CommInsure and Good Faith: How to Make a Claim Against Your Insurer

TGB Partner Tim White explains the CommInsure insurance scandal and outlines how to make a claim against your insurer.

Whilst we all hope to remain fit, well and working, it’s statistically likely that this may not occur and as a result millions of Australians take out appropriate insurance cover to protect themselves and their families, writes TGB Partner Tim White

Understanding the basics-

Individuals have a range of insurance policies available to them should they be unlucky enough to become seriously injured, unable to work, diagnosed with a medical condition that is terminal or die.

These policies are taken out in good faith, with the expectation that should an individual become seriously injured or die or unable to work for an extended period an insured amount as specified in the policy will be paid out.

This type of insurance cover can be provided for within your superannuation fund, where you take out specific insurance cover. Alternatively, you could obtain a separate policy of cover directly with an insurer (referred to as a private insurance policy).

Typically these types of policies fall into the categories of:

A) Income protection;

B) Total and Permanent Disablement (TPD);

C) Trauma cover; or

D) Life insurance.

Each of these types of insurance have very different policies and the wording between them varies considerably. Further, the policies that different insurance companies use, for the same type of cover, have different criteria and definitions to fulfil.

The wording of your specific policy is vital in considering whether your circumstances fulfil the requirements of the policy and therefore the insured amount being paid out.

The requirement of good faith –

The duty of good faith is now an implied statutory term inserted into every general insurance contract in Australia under section 13 of the Insurance Contracts Act 1984 (Cth) (the ICA). The duty of the insurer and the insured to act in good faith is a long standing common law concept.  Section 13 requires both the insurer and the insured to act towards the other, in respect of any matter arising under or in relation to it, with the utmost good faith. Therefore, like the common law, the duty spans from the pre-contractual stage (duty of disclosure) to the post-contractual stage (the making and handling of claims).

If an insurer fails to act in good faith, that alone gives rise to an entitlement to damages under the ICA. If an insurer has acted unreasonably in denying a claim, the individual or the insured can sue the insurer for damages, as a result of it breaching its obligation to act in good faith.  There are several examples of what can amount to an insurer not acting in good faith:

– refusing claims without reasonable evidence or belief that the claim should be declined;

– investigating a claim in an unreasonable manner;

– failing to investigate a claim before declining it;

– using inappropriate reasons to deny a claim; and

– putting undue influence on an expert to provide a report that does not accurately reflect their opinion.

Challenging your insurer –

There are a multitude of ways through which an individual can challenge an insurer’s denial of their trauma, TPD or income protection claim. Usually that involves writing a detailed request to the insurer or the superannuation company seeking an internal review.  If that approach is not successful it is possible to file a complaint with the Superannuation Complaints Tribunal (SCT).

This tribunal will usually act quickly and assists the parties in trying to reach a resolution of the dispute. Many of our clients obtain assistance in taking a matter to the SCT. If this is unsuccessful it remains possible to take the claim to a court. Depending on the State you live in different rules apply in relation to this process but usually legal advice is needed at this point.

Case Study – What’s happening with CommInsure?

Recent allegations made against CommInsure (view here) are clearly extremely serious, worrying and of great concern. As noted above, all insurers must act in good faith towards the insured, particularly during the process of handling or assessing a claim that has been made under the policy.  Put simply, it is alleged that CommInsure have failed to act in good faith in accordance with a number of the reasons listed above (eg. using inappropriate reasons to deny a claim).

The Australian Securities and Investments Commission (ASIC) are currently investigating the allegations made against CommInsure. Just recently, the Senate adopted a motion to broaden the currently ongoing SOFA (Scrutiny of Financial Advice) to include the highly lucrative life insurance industry. The responsibilities of the Senate Economics References Committee conducting the investigation have now been extended and they have been asked to investigate:

1. The need for further reform and improved oversight of the life insurance industry;

2. Whether entities are engaging in unethical practices to avoid meeting claims;

3. Whether a life insurance industry code of conduct is required;

4. The role of the Australian Securities and Investments Commission in reform and oversight of the industry; and any related matters.

Submissions for this inquiry close on April 15 2016, submissions can be made here.

Conclusion – 

Tindall Gask Bentley are acting on behalf of CommInsure claimants and are investigating individual claims on behalf of clients. It is critically important to be aware of your ability to appeal a decision made by your insurer to reject your legal claim and to seek advice early in the process.

For further information or assistance contact your nearest TGB office.