TPD Claims: Considering Wrong Definition is Not Necessarily Fatal by Caroline Smith | April 2006
The case of Cullinane v Mercer Benefit Nominees Limited (2005) FCA 1470.
Introduction In Cullinane v Mercer Benefit Nominees Limited, Justice Lindgren of the Federal Court upheld a Superannuation Complaints Tribunal (“Tribunal”) decision in favour of a Trustee’s decline of a claim for Total and Permanent Disablement (“TPD”) benefits. The Federal Court has reinforced the principle that insurers do not need to point to a specific occupation the member can perform in order to decline a TPD claim. The Court also found that the role of the Tribunal was to ensure a fair outcome, rather than analyse the process of determination.
The Facts Ms Cullinane was in her early thirties and worked as flight attendant for Ansett. In late 1997 she was exposed to airborne chemicals and developed a reaction. She alleged she could no longer return to work and subsequently submitted an application for a “disablement benefit” to the Trustee of her superannuation fund on 16 October 2001. Ms Cullinane had completed tertiary study, had experience working as a computer programmer, office manager and owner/operator of a retail clothing boutique. She worked as a flight attendant/cabin manager with Ansett from 1984 to 1997. The Trustee, though self-insured, contracted AMP to assess the claim on its behalf. AMP recommended that the claim be declined and the Trustee followed this recommendation. Prior to the determination of the claim, Ms Cullinane made a complaint to the Tribunal with regard to a failure by the Trustee to determine the claim. Subsequent to the determination, a second complaint was lodged which attacked the decision to decline the claim. The Tribunal, through its powers under s18 of the Superannuation (Resolution of Complaints) Act 1993 joined AMP in the proceedings.
The Tribunal & Federal Court Decisions The Tribunal upheld the decision of the Trustee to decline the claim. Though he found errors in the decision of the Tribunal, Justice Lindgren of the Federal Court upheld its decision.
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The Role of the Superannuation Complaints Tribunal The Tribunal considered a letter from AMP acknowledging that an incorrect definition of TPD was provided to the Tribunal, and the correct expression was “disablement”. AMP had incorrectly relied upon the definition of TPD in its Policy. Despite this, the Tribunal found that the two definitions were “compatible” and both implied a component of future service. Justice Lindgren agreed with the Trustee’s submission that the Tribunal’s role was to review the outcome of the decision making process, not the process itself. Therefore, even if it was determined that the Trustee applied the wrong definition and answered a claim for TPD rather than disablement, the question before the Tribunal was whether that decision in its practical application in the circumstances was fair and reasonable. The Tribunal found that it was open to AMP and the Trustee on the evidence to find Ms Cullinane was more likely than not to return to work.
Considering AMP’s Decision Ms Cullinane also argued that the Tribunal had erred in considering the decision of AMP, who was not the insurer, nor the Trustee but simply a contracted claims assessor. She submitted that the consideration of AMP’s decision distracted the Tribunal from its task. The Court found that the fact the Tribunal reviewed an opinion which they were not obliged to review did not effect the legitimacy of the Tribunal’s decision, particularly in view of the voluminous submissions made by Ms Cullinane in respect of AMP’s decision.
The Definition of “Unable” When looking at the meaning of “unable”, the Tribunal considered the context of the benefit in relation to the entire Scheme. Noting that the disablement benefit was the equivalent to a death benefit, Justice Lindgren stated: “The essential point made by the Trustee is that under the rules the amount of a disablement benefit is in substance the same as the amount of a death benefit, and so, to put the matter perhaps bluntly, one would expect to find that, in order to be entitled to a disablement benefit, a member must have as much chance of returning to work as a dead person would have.” Justice Lindgren agreed with the Trustee’s approach.
Citicorp v Smith The Federal Court also upheld the principle elucidated in Citicorp v Smith (2005) FCAFC 102 (see our earlier Turk Alert), that there is no obligation upon an insurer to point to a particular occupation the member can perform. Establishing that a claimant is capable of a “type” of work is sufficient basis for an opinion to decline a claim.
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Implications Occasionally, insurers and Trustees will look at the wrong definition in determining a TPD claim. This case stands for the proposition that considering the wrong definition is not necessarily fatal to insurers’ or Trustees’ decisions, if the definitions are equivalent. The reason for this is that the role of the Tribunal is to ensure a fair and reasonable outcome. The intent of the Tribunal is not to find an inadvertent error in procedure by the Trustee and allow a member to rely upon this error to overturn the Trustee’s decision. This judgment can be found at http://www.austlii.edu.au.
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