The corporate regulator has lost its appeal against a Federal Court ruling that a pre-existing condition clause in some HCF Life products did not breach unfair contract term laws.

In 2024 Justice Ian Jackman ruled the clause was liable to mislead and last year he ordered the insurer to pay a $750,000 penalty for using the term in four offerings under its Recover range of products.

But he dismissed an allegation that it was an unfair contract term under the Australian Securities and Investments Commission Act 2001.

Now, the Full Federal Court has decided the pre-existing condition term had a “purpose consistent with the protection of [HCF Life’s] legitimate interest in mitigating the risk of anti-selection behaviour by prospective insured”.

It rejects ASIC’s contention that Justice Jackman erred in finding the term was not unfair.

“We agree with the respondent that there was no error in the approach taken by the primary judge to concluding that the pre-existing condition terms were reasonably necessary to protect the respondent’s legitimate interests,” the Full Federal Court said.

ASIC says it is considering the Full Federal Court’s decision.

A HCF Life spokesperson says the insurer notes the decision concerning a “previously used pre-existing condition exclusion clause in certain HCF Life Recover cover products between August 19 2019 and November 8 2023.

“All claims continue to be assessed in line with section 47 of the Insurance Contracts Act. This matter relates solely to HCF Life and does not affect HCF’s private health insurance products.”