Summary

This Federal Court decision of March 2020 confirms the principles of ‘forfeiture’ in relation to death benefit claims and provides guidance to life insurers as to when a criminal joint policy owner under a life policy, may ‘forfeit’ a benefit that they might otherwise have been entitled to.

The decision also confirms the prudence of paying a policy benefit into court under s 215 of the Life Insurance Act 1995 when there is any doubt as to the proper person to receive such sum.

Brief Facts

The Federal Court (FC) has dismissed an SCT appeal by a superannuation fund member claiming interest and damages on a paid TPD benefit.

Background

The member’s claim for a TPD benefit was accepted by the trustee in October 2013, three years after lodgment of the claim.

Background

Well before the Financial Services Royal Commission (FSRC) commenced, several enquiries and reports had questioned the counterintuitive exception in the Corporations Regulations that severed claims operations from the other compulsory obligations of insurers with an Australian Financial Services Licence (AFSL). Consequently, there was already long standing, concerted pressure for change.

Summary

The NSWSC TPD decision of Sandstrom v FSS Trustee Corporation & Anor [2020] continues the trend of intense judicial scrutiny of decline letters at Stage 1.

The extension of the unfair contracts terms regime (UCT laws) to life insurance contracts will commence on 5 April 2021 after the Financial Sector Reform (Hayne Royal Commission Response – Protecting Consumers (2019 Measures)) Bill 2019 received royal assent on 17 February 2020.

This extension gives effect to recommendation 4.7 of the Financial Services Royal Commission to extend the existing protections of the UCT laws under the Australian Securities and Investments Commission Act 2001 (Cth) to insurance contracts.

Case 607118

Brief Facts

The Complainant had a heart attack in 2017 and made a claim on his trauma policy which covered a ‘heart attack’ as defined . The Insurer rejected the claim as the Complainant’s condition did not meet this definition.

As required by the LICOP, in addition to the policy definition, the insurer also assessed the claim under the LICOP heart attack definition and found that the condition did not meet that definition either.

Overview

A number of amendments to the Insurance Contracts Act 1984 (ICA) have been proposed as part of the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2020 Measures)) Bill 2020 in response to the recommendations of the Financial Services Royal Commission (the FSRC).

The first of the proposed changes will replace the duty of disclosure, in regard to consumer insurance contracts (itself a new concept), with a duty to take reasonable care not to make a misrepresentation.

Like the rest of our society, the current health emergency has had an unprecedented impact on the courts and tribunals which deal with life and superannuation disputes. Below is our summary of how each body is responding.

While each court/tribunal’s specific response has differed somewhat, they have all encouraged or required the following where possible:

Note from Editor

Contents

Impact of COVID-19 on Courts and Tribunals

Financial Services Royal Commission Fallout – Proposed changes to the disclosure requirements and remedies under the Insurance Contracts Act

Charles Usher v Lend Lease Project Management & Construction (Australia) Pty Limited [2020] NSWWCC 61

Summary