In the wake of a controversial court verdict, AIA Australia has warned advisers to be proactive in following up on client health conditions or risk being found negligent.
Speaking at the AIOFP conference in Sydney last week, AIA national manager for technical sales Justine Marquet reflected on the implications for advisers of a recent court case - Swansson v Harrison - heard in the Victorian Supreme Court in March this year.
Ms Marquet explained the court found risk adviser Russell Harrison had followed correct procedures for switching a client's insurers but was negligent for failing to check up on his client’s health before submitting the final paperwork.
The client’s medical condition had worsened between requesting a new policy and Mr Harrison submitting the documents to the insurer but the client failed to inform Mr Harrison of the change.
The client was subsequently diagnosed with terminal cancer and his insurance claim was rejected by AIA on the basis of non-disclosure, prompting the client to sue Mr Harrison.
Ms Marquet said the negligence verdict came despite Mr Harrison warning his client repeatedly about disclosure requirements and the client signing disclosure warning documents.
“The judge found on the balance of probabilities, the adviser did give advice on one, if not more, occasions about the client’s ongoing duty to disclose material facts,” she said.
“Ultimately, this was about checking on the client’s medical condition prior to cancelling the client’s policy.”
Ms Marquet said the case meant advisers should think carefully about the conversations they have with their clients about medical disclosure.
“It was about the oral communications, about the conversation between an expert insurance adviser and a lay person and how Russell was able to explain that to the client,” she said.
Today, Mr Harrison includes multiple disclosure warnings in the paperwork and contacts the client before taking any action on policies, Ms Marquet said.
“He sends an email to the client 48 hours before cancelling a new policy giving them another opportunity to let him know if anything else has changed and also giving another option, which is to do nothing and maintain the status quo in regards to their policies,” she said.
She warned the outcome may have been worse for Mr Harrison if he had been less thorough in documenting his conversations with clients.
“Some of the things Russell did that really helped his case was his notes,” she said.
“He recorded [every conversation] in real time immediately after it happened and he used a note-taking system that could not be altered and could not be deleted.”
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