Paul Cleary & Lisa Norris | September 2011 | Financial Services & Life Insurance
The NSW Court of Appeal recently re-examined the nature of the duties a trustee owes to its members when entering into a new policy of life insurance. The Court found that a trustee had not breached any duty owed to its members by entering into a group life insurance policy which contained different terms to an earlier policy. The Court also revisited the relevance of capacity for part-time employment to TPD claims generally. The Court found that, generally, a claimant who can work parttime will not be TPD for the purposes of a ‘typical’ TPD definition.
Who does this impact? Life insurers and superannuation fund trustees.
What action should be taken? The Court has now indicated that, in the absence of clear language to the contrary, a claimant with the ability to return to work on a part-time basis (or who has in fact done so) is unlikely to meet the criteria for payment of a TPD benefit where the TPD definition is consistent with “the common form wording” considered by the Court. In considering a TPD definition, fund trustees and life insurers should carefully consider whether the applicable policy wording in fact limits “occupation” or “employment” to full time employment, or whether it is on par with the “common form wording” set out in the judgment. A superannuation fund trustee changing its insurance arrangements should consider adopting similar due diligence measures to those taken by this trustee, as part of its Change Management Plan.
Background We discussed this case in our TurkAlert dated May 2010, titled Trustee’s duties, TPD and part time work: are the Courts reining back? To recap, the respondent, Commonwealth Bank Officers Superannuation Corporation (“the Trustee”), was the trustee of the Officers’ Superannuation Fund (“the Fund”) which was established to provide benefits to employees of the Commonwealth Bank (“the Bank”).
Client Update
TPD clauses and super trustees’ duties