The Law Handbook 2024

Chapter 5.6: Superannuation 419 insurer ‘considers’ or ‘is satisfied’ that the member is unlikely to return to employment) then the court can set aside the decision of the insurer if it considers that the member was entitled to disability benefits. The trustee is under an obligation to consider whether an insurer that has rejected a claim has acted properly and, if it has not, to take action, including suing the insurer, if necessary, in order to protect the rights of the member. In practice, trustees rarely, if ever, sue insurers. The member may sue the insurer on the ground that it has failed to act in good faith, reasonably and with due regard to the interests of the member or, if the insurance contract does not require the payment of benefits only if the insurer ‘considers’ or ‘is satisfied’ that benefits ought to be paid, on the simple ground that the member is disabled as defined in the insurance contract. The member can do this, even though not a party to the contract of insurance, because the trustee (which is a party) holds its rights under the contract on trust for the members. It is also necessary for the trustee to be party to the legal action. The trustee may agree to join the member in suing the insurer or, more usually, may be sued by the member for failing to act against the insurer to protect the member’s rights. Trustees and insurers ought to provide a claimant with information about material adverse to the claim and with an opportunity of addressing those matters before dismissing a claim. If this is not done, a court may set aside the decision. (See Re Hannover Life of Australasia Ltd v Sayseng [2005] NSWCA 214 and Sandstrom v FSS Trustee Corporation [2020] NSWSC 200 at [28–48] for statements of the relevant principles.) If the court decides the insurer breached its duty to act honestly and reasonably, it will usually not allow the insurer to make the decision again but will substitute the court’s decision. Alternatively, a complaint can be made to AFCA about the insurer’s decision. AFCA has the same powers to review the decisions of insurers concerning payment of disability benefits under superannuation trusts as it has to review the decisions of trustees. In particular, AFCA is not limited to looking at the process whereby the insurer made its decision and can look at whether the decision was fair. Contacts Australian Financial Complaints Authority (AFCA) Tel: 1800 931 678 Email: info@afca.org.au Web: www.afca.org.au On 1 November 2018, AFCA replaced the Financial Ombudsman Service, the Superannuation Complaints Tribunal (SCT), and the Credit and Investments Ombudsman. Complaints made to the SCT before that date will remain with the SCT. Australian Taxation Office (ATO) Tel: 13 28 65 or 13 10 20 Web: www.ato.gov.au/individuals/super Centrelink Tel (superannuation): 13 23 00 Web: www.servicesaustralia.gov.au Financial Ombudsman Service (FOS) see Australian Financial Complaints Authority (AFCA) Superannuation Complaints Tribunal (SCT) see Australian Financial Complaints Authority (AFCA)