The member had no death cover when the trustee introduced automatic default cover. If members didn’t want cover, they had to take active steps to opt out. The member did not opt out and he also had no cover when he died. His wife complained to the Tribunal.
Under the terms of the policy, the deceased member had to be in ‘Active Employment’ on the date the default cover was introduced in March 2013. It was not in dispute that, at this date, the deceased was neither working nor capable of working 35 hours a week as he was undertaking treatment for aggressive Hodgkin’s lymphoma. This illness eventually caused his death in July 2014.
The policy provided ‘New Events Cover’ if the member was not in ‘Active Employment’ when the cover commenced. This type of cover was restricted to an illness that first became apparent after the commencement of insurance. Here, the member’s illness pre-dated the commencement of insurance and it was, on this basis, that the insurer denied the wife’s claim for payment. These facts were not in dispute. The wife’s complaint really centred around her deceased husband being deceived or misled by the trustee about the terms underpinning the default death cover.
A significant event notice explaining the default insurance was sent to the deceased in December 2012 but, at this time, he was convalescing from his first bone marrow graft. It was, therefore, quite possible he never focused on the information contained in the notice. Importantly, the notice did clearly and adequately describe the policy terms, including that if he never returned to active employment for 30 consecutive days, the new events restriction would apply indefinitely. After this initial communication, the deceased member received statements that indicated he had insured death cover of a specified dollar amount. It appears that it was these statements that the member and his wife focused on, not the earlier significant event notice that explained the insurance and how it worked.
The Tribunal held that the significant event notice did clearly explain how the default insurance cover was to work when introduced in March 2013, and it noted that this was tacitly acknowledged by the wife when she advised her husband was too ill, at that time, to review the notice. While this was unfortunate it did not provide a basis for determining the trustee had failed to properly inform the deceased member. It therefore followed that the trustee had acted fairly and reasonably in denying the wife’s claim for compensation.
The trustee decided to not compensate the member who was claiming compensation arising from a family law split actioned in 2016. Was that decision fair and reasonable?
The member’s former wife served on the trustee a draft Family Court order in October 2009 seeking the trustee’s consent to a family law split between the former wife and the member. This draft order caused the trustee to insert an administrative cautionary flag on the member’s account.
A final sealed Family Court order was not served on the trustee until March 2016. Both the final and draft orders provided the member’s account balance be split 55 per cent to the former wife. The issue was that in 2009 the member’s account balance was significantly less than it was in 2016. This was caused, in part, by the account continuing to receive employer contributions in the intervening years.
The trustee actioned the final order based on the account balance in 2016. The resolution sought by the member was for the trustee to compensate him in the amount that was the difference between the 2009 and 2016 account balances, approximately $39,050.
The trustee pointed out to the Tribunal that the final Family Court order in 2016 contained all the relevant information and it was legally bound to follow that order. There is simply no discretion granted to the trustee under the Family Law Act 1975.
The Tribunal noted that until the trustee was served with the final order, it was not legally entitled to complete the family law split. Further, the trustee was under no legal obligation to follow up with the member, or his former wife, to determine if the draft order had become the final order. Fundamentally, that was the responsibility of the member and his former wife (and/or their respective legal advisors).
As the trustee had paid the correct amount to the former wife in accordance with the final court order, the Tribunal agreed that the trustee was correct in deciding to not compensate the member. The decision was fair and reasonable.
In March 2014, the member was made redundant after a decade with the same employer, a finance firm, where he was the chief operating officer. The member had a bachelor of economics, a diploma in financial planning and a certificate in mortgage broking. While he was looking for new employment, he did not work again until he commenced his own mortgage broking business in September 2015.
By early February 2016, the member’s doctor diagnosed him with adjustment disorder with anxiety and depression and this caused him to cease work altogether. The member then claimed under his superannuation income protection policy. However, notwithstanding the member had received seven statements from the trustee advising he had insurance cover, the claim was denied on the grounds the policy had ceased six months after he was made redundant. The benefit in dispute was $16,500 per month for a two year period.
The member argued he was never advised the cover had ceased. The trustee disputed this and pointed out to the Tribunal that in July 2014 the trustee wrote to the member advising him that he would be transferred to the fund’s personal division having ceased employment with his employer. That communication indicated insurance cover would continue so long as his account balance exceeded $2000 and ‘subject to relevant terms and conditions’.
In March 2015, the trustee wrote to the member explaining the transfer was completed and this communication stated:
“In the event of an income protection insurance claim, you will be required to provide proof of your salary and permanent employment status. To meet the permanent employment requirement, you must have been working a minimum of 15 hours per week. If you are not currently working 15 hours per week, or if your salary has reduced, please advise us at your earliest convenience.”
The trustee also pointed out to the Tribunal that it had no way of knowing the member was not employed for over six months as it only became aware of this fact when the claim was being made. The Tribunal held that it was satisfied that ceasing employment with the employer did not equate to the member being unemployed. In fact, the trustee had no way of knowing this unless the member notified it of the fact. The Tribunal also held that the trustee had provided the member with adequate information, although it could have been clearer about where to access the ‘relevant terms and conditions’ in its July 2014 letter. The March letter welcoming him to the personal division also included a PDS and contact details. This package of information adequately advised him when income protection cover ceased. Accordingly, the Tribunal was satisfied that had the member followed the instructions to contact the trustee if he was working less than 15 hours a week, he would have known his income protection cover had ceased. The trustee’s and insurer’s decision to deny the claim was, therefore, fair and reasonable.