Case 1:

It was not disputed that the member had suffered a spontaneous spinal subdural haematoma which had left him a paraplegic, and that it caused significant changes to his personal and working life. But did the insurance in his super fund cover this situation?

The short answer was “no”, which may be a surprise.

In this case, the member underwent extensive rehabilitation, the result being that while “he had not had any meaningful functional recovery in his lower limbs”, he had made “a good return to community living, being independent with all transfers and activities of daily living and also returning to work”, albeit with reduced hours, and mainly from home.

Part of the Stronger Super Reforms was that from 1 July 2014 an insured disability benefit should only be payable by the insurer to the trustee when the member is suffering permanent incapacity, a condition of release under the Superannuation Industry (Supervision) Regulations 1994 legislation. A consequence of this was that older style policies that were payable when an insured member lost the use of two limbs, or both eyes, were amended to only be payable to the trustee when that loss also resulted in the member being “unlikely to be able to engage in any occupation whether or not for reward” (the relevant amended policy wording, in this case).

Here the member was working from home so he did not satisfy the amended policy terms. The Tribunal did note that the trustee had advised the member that should his condition deteriorate, the insurer and the trustee would re-examine the claim.

So in these circumstances, the decision of the trustee and insurer to deny the claim was fair and reasonable.

For completeness, prior to the Stronger Super Reforms there were circumstances where a policy would be payable to the trustee but not payable out of the fund because the member did not suffer “permanent incapacity” (a condition of release under the SIS legislation). The law was simply aligned so that this misalignment stopped.

[The writers are in no way critical of this change but wonder whether the industry has been truly effective in communicating to its members how disablement insurance works in super. Of course, it goes without saying that the financial benefits of successful rehabilitation far outweigh a lump sum insurance payout.]


Case 2

We are reviewing two aspects of this case, namely the trustee’s refusal to compensate the member for delay in assessing her income protection (IP) claim and the decision to debit her account with IP premiums from August 2011 to September 2013.

The member lodged an IP claim in early 2013 saying she was suffering from “adjustment disorder, stress, anxiety, depression, sore neck/ shoulders”. At this time, she also had an accepted claim for workers compensation on the grounds of “verbal bullying and harassment” in the workplace.

The member provided the trustee with some WorkCover certificates and claimed she was partially disabled from August 2011 to February 2013. However, the trustee and insurer needed additional information to process the claim, including a Medical Attendance Certificate, and taxation returns and Notices of Assessment for the claim period. The request for additional information from the member and her employer went back and forth over a number of years with one long break resulting in the file being closed for a while. When the trustee and insurer eventually had all the information needed, the claim was quickly decided but it was now early 2016.

The Tribunal fully accepted it was important for the trustee to obtain the requested information to determine if the member met the definition of disability/disablement in the policy and to ascertain her pre-disability income and whether she was earning income during the claim period. The Tribunal found that the trustee had clearly set this all out in a letter in June 2013. It therefore determined that the trustee’s decision to not compensate for the delay in assessing the claim was fair and reasonable.

[The writers note that the Tribunal did not comment on whether the trustee could have done more to assist a mentally unwell member wanting to make an IP claim. Presumably, that is something a trustee should consider when reflecting on the outcome of this case and similar member complaints.]

On the issue of continuing deducting premiums while the claim was being processed, the Tribunal saw the facts somewhat differently from the insurer, and the trustee did not express a view on this issue.

The Tribunal reviewed the policy and concluded that, on the facts, the member had to be paying premiums until the policy terms provided cover ended. In this case, the Tribunal was satisfied that cover ended six months after the end of the week in respect of which the last employer contribution was received by the trustee and that was 30 September 2012. Once cover ended, it was not fair and reasonable to debit IP premiums from the member’s account. The Tribunal ordered reimbursement of the relevant premiums and interest on that amount at the fund’s cash rate.


Case 3

The member made an on-line application for death cover insurance that was subject to a pre-existing condition exclusion, commonly referred to by the acronym PEC. The member died within 13 months of cover commencing and the insurer denied the claim on the grounds of the PEC exclusion. The trustee agreed with the insurer’s decision.

Under the policy, PEC meant there was no insured death cover for:

“…any injury, sickness, illness or symptom that existed in the (2) years prior to or at the time the Insured Person’s [Name of category] Insurance Cover commenced and the Insured Person:

  • was aware of, or a reasonable person in their position should have been aware of; or
  • should have sought advice or treatment (conventional or alternative) from a Medical Practitioner or other health professional for (in circumstances where a reasonable person in their position would have sought advice or treatment); or
  • had a medical consultation for or were prescribed medication or therapy for.”

The member was only 23 years old when he died. As a child he had a heart operation to treat a congenital heart issue. He was taking heart medication but his treating doctor noted in a report that “he was stable and therefore no reason why he shouldn’t lead a normal life with normal life expectancy.”

It is important to note that this case is not about non-disclosure as the type of cover the member applied for was granted automatically subject to the PEC exclusion. It was a simple factual exercise to determine the medical facts applying in the two years prior to his death and then the cause of death.

The facts here (based on the medical evidence reviewed by the Tribunal) indicated the member had heart surgery as a child for congenital heart disease, was taking medication in the two years prior to death in connection with that disease and that the heart condition had caused “right ventricular coronary atherosclerosis”, the cause of death.

In these circumstances, the Tribunal was satisfied that the illness had existed in the two years prior to the member’s untimely death and, consequently, the PEC exclusion in the policy applied and no insured death benefit was payable. The trustee’s and insurer’s decision was correct.