Case Study – Ravesi vs National Australia Bank


In this legal case study, the client, Paul Ravesi, successfully argued that he was entitled to damages because his adviser, Peter Moore, an employee of the National Australia Bank (NAB), failed to take out the correct insurance policies on his behalf. Mr Ravesi suffered a serious accident, for which he was entitled to claim on his insurance. Upon lodging the claim, however, Mr Ravesi discovered that only half the cover he expected had been put in place.


At a Glance

Source: Judges’ decision notes
Topics covered: insurance replacement advice, duty of disclosure


In Detail


The client, Paul Ravesi, and his business partner and de facto, Candace Torres, took out an overdraft loan of $50,000 for their business (Affinity) from NAB in July 2006. At the time, it was suggested that Mr Ravesi and Ms Torres should take out some insurance to protect the interests of the business should either party become seriously ill or injured. Acting on this suggestion, Mr Ravesi and Ms Torres were then referred to NAB financial planner, Peter Moore, to arrange insurance cover to secure the loan.

Mr Moore held an initial meeting with Mr Ravesi and Ms Torres on 11 August 2006, where he completed an initial fact find, and agreed to prepare some recommendations for insurance and business superannuation.

Disputed documentation

On 14 August 2006, Mr Moore provided Mr Ravesi with a document entitled ‘Fact Find and Needs Analysis for Paul Ravesi’. The document listed the business debt to be covered by insurance, and an assessment of the amount of money required to provide Mr Ravesi’s family with sufficient cash to maintain their lifestyle in the event of his premature death.

Mr Moore met with Mr Ravesi and Ms Torres again on 12 September 2006, to discuss his recommendations, contained within the Statement of Advice (SoA). At this meeting, the clients and their adviser discussed some small tweaks to the sums to be insured. Mr Moore’s notes from the meeting say that everything else in the SoA was to remain the same, and that he was to prepare a revised Personal Protection portfolio quotation to reflect the variation in sums insured. A quote was issued on 12 September 2006, proposing life cover standard for Mr Ravesi of $150,000, TPD and CI cover of $140,000, and income protection plus of $3750 per month. A similar document was prepared for Ms Torres based upon life cover of $250,000, CI and TPD of $240,000 and income protection plus of $3750.

On or around 25 August 2006, Mr Moore presented Mr Ravesi with a Statement of Advice (SoA) detailing his agreed protection insurance objectives. The SoA lists Mr Ravesi’s protection needs as:

  • $125,000 asset protection cover for the business
  • $150,000 revenue protection for the business
  • $50,000 family protection (death)
  • $40,000 family protection (TPD)
  • $40,000 critical illness protection
  • Income protection

Mr Ravesi’s signature appears on the Authority to Proceed, dated 28 September 2006. The Authority to Proceed recorded that the client had agreed to proceed with alterations to the original recommendation. This was conveyed by a check box, which it is understood was ticked by Mr Moore. Next to the box, Mr Moore wrote:

Key person revenue insurance $150,000 Death $140,000 TPD plus CI
Income protection as recommended.

Mr Ravesi argued that that section of the document was not filled in when he signed it, and that he did not tell Mr Moore that he no longer wanted the asset protection/personal protection component of the cover.

Policies issued

While the Authority to Proceed did not provide specific instructions to remove the asset protection/personal protection components in the Protection Insurance Recommendation, it was clearly understood by MLC to mean that Mr Ravesi did not accept that part of the recommendation. Mr Moore told the court that that is what the Authority conveys.

On the instruction of Mr Moore, MLC issued the following policies:

  • A policy in favour of Affinity, on the life of Mr Ravesi, and providing life cover standard of $150,000 and critical illness plus cover including total permanent disability cover of $140,000. The same policy covered the life of Ms Torres for both life cover and critical illness plus cover including TPD cover in the sum of $100,000 each. (Issued 30 November)
  • A personal protection policy in favour of Mr Ravesi with an individual income protection benefit of $3750 per month, with a waiting period of one month and a maximum benefit period of five years (issued 13 December)
  • A personal protection policy in favour of Ms Torres, with an individual benefit of $200,000 life and trauma, including TPD cover of $200,000 and income protection plus of $3750 per month (issued 13 December)

Letters from MLC to Ms Torres and to Mr Ravesi were sent on 14 December 2006, in respect of cover to commence on 13 December 2006 enclosing those schedules. The letter to Affinity was sent on 1 December 2006 in respect of its cover to commence on 30 November 2006, enclosing its schedule.

On 9 November 2007 and 8 November 2008, Mr Ravesi received an annual renewal notice for his policies.

Claim lodged

On 10 December 2008, Mr Ravesi was severely injured in a car accident. He notified MLC about the accident in December 2008, and lodged a claim on 12 February 2009. His income protection claim was admitted, and Mr Ravesi began receiving a monthly benefit.

Mr Ravesi believed he was also entitled to a personal TPD benefit. It was at this time he became aware that he had no personal protection/asset protection.

Court case

Mr Ravesi brought a case against NAB because he believed he was entitled to damages on the basis that he should have received a policy in his name and for his personal benefit of $140,000 for TPD. Such insurance cover, that is life cover of $150,000 and TPD cover of $140,000, had been recommended by Mr Moore, and Mr Ravesi says he accepted that recommendation.

Counsel for NAB, acting on behalf of their employee, Mr Moore, argued that Mr Ravesi and Ms Torres should have realised the incorrect cover was issued. According to NAB, Mr Ravesi and Ms Torres had adequate opportunity to identify the fact they had the incorrect cover, by way of the initial policy documentation, sent in December 2006, and the annual renewal notices, sent on 9 November 2007 and 8 November 2008.

A cautious advisor was likely to have recorded such an instruction, being a significant departure from the advice

In assessing the case, Judge Mansfield said there was no evidence to suggest any reason why Mr Ravesi might have given the instruction that he did not require the asset protection/personal protection cover originally recommended.

‘On 28 September 2005, Mr Ravesi says he did not instruct Mr Moore that he did not want asset protection/personal protection. Mr Moore simply says that he was told that asset protection/personal protection was not required and he accepted that,’ Judge Mansfield said.

The Judge continued:

‘I find it curious that Mr Moore simply accepted Mr Ravesi’s assertion, if it was made, that he did not require asset protection/personal protection cover…

‘…A cautious advisor was likely to have recorded such an instruction, being a significant departure from the advice, more fully than by the terms of the Authority to Proceed.’

The verdict

Judge Mansfield found in favour of the plaintiff, agreeing that Mr Moore had not acted according to his client’s instructions, thereby breaching his contract. Judge Mansfield also pointed out that the clients, Mr Ravesi and Ms Torres, clearly relied on Mr Moore’s expertise and were prepared to adopt his recommendations.

‘Having regard to the documentary and oral evidence and the way I have assessed it, I find that Mr Ravesi on 28 September 2006 did not instruct Mr Moore that he no longer wished to pursue the asset protection/personal protection elements of the policy recommended in his name and for his benefit…

‘On that basis, Mr Moore did not procure MLC to secure a policy for Mr Ravesi of the character which he sought. That was a failure to comply with instructions and a breach of contract…

Mr Moore should, acting reasonably and providing reasonable advice, have raised the wisdom of that instruction

‘…in my view it was incumbent upon Mr Moore to raise at the meeting on 28 September 2006 the fact that the change of instructions, as he understood it, was removing a significant level of cover which he had recommended in respect of the person whose ongoing well-being was of most importance to the welfare of Affinity and to the security of Mr Ravesi and to some extent Ms Torres. In my view, Mr Moore should, acting reasonably and providing reasonable advice, at that point, have raised the wisdom of that instruction and pointed out those matters.’

However, Judge Mansfield agreed with NAB and Mr Moore that Mr Ravesi was in part responsible for the error, because he failed to look carefully at the documentation sent by MLC in relation to the insurance cover.

‘It is the purpose of those letters, clearly, that the insured should look at them so as to be aware of the level of insurance cover which has been issued. Mr Ravesi, for whatever reason, clearly did not do so. I consider that that is a significant departure from the level of care which should be expected of an insured person looking after that person’s own interests.’

Judgement was for the plaintiff in the amount of $110,460, being a proportion of the $140,000 TPD benefit that Mr Ravesi would have received if his personal protection/asset protection cover had been put in place. The damages awarded were reduced by 40% due to Mr Ravesi’s own negligence, having failed to read the policy documentation provided by MLC.

Key takeouts

Question client actions

The Judge in this case found that it was reasonable to expect that an adviser acting in the same situation as Mr Ravesi would have questioned why Mr Moore decided to reduce his cover. Simply accepting that it was ‘the client’s decision’ was not, in the Judge’s mind, an appropriate course of action for an adviser to take.

As noted in this case, financial advice clients look to their financial adviser as an ‘expert’ in their field. Therefore, advisers should be cautious when dealing with clients who request a departure from the original advice recommendation, and be sure to document the reasons behind the client’s decision.

Keep detailed documentation

Much of the evidence relied upon in this case was the documentation prepared by Mr Moore during the advice process. In nearly all cases, this documentation was incomplete, or unclear. In passing judgement in this case, Judge Mansfield said there was no evidence to suggest the client had instructed the adviser to remove an element of the cover originally recommended. Had the adviser clearly documented this instruction, the client is unlikely to have been successful in their claim.

Importance of reviews

It is also worth noting that no annual review appointments appear to have occurred between Mr Moore and Mr Ravesi and Ms Torres. The pro forma document completed at the start of the advice process included a section indicating the client’s acknowledgment that the adviser had explained the need to review the insurance plan, and for that review to occur either annually, at another regular period, or as notified to the adviser. None of those alternatives were marked as selected on the document. Had a review meeting occurred in the intervening three year period, the gap in his cover is likely to have been identified prior to Mr Ravesi’s accident.

To view a copy of the Judge’s decision notes, click here.