Total and Permanent Disability (TPD) claims

TPD policies generally provide a lump-sum benefit where the insured satisfies the particular definition of total and permanent disability contained in the policy.

The precise definition varies between policies.

Depending upon the policy, the assessment may involve questions such as:

• whether the insured is unable to work in their usual occupation;
• whether the insured is unable to work in another occupation for which they are reasonably suited;
• whether the disability is likely to be permanent;
• whether the insured has ceased working;
• whether the insured has undertaken appropriate treatment and rehabilitation;
• whether the relevant waiting or qualification period has been satisfied; and
• whether any exclusions or other policy conditions apply.

Superannuation-based TPD insurance can involve additional considerations because the policy may be held through a superannuation fund rather than directly by the insured.

The wording of the particular policy is therefore critical.

Income protection claims

Income protection insurance is generally designed to provide an income benefit when illness or injury prevents an insured person from working, subject to the terms and conditions of the policy.

Disputes may concern:

• whether the insured person satisfies the applicable definition of disability;
• the extent of the person’s incapacity;
• the applicable waiting period;
• the duration of benefits;
• pre-existing conditions;
• medical evidence;
• rehabilitation or return-to-work requirements;
• the calculation of pre-disability income;
• offsets or other income received during the benefit period; and
• whether the insurer is entitled to cease or reduce payments.

A claim may also involve an interaction between income protection and TPD insurance, particularly where a person’s condition becomes permanent or their capacity for employment changes over time.

When an insurer declines a claim

A declined claim is not necessarily the end of the matter.

The insurer’s decision should be considered against the actual policy wording, the evidence relied upon by the insurer and the circumstances in which the insurance was obtained and the claim made.

Depending upon the circumstances, we may review:

• the policy and policy schedule;
• the insurance application and underwriting information;
• medical records and reports;
• employment and occupational information;
• correspondence between the insured and insurer;
• the insurer’s reasons for its decision;
• information concerning previous claims;
• evidence concerning the person’s functional capacity; and
• any other material relevant to the claim.

We then advise on the legal and practical options available.

Medical evidence can be critical

TPD and income protection disputes frequently turn on medical and occupational evidence.

It may not be sufficient to establish that a person has a medical diagnosis. The relevant question may instead be whether the person’s condition satisfies the particular contractual definition of disability and what effect the condition has upon their capacity to work.

This can require careful consideration of medical evidence alongside the person’s occupation, qualifications, experience, employment history and actual functional capacity.

Where appropriate, specialist medical or other expert evidence may be obtained.

Non-disclosure and medical history

Insurers may investigate an insured person’s medical history after a claim is made.

An insurer may allege that information relevant to the insurance was not disclosed when the policy was obtained, or that the policy would not have been issued on the same terms had the information been disclosed.

These issues can become technically difficult.

The relevant questions may include what was actually asked in the insurance application, what information was provided, what the insured knew or ought reasonably to have known, and how the insurer would have approached the underwriting decision had different information been available.

Lee Lawyers has acted in complex insurance litigation involving these issues.

An example from our practice

In a significant life insurance dispute, an insurer initially made income protection payments but subsequently investigated the client’s historical medical records and declined the claim based upon alleged non-disclosure.

Lee Lawyers reviewed the insurance and medical history, obtained expert medical evidence, challenged the insurer’s position and commenced proceedings in the Supreme Court of Queensland. The matter ultimately resolved at mediation.

The case illustrates why the wording of the policy, the insurance application, the medical evidence and the insurer’s decision-making process can all be important.

Superannuation and TPD insurance

Many Australians hold TPD insurance through their superannuation fund.

A TPD claim may therefore involve several different documents and legal relationships, including:

• the superannuation fund;
• the insurer;
• the insurance policy;
• the superannuation trust deed or governing rules; and
• the insured member.

This can make the process more complicated than a straightforward claim under an individually held insurance policy.

We can assist in identifying the relevant insurance arrangements and considering the contractual and legal issues that arise.

Reviewing an insurer’s decision

Where a claim has been declined, reduced or discontinued, there may be several avenues for review or dispute resolution.

Depending upon the circumstances, these may include:

1. requesting further reasons or information from the insurer;
2. making an internal dispute resolution request;
3. providing additional medical or other evidence;
4. pursuing an external dispute resolution process where available;
5. negotiating a resolution with the insurer; or
6. commencing legal proceedings where appropriate.

The appropriate pathway depends upon the policy, the insurer, the nature of the dispute and the circumstances of the particular claim.