiable hardship, and reliance on actuarial and statistical data, have largely been unsuccessful.
An exclusion that limits cover for a pre-existing medical condition or mental illness may in certain circumstances be reasonable given the greater likelihood of a claim, however, a blanket exclusion purporting to apply to a ‘first presentation’ mental illness is less likely to be considered reasonable.
A finding of unlawful discrimination arising from blanket exclusions for mental illness will most likely turn on the facts of the particular dispute. For example, in Ingram the tribunal went to some lengths to avoid the impression that the decision automatically applies to all insurers noting that the findings and questions as to the application of exceptions (under the anti-discrimination legislation) turned on the evidence that the insurer sought to adduce and more broadly the basis upon which the insurer sought to argue its case.
In determining the application of the exceptions (under the anti-discrimination legislation), for unjustifiable hardship, it is necessary to consider the benefit or detriment likely to accrue to or be suffered by an insured person, the effect of the disability, financial circumstances and estimated claims exposure, including the potential for increased premiums for travel and other insurance policies.
It has been difficult for insurers to demonstrate that relevant statistical and actuarial data has been considered, or is even available, in order to establish that the exception for unjustifiable hardship under the anti-discrimination legislation should apply. If available, it will be important to provide data that is relevant to the assessment of the insurance risk and distinguishes between pre-existing and ‘first presentation’ mental illness rather than simply the prevalence, diagnosis and treatment of mental illnesses generally.
Broader implications
This issue has arisen in the context of mental illness exclusions in travel insurance policies but potentially extend beyond to, for example, public liability insurance. It may also affect the orientation of policies more generally in respect of mental illness claims which impacts the wording of insuring clauses (not only exclusion clauses), sub-limits on benefits payable for mental illness and the policy terms and conditions applicable to claims for mental illness.
Insurers should carefully consider the use of, and reliance on, blanket exclusions for mental illness particularly in relation to first presentation mental illnesses as opposed to pre-existing conditions. Insurers should also collect and maintain actuarial and statistical data at the time the policy wording is formulated in order to demonstrate why the available exceptions should apply.
This article was written by Jason Stevens, Partner and Tristan Devaris, Senior Associate.