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Etienne, Christiane; Zackeresen, Renee --- "Superannuation life and disability claims: an untapped benefit" [2016] PrecedentAULA 21; (2016) 133 Precedent 40

SUPERANNUATION LIFE AND DISABILITY CLAIMS: AN UNTAPPED BENEFIT

By Christiane Etienne and Renee Zackeresen

Many injured or ill workers are completely unaware of the significant benefits available under various insurance policies held within their superannuation funds (‘funds’) which will cover them in the event that they become incapacitated for work through either illness or injury.

The benefits that may be available to a client include:

1. Death benefit – funds almost always hold death benefit insurance which is recoverable by the estate of a deceased worker. Depending on the insurance policy, if a worker has been given up to a year to live, then the fund may release the death benefit early instead of the total and permanent disablement (TPD) benefit.

2. TPD – many funds hold basic total and permanent disability (TPD) lump sum entitlements which are payable over and above the early release of a member’s account balance.

3. Temporary disability entitlements, also known as income protection (IP), salary continuance or total and temporary disability payment, which are usually paid monthly for a set period of time (two to five years) or, in some cases, until the retirement age of 65 years. Typically, a maximum of up to 75 per cent of a salary is paid.

4. Early release of superannuation account benefit on the basis of permanent incapacity, otherwise known as a Permanent Incapacity Claim (PIC) – a person who has not reached the preservation age may apply to have their superannuation released to them early on the basis of permanent incapacity through injury or illness. This will be available even where a TPD claim is unable to be made under that fund.

Premiums for these policies are paid by all members of a fund. The life insurance policy component is entered into by the trustees of the fund with the insurer for the benefit of all members of the fund (group insurance), without evidence of the members’ medical status.

These ‘default policies’ will in many cases protect workers against financial losses should they become totally and permanently disabled, or are unable to work for an extended period of time due to injury or illness.

Many fund members are unaware of the fact that by virtue of being members they are automatically covered by the fund’s insurance scheme.

Where a worker has moved from one employer to another, they can be a member of several funds, without necessarily being aware of it.

Unlike a claim for personal injuries, a worker who is a member of multiple funds with insurance benefits can make multiple insurance claims for the same injury or illness.

The critical point is to ensure that the worker’s fund has insurance cover as at the date of their disablement or incapacity for work.

ELIGIBILITY

An insurance benefit claim may be lodged if a member of a fund suffers:

• an illness (including psychological or mental illness) or injury that has caused them to stop working; or, if they were not working at the time of injury or onset of illness, that renders them unable to work or perform activities of daily living; and

• they have cover attached to their fund; and

• they are under the preservation age as at the date of disablement (usually 65 years of age); and

• the requisite waiting period (usually three or six months) has expired, during which time the person has not returned to the work force.

It is important to note that in order for a TPD claim to be successful, a person does not need to be ‘never able to work again’.

FUND AND INSURANCE CONTRACT DEFINITIONS

The critical criteria to be satisfied are the definitions set out in the trust deeds of the fund and in the various clauses of the group’s insurance. The wording of what constitutes an eligible TPD claim varies from fund to fund. However, in general terms, the trustee and insurer must be satisfied that:

‘a claimant has become incapacitated to such an extent that they are unlikely or unable to ever work in their own occupation or any other occupation or employment for which they are reasonably suited by training, education or experience’.[1]

Defining a disability claim is not straightforward, and common disputes arise with respect to the assessment of whether the claimant has a capacity for alternative work to that of their own occupation, or any other occupation. What constitutes an occupation and whether ultimately a claimant will return to the workforce has no impact on the payout of the claim.[2]

Many fund insurers often attempt to look to future potential capacity for work as a barrier to the successful outcome of a claim. However, the claim must be assessed as at the expiration of the waiting period following the date of disability, given the claimant’s current education, training and experience.

The definition of TPD in s1.03C of the Superannuation Industry (Supervision) Regulations 1994 (Cth states that a member meets the criteria:

‘if a trustee of the fund is reasonably satisfied that the member’s ill health (whether physical or mental) makes it unlikely that the member will engage in gainful employment for which the member is reasonably qualified by education, training or experience’.

Should a claimant not meet the above general definition of TPD, then other criteria contained in the policy may be considered (subject to the specific policy), such as:

• Total loss of a limb (amputations);

• Loss of sight;

• Loss of a person’s activities of daily living such as (i) bathing, (ii) dressing, (iii) toileting (iv) mobility, (v) feeding, etc.

BENEFITS OF LUMP SUM TPD OR INCOME PROTECTION CLAIMS

There are many potential benefits for clients in pursuing lump sum TPD or income protection claims. These include:

1. Claimants making TPD or IP claims have usually had their life turned upside down as a result of an illness or injury and are very often battling significant financial hardship. These benefits are designed to help maintain their lifestyle from being eroded.

2. These benefits help claimants to achieve some level of control of their lives again, giving them the ability to secure their future or that of their families in the event that they either pass away or are no longer able to be the principal earner in the family.

3. Lump sums give a claimant the flexibility to pay off debts, invest or convert the lump sum into an income stream if appropriate.

4. The erosion of other benefits (for example, workers’ compensation) has left many members reliant on various forms of social services. TPD or IP benefits come as a great relief in difficult and often financial devastating times (typically while a member awaits the outcome of other litigation processes). Accessing TPD or IP benefits may very well help prevent the loss of a home or other hard-earned assets, or simply help to keep children in schools.

5. Workplace injuries and injuries arising out of motor vehicle accidents have some form of reasonable cover for lost income and medical treatment under statutory schemes. Ongoing assistance under the NDIS/NIIS provides domestic assistance for significantly injured or ill persons. Differences in the level of support under such schemes exist, including differences by jurisdiction.

6. TPD and IP may help to cover the gap where a claimant is suffering an injury but has no one to sue, or suffers from an illness that prevents them from working but has no private life insurance policy.

7. IP policies are usually offset by other income replacement benefits available under legislative schemes, or Centrelink benefits. At best they can act to ‘top up’ income benefits to a pre-defined level of income. In the event that the claimant worker has a personal injury compensation claim, then any IP benefit received may have to be repaid back to the fund upon settlement of the compensation claim. A ‘clawback’ clause will usually be contained in the insurance policy document and it is highly recommended that enquiries be made to the fund to clarify the terms and conditions applicable in that regard.

8. TPD lump sums, however, are not offset by any other benefits paid as a lump sum for permanent disablement, but rather are paid in addition to such payouts (other than in Victoria).

DIFFICULTIES IN MAKING DISABILITY INSURANCE BENEFIT CLAIMS

Like most insurance claims there is a process to follow. Unfortunately, experience shows that the process is neither straightforward nor simple.

The initial forms are often lengthy and complex to complete. Claimants are often not up to filing a claim, let alone fighting it.

The difficulties faced with these claims include, but are not limited, to:

• lengthy time delays;

• non-disclosure of documents/information by the funds;

• funds/insurers contacting claimants directly rather than going through their legal representative/s;

• funds/insurers making multiple requests for claimants to be examined by the same or similar medical specialists;

• funds/insurers ‘drip feeding’ requests for information/documents to either the claimant or their legal representative; and

• funds/insurers denying claims on the basis that claimants are able to complete their own claim forms so they must be able to work.

For self-represented claimants, it can feel like a David and Goliath battle – they are on their own, taking on a large and well-resourced insurance company.

Although the funds quite often discourage claimants from engaging legal representation to assist with their claims, it is necessary for a claimant to seek legal advice in these matters due to their complexity.

CASE STUDIES

Case studies can be of assistance to practitioners who are contemplating taking on such matters.

John Savelberg v United Super Pty Ltd T/as Cbus and Hannover Life Re [2011] NSWSC 5/12/2011

This case concerned a TPD definition – whether refusal by the insurer/trustee was unreasonable and invalid – interest per s57, Insurance Contracts Act 1984 (Cth).

Mr Savelberg sustained significant injuries during work on 9 May 2007, which included significant crush injuries to both lower limbs, when he was struck by falling steel components. He has never returned to work since the date of injury.

Mr Savelberg’s TPD claim was lodged on 28 February 2008 (9 months post-injury). It was abundantly clear from the medical evidence at this stage that he was never going to return to work in any capacity. Mr Savelberg had always worked in heavy labouring jobs due to a poor educational background as a result of his dyslexia. He was unable to read or write, so the usual office alternative work arguments were not going to be successful.

On 23 September 2009, 19 months after Mr Savelberg’s claim was lodged, it was denied on the basis that he did not met the TPD criteria. Mr Savelberg was unable to walk without the assistance of walking aides and was hypersensitive in both feet such that he couldn’t wear enclosed shoes. Further medical evidence and submissions were made for review of the decision, and his claim was again denied on 14 December 2009 (22 months after his claim had initially been lodged). Further submissions addressed a Rehab Vocational Assessment, which again highlighted his inability to wear shoes (no work environment would allow him on site in open ‘flip flops’). The claim was again denied, on the basis that he would be able to wear shoes again in due course. Finally, following numerous attempts to address the blatantly obvious facts of the case, legal proceedings were commenced on 28 September 2010. Informal negotiations failed and, on 24 June 2011, after just one day in court, the claim was accepted. The benefit, however, was not paid until September 2011, with arguments made for interest and costs. Interest was awarded – the court found that the decisions of 23 September 2009 were unreasonable and invalid, and interest granted to date liability was admitted. The TPD benefit claimed was $100,000 plus interest.

Clearly, without representation, this case would continue to have been denied.[3]

Mr ‘Smith’ (fictional name) v SunSuper[4]

Issues in this matter include unreasonable delay, the fund refusing to provide a copy of independent medical examiner’s (IME) report to Mr Smith before a determination was made, and the definition of ‘own occupation’ versus ‘any occupation’.

Mr Smith sustained a psychological injury during the course of his employment as a senior logistics manager, working extensive hours under the immense pressure of multiple roles. Mr Smith has managed to return to work in compliance with Centrelink obligations; he can work for a maximum of two hours per week repotting pot plants, spread across three days. Medical evidence clearly stated that he will never return to former levels of employability or management roles.

His claim was initially lodged on 13 May 2014 (sum insured $230,000). SunSuper finally arranged an independent medical examination on 21 May 2015 (12 months later) and, to date, the insurer is not willing to provide a copy of the medical report. The insurer continues to seek further information from treating practitioners, despite already having been provided with opinions that Mr Smith is unable to increase or undertake any of his pre-injury duties.

This claim remains ongoing and a barrister has been briefed.

Ms ‘Jones’ (fictional name) v SunSuper[5]

Ms Jones retained legal representation in January 2013, after being diagnosed with ovarian cancer and ceasing work in July 2012. She had lodged her own claim for income protection (IP) with Sunsuper. Both the fund and the insurer rejected her claim on the basis that she did not meet a clause in the policy, given that her condition had been pre-existing. Ms Jones’ lawyer reviewed the Fund’s Group IP Policy and, on 27 February 2013, lodged a complaint on her behalf, arguing that under s47 of the Insurance Contracts Act 1984 the condition was not excluded. On 24 April 2013, the fund and insurer reversed their denials and paid the IP claim.

During the process of taking on Ms Jones’ P claim, the lawyer conducted further investigations and discovered that she was covered for Total and Permanent Disablement (TPD) lump sum insurance. The lawyer submitted a TPD claim for Ms Smith in June 2013. In August 2013, when the claim had still not been decided, she was deemed by her doctors to be terminally ill (TI). The lawyer refocused her claim as being for the TI benefit. Sadly, Ms Jones passed away on 28 August 2013, prior to the TI claim being decided. The lawyer continued to work with Ms Jones’ family to pursue a death benefit. That claim was approved shortly after her death. However, the amount paid was $375,000 (less than the TPD/TI benefit amount). The lawyer lodged a further complaint referring the fund to the policy clause that entitled the family to the full amount of $525,000.

The lawyer is continuing to fight for Ms Jones’ family in a claim for interest on the benefits due to the fund’s and insurer’s claim assessment delays.

CONCLUSION

When it comes to disability insurance inside Super, claims are complex in nature and despite the ‘good intentions’ of fund trustees that ‘they will look after their members interests’, in reality it is the insurers who call the shots when it comes to paying out a claim.

Over the past six months, the Association of Superannuation Funds of Australia (ASFA) has sought to discredit lawyers for their role in helping claimants in these claims process. It argues that solicitors are encouraging more claims, which they believe will in turn lead to the undermining of the viability of the industry.[6] On the contrary, we submit that the early involvement of solicitors helps to level out the playing field. Solicitors help to make the claims process easy and transparent; they help fund members to navigate the legal documentation, policies and procedures which have been drafted for the insurers and trustees by their own lawyers. Finally, solicitors acting on behalf of members help to balance the conflict between the fund’s or insurer’s obligations to their shareholders and their members’ interests.

The writers remind the super industry and its insurers that claimants may exercise their rights to seek legal advice in pursuit of their entitlements. A greater awareness in the marketplace, together with reduced rights in the workers’ compensation and motor vehicle accident sectors and tightening of Disability Support Pensions, have all resulted in the insurers feeling a profit pinch.

An insurance product provided to members has been priced by the insurers and not by disabled people, nor by the lawyers helping them. Any rise in premiums by insurers in recent times must be seen for exactly what it is – a clawback of profits. It should not be blamed on those claimants who have exercised their right to access entitlements for which they have paid premiums through their super funds. Such policies were designed to support disabled fund members to help themselves and their families during difficult times.

The writers, in conjunction with the Australian Lawyers Alliance (ALA), are proposing to work with the funds and their insurers to develop a Code of Practice which they hope will assist in the development of a system that ensures a better outcome for injured and sick members.

Christiane Etienne is the CEO and Principal of Win/Win Super Claims. PHONE (02) 8488 9998 EMAIL christianee@winwinsuperclaims.com.au.

Renee Zackeresen is Principal Director of RaZor Legal. PHONE (1800 729 671 EMAIL renee@razorlegal.com.au.

Both Christiane and Renee are members of the Executive Committee of the ALA’s National Disability Insurance Special Interest Group.


[1] Please note that this is a general definition only. Each fund uses this basic structure with some slight differences. Definitions vary from fund to fund and sometimes from policy to policy. It is best to read the appropriate policy carefully prior to beginning a claim.

[2] The Superannuation Complaints Tribunal website provides further information and cases: http://www.sct.gov.au.

[3] Case study provided by Christiane Etienne, Principal of Win-Win Super.

[4] See note 3 above.

[5] Case study provided by Josh Mennen, Principal at Maurice Blackburn Lawyers, Brisbane.

[6] Jassmyn Goh, No need for lawyers when making insurance claims: ASFA (26 May 2015) <http://www.moneymanagement.com.au/news/insurance-property/no-need-lawyers-when-making-insurance-claim-asfa> Jassmyn Goh, 85-90 per cent of super insurance claims are paid out (26 May 2015) http://www.superreview.com.au/news/insurance/85-90-per-cent-of-super-insurance-claims-are-paid-out; George Lekakis, ‘Superfluous’ lawyers milking the super system (26 May 2015) http://www.thenewdaily.com.au/money/2015/05/26/superfluous-lawyers-milk-super-system/.



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