A 21-year-old Melbourne woman who challenged an insurer for failing to honour her travel insurance says she hopes her court victory will prevent others being discriminated against for having a mental illness.
Ella Ingram took action against QBE in the Victorian Civil and Administrative Tribunal in a case that could affect the whole insurance industry.
Ms Ingram, who developed depression when she was 17, was refused reimbursement for a 2012 school trip to New York, after she became too mentally ill to travel.
QBE's travel insurance does not cover trip cancellation due to mental illness, even if the mental illness is not a pre-existing condition.
In the first ruling of its kind, VCAT member Anne Dea found Ms Ingram's depression was a disability and by refusing to insure her QBE "engaged in direct discrimination".
Ms Ingram described the win as "a bit surreal" and a "huge relief".
She said she decided to launch legal action when she realised how many others may be in the same position.
"For me I just thought it was ridiculous that I couldn't claim my trip," she said.
"I guess knowing that so many other people were going to be in a similar situation to mine and as soon as I knew I could take it as far as I have there was no doubt in my mind that I wanted to.
"I would like for insurance companies to treat mental illness the same as any other physical illness and for them to not just base their reasons on stereotyping.
"We're in the 21st century and it's great that people like myself are speaking out about mental illnesses and it's time that they get up with the program."
Member Dea found QBE breached the Equal Opportunities Act when it issued her a policy that included the mental illness exclusion and when it refused indemnity based on that clause.
The company has been ordered to pay Ms Ingram $4,292 to cover lost travel costs and $15,000 in compensation for hurt and humiliation.
Ms Ingram said she has had people contacting her on social media thanking her for taking the action she undertook.
Ms Ingram's lawyer Melanie Schleiger said it was the first time the issue has been tested.
"As a result of this case we know that insurance companies must comply with the law and community expectations that people with a mental illness will be treated fairly," she said.
QBE said that mental illness was excluded from its policy because statistics showed there was a high risk of cancellation because of mental illness.
However, Member Dea rejected Ms Ingram's application for QBE to issue a declaration it engaged in unlawful discrimination, to avoid any impression it applies to all insurers.
In a statement, QBE said it understood concerns about mental health but to cover it, the company would have to increase costs.
"We understand the concerns expressed over mental health illness and empathise with all Australians who suffer from mental health illnesses," it said.
"The general insurance industry relies on insurers being able to price products appropriately to reflect the risks and, as such, the law in each jurisdiction recognises insurers are entitled to discriminate on this basis.
"With a significant number of Australians suffering from mental health illnesses to some degree in any given year, to provide travel insurance cover for mental health illness would significantly increase the cost of travel insurance premiums for the whole community."
Mental Health Australia estimates tens of thousands of people affected by mental illness have been excluded from travel, income and life insurance.
Nearly one in two Australians will experience some form of mental illness in their lifetime.
"The practice of excluding people with mental health conditions from accessing travel, income protection and life insurance policies reinforces stigma and discourages people from seeking support when they need it most," beyondblue chief executive Georgie Harman said.
"With the right support and treatment, most people recover from conditions like depression and anxiety."
Insurance Council of Australia chief executive Rob Whelan said the council would take time to "carefully analyse" VCAT's decision.
"The ICA and its members recognise the severity and complexity of mental illness, and the devastating impact it can have on sufferers and their families," he said in a statement.
"The provision of travel insurance for financial losses related to mental health is challenging due to differences in how mental health conditions are diagnosed, categorised and treated.
"Insurers are actively seeking updated data to improve their ability to quantify the risk associated with a range of mental health conditions."