Kathryn held credit protection insurance with Insure Limited, in relation to her credit card.
Kathryn was employed from 2007 by Employ Limited, until she was made redundant on 6 January 2012. At the redundancy date Kathryn owed about $4,500 on her credit card. Kathryn then entered into a fixed term employment contract for four months with Fixed Limited, from 31 January 2012 to 25 May 2012. Kathryn was then unable to get further employment.
Kathryn continued to make the required payments on her credit card, with the assistance of her partner. However, by April 2013 Kathryn could not keep up with her payments and submitted a claim to Insure Limited for assistance with payment of her credit card balance. Kathryn claimed on the basis that she was ‘involuntarily unemployed’ as a result of being made redundant from Employ Limited.
Insured Limited decline the claim
Insure Limited declined the claim because it said Kathryn’s unemployment was due to a specific period of employment coming to an end. Insure Limited said that because Kathryn knew her contract with Fixed Limited was only for a short period of time, Kathryn was not involuntarily unemployed, rather, she became voluntarily unemployed. This meant there was no entitlement to cover under the insurance policy.
Insure Limited also said that Kathryn had ‘returned to work’ when she took up the contract with Fixed Limited, and that because she returned to work within 30 days of being made redundant, the policy precluded cover.
Kathryn did not agree with Insure Limited’s interpretation of the insurance policy. In her view, ‘returning to work’ meant returning to permanent work. Kathryn was of the view that entering into the contract with Fixed Limited did not mean she was not entitled to cover when she had been continuing to pay the insurance premiums.
We reviewed the file and the insurance policy.
We thought that Kathryn’s involuntary unemployment was due to her being made redundant from Employ Limited, and was not due to her contract with Fixed Limited ending. Essentially, we were of the view that entering into the contract with Fixed Limited did not ‘interrupt’ or stop Kathryn from making a claim.
In addition, the 30 day waiting period was defined in the policy as simply the time period when no cover was available. In other words, the 30 day waiting period did not influence whether there would be cover or not.
We were also of the view that ‘returning to work’ was ambiguous, and could mean various things. It could mean self-employment, standard employment or as an independent contractor, fixed term or permanent employment, or employment on a casual, part-time or full time basis. We thought that if Insure Limited wanted to ensure that ‘returning to work’ meant any type of employment, it needed to define ‘work’ more specifically in the policy.
Moreover, we thought it was unfair that Insure Limited declined the claim when Kathryn had mitigated her loss by entering into the contract with Fixed Limited, and had not claimed for around a year when she had been unemployed.
Our case manager spoke with Insure Limited and outlined the reasoning behind our views. The case manager said there were some good arguments put forward by both parties about the complaint.
Insure Limited took on board our comments and offered to settle the matter by payment of the balance of Kathryn’s credit card at the time she was made redundant (around $4,500). Kathryn accepted the offer and this resolved her complaint.