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  • Bethany Bujaroski

Member's Interests First


This case demonstrates the ongoing duty a superannuation fund has on behalf of their member. Although members rely on the fund for retirement, they also rely on them to act as the trustee for their insurance policies that are held in super. A super fund thus has an ongoing duty to support the client, particularly when they are vulnerable on claim.


In this case, the trustee failed to perform this duty. The insurer also failed to comply with their duties under the relevant statutes. Our office recognised the extensive impact this situation had on the client, thus we presented an extensive analysis of both the trustee’s and the insurer’s failure to comply with their duties and obligations under the governing statutory authorities, codes of practice, and community expectations. This provided justification for the remedy we sought for our client.




1. SUMMARY OF THE FACTS


This client held two insurance policies with the insurer. The client made a successful Total and Permanent Disability claim. He could have, however, made a subsequent claim on his Salary Continuance policy. The trustee and insurer did not act within their duty and advise the client that this was a possible option for him to pursue. Therefore, the client did not receive the rightful benefit for his additional policy. This policy was held in super, meaning that both the insurer and the trustee are at fault here.


2. THE BREACHES OF LEGISLATION


Breach of Financial Services Council’s Code of Conduct

The life insurance code of conduct was implemented to protect consumers by promoting high standards of service by insurers. By turning a blind eye to the client’s salary continuance policy, the insurer significantly breached the code's promise to act honestly, fairly, respectfully, and transparently.


The Financial Services Council Code of Practice asserts in s8.2 that the insurer's responsibilities when a client makes a claim: “When you make a claim we will consider all of the features of the Life Insurance Policy to which your claim relates in order to ensure you are claiming for all available benefits under your Life Insurance Policy.”

The insurer has breached s8.2 of the FSC code by not considering all of the client’s life insurance policies with them that would fairly and reasonably relate to his claim. By turning a blind eye to his salary continuance policy the trustee has not been transparent in its dealings with the client.


Breach of Duty of Utmost Good Faith

s 13 of the Insurance Contracts Act asserts that a contract of insurance is based on the utmost good faith where each party must act in such a way. It was an unlawful act of the insurer and the trustee to willfully turn a blind eye by refraining from making a concurrent claim on the client’s salary continuance policy. Both the insurer and the trustee put their own interests first and did not advise the life insured/member that he had a salary continuance policy for which he would most certainly be able to claim on. This is a clear and blatant breach of s 13 as both the insurer and the trustee breached their duty of acting with utmost good faith toward their member.


Breach of Providing Services Efficiently, Honestly and Fairly

s 912 Corporations Act 2001 stipulates that a financial services licensee must do all things necessary to ensure that the financial services covered by the license are provided efficiently, honestly and fairly. Both the insurer and the trustee acted dishonestly by jointly turning a blind eye to the second policy, salary continuance. There is no doubt that the client would have had a successful salary continuance claim, as he had a successful TPD claim which has a much higher threshold of success. An efficient, fair and honest insurer and trustee would have advised the client of his ability to claim on his salary continuance policy.


Trustee’s Breach of Acting Honestly, Fairly and in the Best Interests of the Client

s 52 Superannuation Industry (Supervision) Act sets out the covenants to be included in governing rules for registrable superannuation entities. The act states that superannuation trustees must act honestly, fairly, and in the best interests of the beneficiaries. For a Trustee to act fairly and honestly, having all the facts before itself, it would be fair and reasonable for the trustee to have informed the member of the salary continuance policy. By not doing so we argue that the trustee has breached s52 Superannuation Industry (Supervision) Act and is incongruent with the community standards and expectations.


ASIC’s ‘Fairness Imperative’

The insurer’s actions contradict ASIC’s ‘Fairness Imperative’, which is encapsulated as “doing what's right; it's the quality of being reasonable and just”, reflecting the standard of fairness expected from Insurance Providers by our community. The insurer and trustee have both breached this by unfairly turning a blind eye to the client’s Salary Continuance policy which he could have claimed on.


3. CONCLUSION & REMEDY

Based on the above arguments, our office requested that based on the date of Total and Permanent Disability, a salary continuance claim be lodged. Further, the client was entitled to compensation as well as interest on the outstanding monthly benefit he has paid over the period of holding his policy.


If you or someone you know has experienced a similar situation, or you are unsure about the obligations of your superannuation provider or insurer, contact our office at 4285 6133.



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