The Victorian Bushfires – Expediting Payment of Claims By Peter Riddell & Helen Mentiplay | March 2009 Area of Expertise | Insurance & Financial Services
Summary Many life insurers are utilising a variety of measures to facilitate the fast tracking of claims arising as a result of the Victorian Bushfires. The Victorian State Coroner has adopted a disaster victim identification process which, whilst internationally recognised and thorough, may result in a delay of many months before all victims can be identified. In the meantime, insurers, IFSA and the Supreme Court of Victoria are taking pro-active steps, as outlined in the paper, to provide early help to victims and their families.
Who Does This Impact? Claims teams of life insurers and superannuation trustees.
What Action Should Be Taken? Insurers wishing to expedite the payment of claims may wish to enter into appropriate Deeds of Release and Indemnity in order to make total or partial payments under policies and also waive certain evidentiary requirements.
Background The life insurance industry has responded swiftly to the recent tragic bushfires in Victoria, with most life insurance companies, banks and other financial institutions offering a range of support measures for victims and their families. Trustees and insurers can expect a growing number of enquiries from bushfire victims about the range of benefits their insurance policies and superannuation funds may provide and about the possibility of gaining early access to their superannuation benefits on account of financial hardship, following recent government announcements. In addition to streamlining claims processes through the appointment of dedicated claims staff, many companies are waiving certain evidentiary requirements in an effort to expedite payment of life, disability or critical illness claims. This paper will review some of the proactive steps being taken by insurers and industry bodies to date, and suggest some practical measures which can be taken by insurers to expedite the claims process.
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Proofs in Support of a Claim Insurers will usually require some or all of the following information in support of a claim for a death benefit: •
A certified Death Certificate
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A certified Will
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A certified copy of the Grant of Probate or Letters of Administration
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The original policy document
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Certified proof of age of the deceased
In some instances a claim will be made on a superannuation fund trustee for a benefit which includes a sum insured pursuant to a group life policy. The trustee can only pay a death benefit as permitted by the Superannuation Industry (Supervision) Act 1993 and the relevant Trust Deed, which will generally restrict payment of the benefit to potential beneficiaries who were a ‘dependant’ of the deceased. Therefore,, in assessing these claims the trustee will also need to identify potential dependants, and will require a statutory declaration from family members or the executor regarding potential dependents. The difficulties which many claimants will face following the Victorian fires are that in many cases much of the documentation required to prove the claim, such as Wills, will have been destroyed in the fires, or alternatively they will face delays in obtaining death certificates to provide to insurers and trustees in support of their claim.
IFSA The Investment and Financial Services Association (IFSA) has offered to act as a centralised point of contact between the Victorian State Coroner and life insurance companies. It is intended that this approach will expedite the claims process in a number of ways, in particular by reducing the need for enquiries from multiple insurers and providing an effective means by which the Coroner can communicate with insurers. IFSA is also taking pro-active steps to contact superannuation fund trustees to ensure that claims for benefits under group life insurance policies are not delayed where a determination is also required by the trustee.
The Disaster Victim Identification Process Before a death certificate or interim death certificate can be issued by the Coroner, identification of the victims must be made. It is necessary that the Coroner undertake a structured, systematic approach in order to avoid the obvious grief and trauma that would follow in the event a misidentification occurs. The Victorian State Coroner has responsibility for the identification process and is utilising a disaster victim identification (DVI) process, which is an internationally recognised scientific process involving a combination of dental, medical, DNA and fingerprint examinations.
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The process is a complex one and involves collection of evidence at the scene, scientific analysis, and gathering of information from family and friends. This information is then presented by the police to the Identification Board headed by the Coroner, who will then make a determination of identification where possible. At the time of writing the Coroner has only formally identified a small number of victims.
Probate or Letters of Administration The gathering and distribution of assets after somebody dies is usually done by the executor of the Will who, in certain circumstances, must apply to the Supreme Court for a Grant of Probate (or Letters of Administration if there is no Will) as proof as his or her capacity to collect and distribute the estate of the deceased. A Death Certificate, or at least an interim Death Certificate, from the Coroner is usually required in order to make an application for Probate or Administration. If a grant of Probate or Administration is required, an insurer or fund trustee will generally not pay a death benefit until the Probate or Administration has been granted by the Court, and copies of the relevant documentation are received. The Victorian Supreme Court has put in place a new structure to deal with proceedings arising from the bushfires so as to fast track proceedings dealt with by the Registrar of Probates. The Probate office has recently confirmed that due to the large number of bushfire related deaths, coupled with the degree of forensic precision required to ensure accurate identification, it is envisaged that the issue of Death Certificates may take some time. However, the Registrar of Probates can grant Probate or Administration on the filing of an interim certificate issued by the State Coroner or the Registrar of Births, Deaths and Marriages. The Probate office has also confirmed that, in circumstances where a Will has been destroyed in the fires, it remains possible for a copy to be provided to the Court. This can be done by obtaining a copy held by a solicitor or bank, and providing evidence that the Will was executed, or proving the contents from instructions given to the drafting solicitor and the evidence of a witness who signed the Will. Claimants should be advised to seek independent legal advice regarding this issue.
Death Presumed from Circumstantial Evidence In the event a person is missing there may be available evidence of a circumstantial nature that is sufficient to establish that he or she has died. The Courts are able to make an order for a Grant of Probate on the presumption of death provided it is satisfied that the missing person is no longer alive. The relevant principle stems from the 1937 High Court decision in Axon v Axon which provides that if a person has not been seen or heard of for at least 7 years by those people who in the common course of affairs would be likely to have been communicated with, then in the absence of evidence to the contrary, it ought to be found that the person has died. In appropriate circumstances, an inference of death may be made where less than 7 years has elapsed if there is sufficient circumstantial evidence to prove the death. If a claimant is able to provide circumstantial evidence to an insurer which would satisfy a court that an inference of death should be made, the insurer should be mindful not to refuse payment of the claim on the basis that 7 years have not yet elapsed. In these circumstances it is possible that a refusal would give rise to an entitlement to interest pursuant to s 57 of the Insurance Contracts Act Act, on the basis that it was unreasonable for the insurer to have withheld payment once it had the relevant information before it. Each case will of course be determined on its own facts.
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Progressing Payment of Claims In the meantime, insurers wishing to progress payment of claims can adopt some of the following measures: •
Identify insureds residing in postcodes affected by the fires in anticipation of potential claims.
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Make advance payment of part of the life cover sum insured to beneficiaries on a case by case basis.
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Waive evidentiary requirements for payment of claims on a case by case basis.
If evidentiary requirements are to be waived, insurers would be well advised to enter into appropriate Deeds of Release and Indemnity with claimants. Such a Deed will afford a level of protection for the Insurer in the event a claimant is not bona fide, a mistake has been made as to the identity of the deceased, or the insurer wishes to investigate any potential non-disclosure issues. Generally, monies paid on the death of a life insured who is subsequently found to be alive can be recovered as monies paid upon a mistake of fact. However, whilst a judgment can be obtained against the recipient of the monies, there is no guarantee that the recipient will be in a financial position to make any repayments. The same difficulty can arise if an insurer is required to rely upon a Deed of Release and Indemnity, although, subject to the terms of the Deed, a judgment may be easier to obtain in such circumstances, allowing swifter recovery of the funds.
Conclusion On 12 March the Bushfire Appeal Fund Advisory Panel Chair Chair,, John Landy Landy,, and Victorian Premier Premier,, John Brumby Brumby,, announced that more than $130 million in donations to the Bushfire Appeal Fund were to be distributed to people who suffered damage in the bushfires, beginning the first phase of what will no doubt be a long and difficult process of recovery, rebuilding and healing. The initial distribution will be made to all homeowners whose principal place of residence was destroyed by the bushfires, who would receive a Rebuilding and Recovery Grant of $50,000. Further distributions from the fund are planned. Mr Landy credited ‘the unprecedented generosity of Australians’, who had donated through the Australian Red Cross, which had enabled the Fund to provide assistance to those whose homes had been destroyed or significantly damaged. The community’s sympathetic response has been mirrored around the country and the insurance industry can take great pride in taking a notable lead in providing a range of support measures to provide early help to the victims and their families. Both the Minister for Superannuation and Corporate Law, Senator Nick Sherry,1 and corporate regulator regulator,, ASIC2, have recently provided advice to bushfire victims about seeking benefits through their superannuation funds and the possibility of gaining early access to their superannuation benefits on account of financial hardship. Trustees and insurers can expect a growing number of enquiries of this nature. It is clear that the industry’s efforts will consequently need to be maintained and reinforced in coming months as victims come to grips with the financial aftermath of the disaster.
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Endnotes 1
Interview with Joe O’Brien and Virginia Trioli ABC2 News Breakfast Wednesday, 11 February 2009
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ASIC provides extensive advice to bushfire victims through its website http://www.fido.asic.gov.au
For more information, please contact: Peter Riddell Partner T: 03 8600 5005 peter.riddell@turkslegal.com.au
Helen Mentiplay Lawyer T: 03 8600 5004 helen.mentiplay@turkslegal.com.au
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