Sharma v H.E.S.T. Australia Ltd

Sharma v H.E.S.T. Australia Ltd concerned an appeal against the Australian Financial Complaints Authority’s (AFCA) decision to affirm the insurer's and trustee's denial of additional death and income protection benefits of a deceased policyholder due to alleged fraudulent misrepresentation. The deceased, Dr Sharma, had become a member of the Health Employees Superannuation Trust Australia, which had established a group life insurance policy with ING Life Limited, later known as OnePath. Dr Sharma had applied for additional insurance cover, which was granted by OnePath based on misrepresentations in his application. Upon discovering the misrepresentations, CommInsure, the subsequent insurer, and the Trustee decided to avoid the additional insurance cover, leading to the dispute.

The central legal issues were whether AFCA correctly interpreted sections 29 and 33 of the Insurance Contracts Act 1984 (Cth) and whether it was lawful and reasonable for AFCA to allow the insurer to avoid the policy due to the deceased's fraudulent misrepresentation despite the provisions of section 33. Specifically, the court had to determine if AFCA erred in concluding that common law or equitable principles could apply in cases of fraudulent misrepresentation in group life policies where there was a change of insurer.

The court found that AFCA had materially misdirected itself in law. It concluded that AFCA did not correctly understand the operation of section 33 of the Insurance Contracts Act, which restricts the insurer's ability to seek damages for deceit under common law or equity. The court held that AFCA's decision to allow the insurer to avoid the policy based on common law or equitable principles was erroneous. Furthermore, the court determined that the conclusion that the insurer's and trustee's decisions to avoid the policy were fair and reasonable was not based on a correct understanding of the law. Consequently, the appeal was allowed, and the matter was remitted to AFCA for redetermination in accordance with the court's reasons.

The final orders included allowing the appeal, setting aside AFCA’s determination, remitting the complaint to AFCA, and directing the parties to submit costs submissions within seven days of the publication of the reasons. If costs were not agreed upon, the court would determine them on the papers.