Rejecting predatory TPD claims will change behaviour
Predatory legal behaviour around Total and Permanent Disability (TPD) insurance claims from superannuation funds would be reduced if funds and insurers rejected pre-emptive actions by plantiff law firms, according to a lawyer working in the space.
Speaking at the Money Management TPD — Fatal or Flexible breakfast briefing in Sydney on Friday, Berill Legal principal lawyer, John Berill, said lawyers had a role to play in challenging unreasonable decisions.
However, he said lawyers should not be lodging proceedings before an insurance claim has been lodged or a decision made by the insurer or super fund trustees, and if these moves were rejected more often, they were likely to cease.
"If a lawyer issues court proceedings before lodging a claim, there is a simple solution to that - make an application to strike out that action. You will succeed because most actions are about suing the trustee for breach of trust, that is, where the trustee decision was unfair or unreasonable or where no reasonable trustee could have reached that decision," Berill said.
"There has to be a trustee decision before a court can intervene, so if you are issued a writ for court proceedings at the time of lodging a claim or without a claim have been lodged that writ will fail, so take it on."
He stated plaintiff law firms looked at engaging in legal action because it had a higher chance of settlement than either the Superannuation Complaints Tribunal (SCT), or the Financial Ombudsman Services (FOS), and past practices of insurers and trustees have been used to gauge whether pre-emptive legal action would result in a settlement.
"There are some funds that if you look at past practice on court proceedings - and looking at past practices is a relevant factor - if you have a fund that rolls over if court proceedings are issued, then people more likely to issue court proceedings than not," Berrill said.
"This type of behaviour will stop if insurers and trustees don't adopt an attitude of throwing hands in air and just paying these claims. If we hold people to account this practice will stop soon enough."
Despite this, Berrill said lawyers still had a place in settling TPD claims as the SCT and FOS were often slow and difficult to navigate, with the SCT taking up to three years to decide some cases with only a 15 per cent success rate for fund members.
"FOS also has issues around time it takes to deal with complaints. It has a two tier system where a non-binding recommendation is made before a panel decision is made," he said.
"It has also introduced a ‘door bitch' mechanism - and a significant number of people in the consumer movement have concerns with this — which has created thresholds to entry to FOS where it looks at what they think are the prospects of success of a claim before they even let it in the door to deal with it."
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