The Law Handbook 2024

416 Section 5: Managing your money Disability benefit disputes Disputes about total and permanent disability benefits are also common, since a determination of whether the member is disabled as defined by the trust deed must be made. Such benefits are often provided by way of an insurance policy between the trustee and an insurance company. So, a dispute can also arise as to whether the person is disabled as defined in the insurance contract. Other disputes can arise about whether a person is covered by insurance at a particular time, and by which insurance company. These disputes occur because the trustee has changed insurer. The questions of when incapacity occurs, and which insurer is liable at that time, can also arise. Structure of disability benefits The definition of ‘total and permanent disability’ varies. A common definition requires the person to have been absent from work due to sickness or injury for at least six months and is unlikely, in the opinion of the trustee or insurer, to ever work again in any profession, trade or occupation for which the person is reasonably suited by education, training or experience. Work for which the person is ‘reasonably suited by education, training or experience’ is work for which the person is neither overqualified nor unqualified. For example, a carpenter who could work as a clerk might be regarded as totally and permanently disabled within this definition because such work is not suitable, given his carpentry experience. Other common definitions require the person to have been absent from work due to sickness or injury for at least sixmonths and to be unlikely, in the trustee’s opinion, to ever again work in their usual occupation (an easier test for the member to satisfy), or unlikely to engage in any gainful occupation for which they are qualified by education, training or experience or could be qualified by retraining (a more difficult test). While the ‘unlikely to’ test takes into account the question of whether the person could attract an employer, some insurance policies only insure against the person being ‘unable to engage’ in a gainful occupation for which they are qualified by education, training or experience. This is a more difficult definition to satisfy because it arguably does not take into account the question of whether the person could attract an employer. Some insurers only provide an ‘Activities of daily living’ definition, which the Australian Competition and Consumer Commission has called ‘essentially junk insurance’. It is worthwhile checking what form of definition the insurer applies to you. Insurance Trustees often, but not always, finance the provision of death and total and permanent disability benefits through a group life insurance policy. Where the trustee is a commercial organisation, the insurer is usually a related company. Where the benefit is insurance-funded, sometimes the member is only entitled to the benefit if the insurer pays the insured benefit to the trustee. But there are still two decisions to be made. The insurer must decide whether the member is entitled to the insured benefit, and the trustee must decide whether the member is entitled to a disability benefit. The trustee must not allow the insurer to dictate their decision. If the trustee considers that the insurer should pay the benefit, the trustee may have a duty to press the insurer for payment. Reviewing a trustee’s decision How trustees should make decisions Trustees are required by law to make decisions solely with the interests of the beneficiaries in mind. They must exercise any powers and discretions under the trust deed in good faith, and for the purpose for which the powers were granted. Trustees must also give real and genuine consideration to the exercise of their discretion. They must not simply rely on the opinion of another person; for example, the opinion of the insurer or of the insurer’s medical practitioner. Even where the trust deed gives the trustee the power to delegate the making of decisions, the decision has to be made within the delegation given. It may be possible to argue, depending on the terms of the trust deed, that a decision has been improperly delegated. A trustee will also fail to give a matter real and genuine consideration if the trustee asks itself the wrong question. One example would be a trustee refusing to pay a total and permanent disability