Big win for insurers, big lesson for planners

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A major decision in the NSW Court of Appeal has clarified the law in relation to total and permanent disablement (TPD), overturning a decision originally in favour of the claimant.

The case involved a former truck driver who claimed he was unable to continue in his job due to an injury but then undertook a refresher course to retrain as a part-time taxi driver. The court originally found that ‘retraining’ meant that work as a taxi driver fell outside his previous education, training and experience because the man had to obtain a licence. The decision was unanimously overturned last week, and Lisa Norris, life insurance expert and partner in the Sydney office of specialist law firm TurksLegal, says financial planners can take something away from the decision.

“I think an important lesson from the judgement is to make sure that the TPD cover they are arranging for their clients will cover the eventuality they thought it would,” she says.

There are two basic types of TPD insurance:

  • Any occupation – which covers a person who by reason of disability is unable or unlikely to be able to return to work in any occupation they are reasonably fitted for, and;
  • Own occupation – which covers a person who by reason of disability is unable to return to their pre-disability occupation, specifically.  

These products cover different risks and are priced accordingly. 

“If a client requires TPD cover that will still pay a benefit if there is an ability to work on a part-time basis, or following retraining, financial planners may consider that an ‘own occupation’ product is more suitable for that client.” 

The truck driver’s claim would have seen a blurring between those two types of cover. The Court of Appeal’s decision clarified that with an ‘any occupation’ definition, capacity for different work following ‘reasonable’ retraining may mean a client is not TPD.  It also held that regular part-time work could be taken into account in deciding if a client is TPD.

“This is an important decision and a welcome development for group life insurers,” Norris says. “In fact, had the decision gone the other way, it may have meant that any form of ‘retraining’ could not be taken into account when determining TPD which would have caused great uncertainty in the superannuation sector.”

Superannuation trustees have seen a substantial upswing in claims for TPD over recent years. The insurance premiums paid by members have also been rising to match. Had the plaintiff been successful it could have opened the way for many more marginal claims and put further pressure on insurance premiums, says Norris.

  • Rachael on 5/05/2013 10:52:42 AM

    "refresher" does imply previous experience. Regardless, both occupations are driving based roles, hence falls generally within the scope of his previous experience. You couldn't reasonably expect an office worker who only uses their car for basic transportation to retrain as a taxi driver and expect to successfully deny thir claim. It would need to fall within the scope of their previous experience.

  • Sue Laing - the risk store on 2/04/2013 11:15:12 AM

    Jamie this being a court case the proceedings aren't publicly available as they are for the Tribunals. Anyone wanting a transcript has to pay for and order this via the court.

  • Jamie Forster on 2/04/2013 10:25:21 AM

    I find this case quite concerning as, anyone with a driver’s licence could re-train as a taxi driver with minimal fuss. In fact, anyone without a licence could as getting a licence isn't that difficult and could therefore be considered reasonable re-training.

    I feel that there must be more to this case than in this article. For instance, the truck driver took a "refresher" course. That suggests that he already has the skills to be a taxi driver.

    Can someone direct me to the case.

  • Concerned Financial Planner on 1/04/2013 9:07:55 AM

    Mark, I found your comments degrading toward a section of community, the taxi drivers. I am more puzzled how come these degrading comments are made by a person who claims on his website and profile to be not only a “community minded” and “relationship building is very important to [him]” but also a CFP and an “inaugural member of the Financial Planning Association's (FPA) Risk Advisory Committee”.

    As a concerned Financial Planner when I see and hear comments like yours toward any section of community or other members of community, I wonder how are we going to become “Professionals” and change this industry, the Financial Planning into a “Profession”!!!???

    We will not be respected by others as “Professionals” if we do not respect other people and their trades or professions.

    Mark, as a concerned financial planner, a CFP and a member of FPA, I highly expect your new rectifying comments on this page.

  • Concerned on 28/03/2013 4:33:17 PM

    Re-training works well under income protection, but this could be a real problem for TPD.

    TPD is a lump sum payment -"all or nothing".

    There is a risk that this will increase the adverserial nature of TPD claim payments. e.g. the suspicion (justified or not) for Insurers' medical opinions and for claimants' malingering.

    Some claimants - unwittingly one suspects - will see this as being cheated out of their lump sum TPD payment. It will drive some into further malingering behaviours or non-participation in their rehab - at great cost to their lifestyle.

    Surely not a good outcome. There must be a better way.

  • Mark Thompson on 27/03/2013 3:47:25 PM

    I reckon that the decision was reasonable. From recent observations a taxi driver is not required to have much understanding of streets and thoroughfares or road rules, need not speak English, need not have superior driving skills and need only have the personality of an earth worm. Now had a taxi driver been asked to retrain as a truck driver, that would be a different matter.

  • Craig on 27/03/2013 10:21:46 AM

    It's unfortunate that this ended up in court as rather than provide clarity, i think it just makes things more confusing....who decides what is 'reasonable' retraining? Surely clear and concise policy wording is preferable to the courts. The reference to 'any' and 'own' occupation is completely irrelevant to the case mentioned as he would not have qualified for 'own occupation' TPD anyway.

  • Sue Laing - the risk store on 27/03/2013 10:15:58 AM

    Two points about this:
    Firstly, group policies in some funds already allow that if there is IP and a rehab (retraining) programme is undertaken within the IP claims management process, then those new skills can be taken into account by the insurer/Trustee in their TPD assessment.
    Secondly, the industry has commercially restricted the types of occupation that can purchase own occ TPD. Where does this leave the adviser who needs to cover a truck driver or other occ which can't be insured for anything but any occ?

    There is no doubt that court cases and FOS/SCT determinations are changing the face of TPD from what it was originally designed to do. Perhaps it's time to look at the UK which has introduced some real clarity with new TPD definitions designed to facilitate this evolution.

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