WANNA DATE …………..?

Financial Newswire’s Life/Risk expert, Col Fullagar examines recent decisions in which dates proved to be the critical factor in how much claimants got paid and whether they actually got paid at all.

The writer confesses that when it came to having ritzy lines to encourage someone to go out on a date with him, the phrase “Buckley’s and None” springs to mind. In fact, the incumbent only had one line “G’Day, my name’s Col. What do you think of me so far?” ….. which could explain a lot !

What said writer learnt from the sparsity of dates was, however, the importance of same.

Dare it be suggested that the same applies when it comes to the assessment and payment of lump sum claim benefits where a date could make a difference of hundreds of thousands of dollars in the amount payable and, in some instances could result in no benefit being payable at all.

Two recent examples follow …….

Total and Permanent Disability (“TPD”) Benefit Calculation Date

Mr T (no relation to the 80’s TV star) held a term insurance policy to which was added an Own Occupation TPD benefit. He was 44 years old and working as a chiropractor when in June 2022 he ceased work due to the effects of degenerative osteoarthritis in his left shoulder. A claim was duly lodged, and the assessment process began.

In January 2023, while the claim assessment continued, the indexation benefit included in Mr T’s policy increased the benefit amount by $107,000 from $2,141,295 to $2,248,360.

In May 2023, the insurer concluded its assessment of Mr T’s claim by forming a view that he was permanently unable to work in his own occupation. The insurer proceeded to pay the lower of the above two amounts. Mr T however believed he should be paid the higher amount. One thing led to another and the handing down of a court ruling by the District Court of NSW.

The presiding Judge noted the relevant definition required the following to be satisfied:

• The insured suffered a sickness or injury while working in regular employment for income …….., and:
• The insured had been absent from and unable to work because of the sickness or injury for a continuous period of at least 6 months; and
• The insurer believed, after consideration of medical and any other evidence, that the insured was incapacitated to such an extent that they were unlikely ever to be able to work again in the occupation in which they were last engaged before becoming unable to work.

The insurer contended that the benefit amount payable should be that which applied when Mr T ceased work in June 2022 or, in the alternative, on the expiry of the relevant TPD waiting period. As the benefit at either of these dates was the lower amount, that is what was paid with premiums paid after that date being refunded.

Mr T contended that the benefit amount payable was that which applied once each of the criteria within the definition had been met. As this date was May 2023, Mt T believed he was entitled to the higher amount.

The Judge agreed with Mr T:

“It seems to me that when (the relevant clause) is considered, one sees a series of requirements to be met, each of which are conjunctive. In my view there is no basis for construing any one of these conjunctive requirements as being subordinate to the others. In my view, each requirement must be satisfied before the TPD claim is to be met, and it is not until the time that they are all satisfied that the sum insured is to be determined.”

This date, concluded the Judge, was May 2023 when the insurer formed a “belief” that the prior legs of the definition had been met. As such, the higher benefit amount was payable.

Any adviser and/or client who has been subjected to a TPD claim and sometimes trauma claim being backdated many years and having subsequent indexation increases wound back will quickly appreciate the implications of this ruling with the judge also adding another “ …. in my view the effect of the plaintiff’s preferred construction is to provide an incentive for the insurer to form the Prognostic Belief at the earliest reasonably available time.” Wouldn’t that be nice !!

Some canny claimants may assert this creates a discouragement to lodge a claim in a timely manner if and when the benefit indexation rate would increase the insured benefit amount by more than the premiums payable. This, however, has to be weighed against the attraction of having the insured benefit amount at the claimant’s disposal sooner rather than later.

Some canny lawyers may query whether this judgment would be followed by insurers or indeed by other judges in comparable cases.

(Source – Tassell v TAL Life Limited, (2024) NSWDC 301)

Trauma Claim – Date of Diagnosis v Date of Occurrence

By way of background:

• February 2016 – Ms C started a trauma insurance policy.
• July 2016 – Ms C began to suffer symptoms which led to medical investigations being undertaken. The symptoms and investigations continued spasmodically over the next two years with findings varying from “nothing significant to be concerned about” to the diagnosis of medical conditions unrelated to cancer.
• February 2018 – Ms C cancelled her trauma insurance policy due to premiums being considered too expensive.
• August 2018 – The ongoing medical investigations revealed the presence of a rare form of malignant cancer.
• June 2019 – Ms C lodged a trauma insurance claim which was declined by the insurer on the basis that the relevant diagnosis was not made while the policy was in force. Ms C disputed the insurer’s position and lodged a complaint with AFCA.

AFCA concluded the relevant policy extracts were:

“When we will pay …. If the life insured suffers a critical condition while this policy is in force, we will pay you the critical illness benefit …….indicated below.”

Cancer was defined as, in part “…. the presence of one or more malignant tumours, leukemia or lymphomas.”

At the end of the list of insured events, the following was stated:

“The life insured first has a critical condition:

• For surgical conditions when the surgery actually happens; and
• For all other conditions when the condition is first diagnosed as meeting its definition.”

In defence of its decision to decline the claim, the insurer stated that its liability was tied to the date of diagnosis, and it did not remain on risk for conditions that are diagnosed after cover ends.

To support her position, Ms C provided reports from her two treating doctors that concluded the tumour was present in 2016, prior to the date the cover was cancelled, and was the most likely cause of the symptoms Ms C suffered at that time.

AFCA favoured Ms C’s position finding that the “When We Pay” provision of the policy (the insuring clause) only required the life insured to suffer an insured critical condition while the policy was in force, without any reference to the need for a diagnosis.

In regard to the policy provision “The life insured first has a critical condition ….. when the condition is first diagnosed as meeting its definition” AFCA found this was simply a stipulation that payment would be made after the condition was diagnosed as distinct from requiring the diagnosis to occur while the policy was in force.

AFCA determined the complaint in favour of Ms C with the insurer being required to pay the relevant benefit amount to her.

Clearly, a key to the favourable decision for Ms C was a combination of related symptoms being observed while the policy was in force and the later linking of those symptoms by her treating medical practitioners to the presence of a previously undetected malignant tumour. It was also important that the policy wording of the insuring clause lent itself to a diagnosis not being required while the policy was in force.

To the extent that any of the above factors were absent, a successful claim would become increasingly tenuous.

A complicating factor both for the claim and Ms C’s medical wellbeing was the rarity of the cancer type which meant diagnosis evaded the medical fraternity for many months.

The takeaway from the above examples is the importance of the fine print within the policy wording when it comes to dates. Something the writer also learnt many years ago when he turned up to collect his date only to find her absent as she had received a better offer….. which could explain a lot !!

PS For those interested, the phrase “Buckley’s and None” is thought to have originated from the improbable survival of William Buckley, a convict who escaped colonial authorities in 1803 and lived with Indigenous people in the Australian bush for 32 years before eventually surrendering. 

Col Fullagar is the principal of Integrity Resolutions Pty Ltd