Man who missed insurer letters while in jail loses dispute

A man seeking a $600,000 pay out after learning his pension payments stopped when he was in prison, and so a direct debit for his insurance premium payment was not paid, has lost a claim dispute.

The Suncorp home and contents customer was imprisoned in December 2015.

He thought his pension would continue to be paid into the account the policy premium was paid from but later learned payments had stopped while he was in prison. As a result, a premium due on Boxing Day in 2015 was not paid.

Suncorp sent a written notice of an unpaid instalment on January 6 2016 to his last known address, and cancelled the policy around a month later on February 9 2016 for non-payment. Suncorp had not been told the complainant had been imprisoned.

The man said a neighbour collected four months of mail – including Suncorp’s two letters – and forwarded it to him in prison. However, he did not receive this until after the policy was cancelled. He said Suncorp should have sent a notice by registered mail that required his signature.

In January 2017 a fire damaged his home, which was sold in 2019, and last year the man wrote to Suncorp asking that it reinstate the policy, pay him the sum insured of $366,600 for home building and $184,200 for contents, and pay him an additional $50,000.

The Australian Financial Complaints Authority (AFCA) ruled that as the policy was not in force at the time of the fire, Suncorp was not required to accept the claim.

“The policy was cancelled, and the complainant knew the policy was cancelled, many months before the fire,” AFCA said.

The man said he was only given two days’ notice that he was going to be imprisoned, had little time to get his affairs in order and little ability to contact people outside the prison who could help. He also suffered a stroke, which limited him physically and emotionally.

His bank told him, on the day before he went to prison, that his pension would continue to be paid into the account the premium was paid from, and later – after he realised the policy had been cancelled – advised he could bring the premium payments back up to date when he left prison, he said.

While the circumstances made it difficult for him to manage his affairs, AFCA said “these circumstances were not caused by any error by the insurer”. It said Suncorp had exercised a right to cancel the policy, and had done so effectively, for non-payment of premium after the policy was renewed on March 26 2015.

“The complainant did not pay the premium instalments required under the policy. Therefore, I am satisfied that the insurer had a right to cancel the policy,” AFCA’s ombudsman said.

“The policy was not in force at the time of the fire. Therefore, the insurer has no liability under the policy with respect to the fire, and is not required to accept the claim.”

Insurers can cancel a policy for non-payment of a premium instalment if the cancellation requirements are set out in the policy, the insured was clearly informed of the relevant policy terms and a premium instalment has remained unpaid for at least one month.

“The premium instalment due on 26 December 2015 was never paid. Therefore, a premium instalment had been unpaid for at least one month from 26 January 2016,” AFCA said. “An insurer can give a person notice in writing by posting the notice to the person’s last-known address. The insurer does not have to prove that the person received or read the notice.”

Suncorp’s policy terms stated: “Overdue instalments: If you pay your premium by instalments and your instalment is overdue, we can do one or both of the following: refuse to pay a claim if an instalment is 14 days (or more) overdue; cancel your policy without notifying you in advance if an instalment is one month (or more) overdue.”

The Code of Practice says an insurer will give written notice of an unpaid instalment premium at least 14 days before cancelling a policy for non-payment. Suncorp’s letter of January 6 2016 was written notice of an unpaid instalment premium and met that condition, AFCA said.

Suncorp’s cancellation letter of 9 February 2016 incorrectly said the policy had been cancelled from December 26 2015. However, AFCA ruled the incorrect date did not cause the complainant to suffer a loss or affect the outcome of the dispute.

“The insurer did not make an error that caused the policy to be cancelled. Therefore, it would not be fair to hold the insurer responsible for any loss caused by the policy cancellation,” the ruling said.

See the full ruling here.