Interesting Superannuation Legal Case – TPD

Newey v First Superannuation Pty Ltd (t/as First Pty Ltd) [2009] NSWSC 1100

Background

Plaintiff:  Newey was a former employee of Emerdyn Pty Ltd who was a participating employer of the Furniture Industry and Retirement and Superannuation Trust (FIRST). He was a welder who had a pre-existing back condition from 2004 and an aggravation of that at work in 2006. He also had a hip condition requiring surgery.

Defendant:  Hanover Life Re of Australasia Ltd (insurer) and Furniture Industry and Retirement and Superannuation Trust (FIRST).

A TPD claim was lodged by the Plaintiff on 13 March 2008 for the insured lump sum TPD benefit he was entitled to through the group policy between FIRST and Hannover. Hanover and FIRST continued to defer their determination and the plaintiff commenced proceedings on 6 November 2008 (about 8 months post submitting the claim) because of this delay in waiting for a decision. The claim was paid on 13 August 2009 – a total of about 17 months after lodging the claim.

As the claim had been paid by the time of the proceedings, the only issues remaining to be resolved were interest and costs.

The plaintiff claimed interest under s57 of the Insurance Contracts Act 1984 (Cth) which provides that an insurer is liable to pay interest from the day on which it was unreasonable for the insurer to have withheld payment of an amount under a contract of insurance until the date that payment was made.

The plaintiff claimed that Hanover was liable to pay him at an earlier date than it did: namely, 8 May 2008, or November 2008 (the date on which the statement of claim was lodged).

Decision

Interest payable

Rein J:  In order to successfully claim interest on the basis of s57 of the ICA the plaintiff needed to establish either:

1.  Hanover, as at May/November 2008, believed that the plaintiff met the definition of TPD, or
2. if it did not believe as above, that it ought reasonably to have done so.

Medical Evidence

Rein J goes through a detailed analysis of the medical evidence and correspondence involved:

• Hanover sought further information directly from or in relation to the plaintiff and then awaited developments. Hannover wrote on four occasions to the plaintiff that it proposed deferring a decision on whether the TPD claim was payable because of this.
• The documentation provided to Hanover included material that, taken alone, supported the contention that the plaintiff met the TPD definition however there was other material that did not.
• There were four issues that led Hanover to be unable until August 2009 to be satisfied that the plaintiff qualified as TPD. This was the evidence that:
  • although the plaintiff injured his back in 2004, he had recovered and returned to work following conservative treatment and then subsequently relapsed in September 2006 following an incident at work;
  • surgery on his lower discs could potentially have remedied his problems but it was best to have a required hip surgery first;
  • the plaintiff underwent hip surgery in September 2008 and in February 2009 he had the spine operation as emergency treatment; and
  • the plaintiff had worked other than as a welder and could perform duties other than those of a welder;
  • Hanover agreed to pay the entitlement following receipt of a report from a clinical nurse dated 03 august 2009 that stated it was ‘almost certain’ the plaintiff would not be able to return to a welding- type job and would need retraining in another industry.

On the basis of the above evidence Rein J concluded that the plaintiff failed to establish Hanover or FIRST as at May/November 2008 believed that the plaintiff met the definition of TPD or could reasonably have formed the view on the material available to them that the plaintiff meet the TPD definition or that their decision to defer determination was unreasonable.

Regarding the plaintiff’s case against FIRST, his Honour held:

• if an insurer is not in breach of its obligations, it is unlikely that the trustee will be;
• if the insurer is in breach,  the insured will need to establish a breach of the trustee’s obligations to it;
• it will generally follow that if the insurer had not formed an opinion reasonably and the trustee has not taken action on behalf of the insured against the insurer, the trustee will be in breach of its obligations.

On the facts however Rein J Held that neither Hanover or FIRST rejected the plaintiff’s claim. They only deferred their decisions and that was reasonable in the circumstances. The insurer did not determine an adverse outcome for the plaintiff without giving him an opportunity to be heard.

Procedural Fairness

Rein J rejected the plaintiff’s assertion of procedural unfairness on the basis that Hanover did not give the plaintiff’s solicitors copies of all the material the workers’ compensation insurer had given them (in particular, Dr Perla’s report) until after proceedings had commenced. Rein J held that Dr Perla’s report merely repeated information found elsewhere and, insofar as it expressed views on the plaintiff’s fitness for work apart from surgery, Hanover placed no weight on it in deciding to defer determination.

Rein J ordered that the plaintiff pay the defendant’s costs but to a maximum of $5000 (the interest in dispute was only $4,500.00).

Application Of Newey

1. A superannuation fund trustee must make decisions in good faith and give ‘real and genuine’ consideration to the applicant’s claim. If they do not, it may lead to orders for the payment of interest and costs.
2. This is a fairly commonsense approach to applying interest.
3. Also, raises an interesting question for those funds that reject a claim because they are unable to make a decision at that time. It seems if Hannover had done that here as opposed to defer the decision, interest may have been payable.
4. The trustee’s breach here, had Hannover been seen to not have come to a decision when reasonably it should have, would have been that they didn’t ‘take action’ on behalf of the member.

Recently applied in Preston v AIA Australia Limited [2013] NSWSC 282 (3 April 2013):

[86] The defendant contends that the plaintiff should be allowed no s 57 interest because , it contends, the plaintiff never provided it with information requested for its due consideration of his claim and, accordingly (upon an application of the law elaborated in NRMA Insurance Limited v Tatt (1989) 94 FLR 339 at 355, Sayseng v Kellog Superannuation [2007] NSWSC 857; (2007) 213 FLR 174 and Newey v First Superannuation Pty Limited [2009] NSWSC 1100), it was never “unreasonable” within the meaning of s 57 for the defendant to have withheld payment.