A Case of Interest? TPD Claims and s57 of the Insurance Contracts Act

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A Case of Interest? TPD Claims and s57 of the Insurance Contracts Act by Helen Barnett and Peter Riddell | August 2007 Area of Expertise | Life Insurance

In Diosdado Sayseng v Kellogg Superannuation Pty Ltd & Anor1 Nicholas J of the Supreme Court of New South Wales held that the plaintiff was entitled to interest on his total and permanent disablement benefit (TPD), from a date prior to the insurer’s initial decision to decline the claim. The decision underlines the importance for insurers to take a proactive and considered approach in their management of TPD claims so as to avoid potentially large awards of interest. This is of particular significance given the proposed amendments to the Insurance Contracts Act 1984 (Cth) (the Act) and Regulations, which will see an increase in the prescribed interest rate.

The Facts The plaintiff issued proceedings against the trustee of his superannuation fund and its group life insurer, claiming an entitlement to a total and permanent disability (TPD) benefit pursuant to the group life insurance policy. On 8 June 2007, Nicholas J of the NSW Supreme Court held that the plaintiff fulfilled the definition of TPD within the meaning of the policy, and the insurer was therefore liable to pay the trustee the agreed benefits plus interest.2 The benefit was subsequently paid to the trustee on 29 June 2007. On 8 August 2007 the parties returned before His Honour for determination of the amount of interest payable pursuant to s57 of the Insurance Contracts Act 1984 (Cth) (‘the Act’). Section 57 of the Act provides that an insurer who is liable to pay an amount under a contract of insurance will also be liable to pay interest on that amount. Pursuant to 57(2), the period for which interest is payable is: “the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount” and ending on the day on which payment is made. The dispute between the parties focused on the date on which the period of interest commenced. The judgment indicates the following chronology in respect of the Plaintiff’s claim:

21 September 1998

Plaintiff ceases active service with Employee

4 November 1998

Trustee advises Insurer of the claim

6 November 1998 21 March 1999

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T U R KSLEGAL

Insurer advises Trustee of its requirements for investigation and assessment of the claim Plaintiff absent from work for six months

TURK ALER T


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