- This article discusses some of the obligations of insurers and trustees of superannuation funds in considering whether to accept disability claims and some bases on which their decisions can be contested.
- If the decision has not been properly made, it can be disputed either by making a complaint to the Australian Financial Complaints Authority or by commencing proceedings against the trustee and, possibly, the insurer in the Supreme Court.
Most employees in Australia are members of superannuation funds and many members are insured against becoming totally and permanently disabled and, in some instances, against becoming temporary disabled.
If a member’s claim for payment of a disability benefit is refused by the trustee of the superannuation fund and/or by the fund’s insurer, what are the principles that determine whether the trustee and insurer have properly carried out their responsibilities in considering the claim and declining to pay it? If the decision has not been properly made, it can be disputed either by making a complaint to the Australian Financial Complaints Authority or by commencing proceedings against the trustee and, possibly, the insurer in the Supreme Court.
The following is a brief summary of the key principles that should be applied in reaching a decision to decline the claim.
Acting in the member’s best interests
A key point for a trustee to take into account in determining a disability claim is that a trustee owes a fiduciary duty to the member and is obliged, therefore, to act in the interests of the member (as well as the other members) in reaching its decision (Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601).
The member must be given an opportunity to respond to any adverse medical reports (Hannover Life Re of Australasia Ltd v Sayseng (2005) 13 ANZ Ins Cas 90-123;  NSWCA 214 and Wheeler v FSS Trustee Corporation as trustee for the First State Superannuation Scheme  NSWSC 534). This will ordinarily require that the member be given the adverse reports and be told that contrary medical evidence can be submitted (Honey v McLennan (1997) 18 WAR 384).
Giving properly informed consideration to the claim
In considering a disability claim, a trustee has an obligation to make all of the relevant and appropriate enquiries and to take into account all relevant information in making its decision (Finch v Telstra Super Pty Ltd (2010) 242 CLR 254;  HCA 36 at ). In Finch, the High Court also said (at ) that whether a member has an entitlement to a total and permanent disablement benefit does not involve the exercise of a discretionary power by a trustee. Rather, it involves the performance of a trust duty to establish whether the member’s circumstances satisfy the factual conditions that have to be met to be entitled to be paid a benefit.