Income protection policyholders with Long Covid are having claims declined under mental health exclusions tied to prior diagnoses, raising questions about how broadly those clauses can be applied and what that means for advisers recommending cover.
Insurance lawyer Tim Gunn, a sole practitioner based in Matakana, New Zealand, who specialises in income protection cases, said he is seeing more denials in which mental health exclusions are being used against people unable to work because of Long Covid.
“I understand there are numerous people in the same or similar situation and that it may not be limited to one insurer,” Gunn said.
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Gunn is assembling a group legal action to test the fairness and application of mental health exclusion clauses to Long Covid disablement claims. A successful challenge could force changes to how exclusions are worded across the market.
“This is because the costs of litigation on a per-individual basis are high. So, the hope is that by grouping cases together we can get a fair outcome for everyone,” Gunn said.
“Despite Long Covid not being a mental health condition, the insurance companies say they are caught within the wording of those mental health exclusions,” he said.
The cases became public after Long Covid Support Aotearoa, a nationwide patient-led advocacy group established in 2020, highlighted them in an October 2026 press release. One case involved Christchurch software engineer Tales Azevedo Alves, whose income protection claim was declined in August 2026 after his insurer relied on a mental health exclusion that captured “fatigue-related disorders,” a sub-category listed within the policy’s mental health clause, following an earlier ADHD diagnosis. Azevedo Alves has disputed the decision, arguing Long Covid is a physical post-viral illness.
A second case involved Nicola Coombe, whose total and permanent disability claim was declined under an exclusion applied because of a previous experience with anxiety and depression.
“People living with disabling illness are already dealing with so much. The last thing they need is to have to fight for the income protection they’ve paid for - and expected would be there for them,” said Larisa Hockey, chair of the group.
“A diagnosis from someone’s past shouldn’t be used to dismiss what they’re going through now. Having had anxiety, depression or ADHD doesn’t mean they have a mental health disorder today - or that it caused their disability,” Hockey said.
For advisers placing income protection, the cases expose a practical risk at point of sale. Mental health conditions already account for an estimated 32% of income protection claims in New Zealand, according to a 2026 analysis reported by Insurance Business. If exclusions drafted for mental health are broad enough to capture fatigue-related physical conditions, clients with any prior diagnosis could face unexpected denials.
Advisers may want to review the scope of mental health exclusions in the policies they recommend, ask insurers how sub-categories such as “fatigue-related disorders” are applied at the claims stage, and document their advice process. Under the Conduct of Financial Institutions (CoFI) regime, which took full effect on March 31, 2025, all licensed insurers must maintain fair conduct programmes, according to the Financial Markets Authority’s (FMA) March 2025 announcement. The FMA licensed 46 insurers under the regime. Whether declining a physical illness claim under a mental health exclusion meets that fair conduct standard has not been tested.
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Insurance disputes in New Zealand are already at record levels. The Insurance & Financial Services Ombudsman (IFSO) Scheme accepted 600 disputes for investigation in the year to June 30, 2025, a 25% increase on the prior year, according to the IFSO’s July 2025 media release. Of those, 29% involved health, life, or disability insurance.
ANZMES Charitable Trust, New Zealand’s national advisory body for ME and associated conditions including Long Covid, said insurance assessments should reflect current medical evidence.
“Growing international evidence demonstrates that Long Covid and Myalgic Encephalomyelitis (ME) involve biological dysfunction affecting multiple body systems, including immune, neurological, autonomic and metabolic processes,” said Fiona Charlton, ANZMES president.
“Insurance assessments must be based on current scientific evidence and individual clinical circumstances, not outdated assumptions,” she said.
Long Covid Support Aotearoa has called on the FMA to review how insurers word and apply mental health exclusions, and for evidence-based assessments that evaluate functional capacity rather than relying on diagnostic assumptions. The FMA and the Human Rights Commission have both indicated they respond to complaints of this nature.
Gunn has asked people interested in joining the potential group action to contact him directly.
