THE ROLE OF THE TRUSTEE

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2 DISABILITY CLAIMS THE ROLE OF THE TRUSTEE Lynda Purcell National Claims Advisory Manager Mercer Consulting (Australia) Pty Ltd 9 October 2018

3 DISABILITY CLAIMS DECISICION MAKING THE CONCEPTS OF PURSUIT & REASONS

4 FIDUCIARY RELATIONSHIPS Quintessential fiduciary relationship is that between a trustee and beneficiary: The archetype of a fiduciary is of course the trustee Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64 per Gibbs CJ at [28]

5 HIGH EXPECTATIONS ON DECISION MAKING ABILITIES Superannuation is not a matter of mere bounty, or potential enjoyment of another s benefaction The legitimate expectations which beneficiaries of superannuation funds have that decisions about benefits will be soundly taken are high Finch v Telstra Super Pty Ltd [2010] HCA 36 at [33] A beneficiary is entitled as of right to a benefit provided the beneficiary satisfies any necessary condition of the benefit Finch v Telstra Super Pty Ltd [2010] HCA 36 at [66]

6 INSURER DUTY Has a duty of good faith and fair dealing, requiring it to: have due regard for the interests of the claimant afford the claimant procedural fairness when there are adverse findings When forming an opinion under the policy terms and conditions, it must consider and determine the correct question(s) Must act reasonably in considering and determining the matter (not discretionary) Must take into account the relevant material in its entirety and not selectively misstate the effect of the material before it [Is the decision open to the insurer? Reasonable persons may reasonably take different views ]

7 TRUSTEE DUTY Observe the provisions of the trust deed Act honestly, in good faith and without bias Exercise its duties and powers in the best interests of all members with care, skill and diligence of a prudent superannuation fund trustee which includes: all dealings with the insurer such as, appointment, monitoring and timely progress Give properly informed real and genuine consideration not rubber stamp the insurer Make reasonable enquiries (but not endlessly) Review insurer s decision against relevant policy terms

8 TRUSTEE DUTY THE PURSUIT Superannuation Industry (Supervision) Act 1993 (Cth) Extended to include a claims covenant Requires a trustee Subsection 52(7)(d) to do everything that is reasonable to pursue an insurance claim for the benefit of a beneficiary, if the claim has a reasonable prospect of success

9 Extract from the Explanatory Memorandum Trustees should consider the likely costs and benefits (with respect to all affected members of the [fund]) of pursuing an insurance claim in determining whether it is reasonable to pursue a potentially successful claim. Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012, Explanatory Memorandum at [1.98]

10 THE CLAIMS COVENANT Mandatory Duty but not mandatory to litigate Two key elements: Reasonable belief that the claim has a reasonable prospect of success Excludes claims that are: hopeless or bound to fail question of hopelessness can only be determined after thorough investigation so lacking in merit or substance as to be not fairly arguable It is not a particularly stringent test suggesting something less than likelihood of success In reality, few claims can be excluded Reasonable steps to pursue the claim Doesn t only occur at the end stage It is a continuum how far and what form will depend on the facts and circumstances of each claim

11 Step 1 Pre and during the claim process Communication rights, criteria, process Quality control administrator and insurer Step 2 Procedural Fairness Orderly assembly of claim documents Highlight adverse material Step 3 Insurer s decline decision Consider whether the insurer has met its duties Make own enquiries if necessary Challenge the insurer Step 4 Trustee cannot agree on decline Insurer s contractual adjudication process Lodge a complaint with FOS/AFCA Support a complaint at SCT/AFCA

12 TRUSTEE DUTY GIVING WRITTEN REASONS Purpose Provide accountability and transparency in decision making Statutory Duty the reasons shall also set out the findings of fact and refer to the evidence on which those findings were based Acts Interpretation Act 1901; s 25D

13 TRUSTEE DUTY GIVING WRITTEN REASONS Set out: the parameters within which the decision is made (relevant trust deed provisions, insurance policy terms, legislation) findings on material questions of fact (reference to the applicable documents) key evidence relied upon if appropriate that not considered relevant or persuasive rationale in easy to understand terms, not ambiguous or vague

14 OBSERVATIONS Decision Making Proper examination Correct policy and trust deed provisions applied Decision open to the insurer? Adherence to timeframes contained in the Insurance in Super Code Trustees taking longer than the statutory 90 days to respond to complaints Insurance in Super Code requires complaints response within 45 days or 90 days for the exceptional cases: [13.15]

15 OBSERVATIONS the Pursuit Demonstration of reasonable steps of pursuit plaintiff might allege breach of duty [Watson v Hannover Life Re of Australsia Limited [2018] NSWSC 877; Carroll v United Super Pty Ltd (No. 2) [2018] NSWSC 1101] SCT critical, noting apathy in this regard [D15-16\124] Covers seeking delayed payment interest from insurer Monitor insurer s compliance with Life Insurance Code timeframes Insurance in Super Code requires advocating on a member s behalf if it has a reasonable prospect of success: [7.28]

16 OBSERVATIONS the Reasons ASIC identified a lack of awareness or understanding about the application of S25D of the Act Interpretation Act 1901 Most common reason for SCT referrals to ASIC Improves trustee accountability and promotes confidence in their decision making (ASIC Report 591, p 12)