01 Apr 2017
Clarifying claims and cover
By Matthew Daley, Jane Paskin and Vanessa Pallone
Three Superannuation Complaints Tribunal decisions consider TPD and income protection claims.
of Clayton Utz review recent (SCT) determinations.
This is a case where the member had been paying for total and permanent disablement (TPD) cover for many years only to find out, at claim time, he had no cover. While the insurer paid back nearly 10 years of premiums, the case points to what some commentators are now calling a structural fault with group insurance in superannuation funds.
The member joined his previous fund in 1998 and was covered for both death and TPD under the fund's group insurance arrangements. At the time, he worked as a slaughterman/labourer at an abattoir. On 6 October 2000, he injured his back while at work. He had a period of time off work but eventually his employment was terminated as there were no light duties that were suitable for him. He spent the next five years living off WorkCover but did not claim TPD. It is not clear why he made that decision but there is a suggestion he had spoken to someone at the time with knowledge of super.
In May 2002, the trustee changed insurers. Under the takeover terms, the new insurer required a member to be "at work" performing their normal duties to be covered for TPD on day one of the new insurance arrangement. If the person was not at work, the cover only commenced on the return to all of the essential duties' (defined in the policy) of their occupation that they were performing when last at work. In other words, when the member returns to work and the previous sickness or injury is no longer limiting their performance.
In this case, the member had left employment at the abattoir some years earlier so there was no issue that he had not returned to the role of slaughterman/labourer. He had in fact worked in both a full- and part-time capacity after his WorkCover entitlements were reduced, but he eventually ceased work altogether due to the pre-existing back injury.
On 29 July 2011, the member submitted a claim for TPD. The insurer investigated if it was on risk for TPD and discovered he was not at work on takeover day and had never returned. Under the policy terms, the insurer was not on risk so it promptly paid back $6,326.08 that had been paid in premiums over the years. That amount was credited to his super account by the trustee.
The trustee submitted it had no way of knowing the member was not covered until claim time. It was noted by the Superannuation Complaints Tribunal that the member had been advised of the changing o insurers at the relevant time and was provided with a brochure explaining the "at work" concept. The member could not recall receiving the brochure but the trustee could prove it had been sent to his address.
Given this is the way takeover terms work in group insurance, the Tribunal found both the trustee and the insurer had acted fairly and reasonably in denying the member his TPD claim.
This is another case involving a fund changing its insurer and the member not having cover under the new insurance arrangement despite having paid premiums for many years.
The fund provided the member with income protection (IP) cover but the cover ceased when she attained age 60 on 9 February 2012.
The fund decided to change its group insurer and the new insurer agreed to take IP cover to age 67, but subject to a pre-existing medical exclusion clause in the policy terms.
The member was given two units of IP cover on 1 March 2012 from the new insurer. She was now claiming under this policy, having previously been on claim under the original policy for widespread osteoarthritis that had caused her to stop working.
The member accepted her osteoarthritis was a pre-existing condition, but argued this second claim was due to diabetes and that had not been diagnosed until 2014 so could not be a pre-existing condition. The insurer disagreed and the trustee affirmed that decision. It was these two decisions that the member considered were not fair and reasonable in the circumstances.
The insurer obtained the members extensive medical history from her treating doctors and it became evident that she first had a fasting glucose test in September 2010 and, while that test did not indicate she had diabetes, it indicated she had raised sugar levels. She was prescribed Metformin (an oral hypoglycemic agent) from September 2011 for impaired glucose tolerance. A formal diabetes diagnosis was not made until March 2014.
So the issue before the Tribunal was whether or not it was necessary for a formal diagnosis of diabetes to have been made prior 1 March 2012 (when the new insurer went on risk), for it to be a pre-existing condition under the policy.
It was held that a formal diagnosis of diabetes was not required under the policy for her diabetes to be a pre-existing condition. This was because the policy defined a pre-existing condition as including any illness the topic of a medical consultation. Under the policy, this included "any activity undertaken for the detection, treatment or management of an illness, injury, medical condition or related symptom including but not limited to the application of prescribed drugs or therapy". The member's medical history in respect of abnormal glucose metabolism or impaired glucose tolerance satisfied this definition and hence she had no cover, and the trustee and insurer's decisions were fair and reasonable in the circumstances.
This is a case where the medical evidence was inconclusive and did not support the member's TPD claim.
The member was born in 1983 and worked as an audio visual technician. He first experienced auditory problems with his left ear in 2004 and these problems grew progressively worse. He ceased work in 2011, did some casual work in 2012 and was completely unable to work from 2013.
Throughout this time, he saw many doctors to try and diagnose his illness, but it remained uncertain and with no formal diagnosis. The member reported being unable to tolerate repetitive sounds like a clock ticking or vegetables being chopped. He also had some aversion to texture and touch. All of the auditory and MRI tests were inconclusive.
Mental health issues were explored as there was a history of child sexual abuse. He was treated for depression and attended counselling sessions but the overall medical opinion was he did not have a mental health problem.
The member tried to retrain but dropped out of an engineering/IT degree due to his illness.
Despite the lack of a firm diagnosis, all of the reporting doctors were of the opinion the member had some capacity for work at least part-time in another occupation which provided a quiet or noise-controlled environment.
The Tribunal held there was insufficient medical evidence to support a conclusion of him being unlikely to ever return to work for which he was reasonably suited and given his relative youth, the Tribunal found the trustee and insurer had acted fairly and reasonably in denying his claim.
This article was first published in Super Funds, 1 April 2017