FEDERAL COURT OF AUSTRALIA
AIA Australia Ltd v Lancaster [2017] FCA 962
File number: NSD 122 of 2017 Judge: ALLSOP CJ Date of judgment: 18 August 2017 Catchwords: SUPERANNUATION – appeal against determination by Superannuation Complaints Tribunal – entitlement of fund member to income protection benefit under insurance policy held by fund – calculation of benefit payable by reference to income – income had increased at date of disablement but neither trustee or insurer notified at that date – insurer calculated benefit based on income advised to it – Tribunal ordered benefit be calculated based on increased salary – whether Tribunal determination inconsistent with terms of insurance policy Legislation: Insurance Contracts Act 1984 (Cth), ss 37, 53, 57
Superannuation (Resolution of Complaints) Act 1993 (Cth), ss 14, 37, 46
Insurance Contracts Regulations 1985 (Cth), r 32
Cases cited: Alcoa of Australia Retirement Plan Pty Ltd v Thompson [2002] FCA 256; 116 FCR 139
Board of Trustees of the State Public Sector Superannuation Scheme v Edington [2011] FCAFC 8; 119 ALD 472
Cameron v Board of Trustees of the State Public Sector Superannuation Scheme [2003] FCAFC 214; 130 FCR 122
Dumitrov v SC Johnson & Son Superannuation Pty Ltd [2006] NSWSC 1372
Dumitrov v SC Johnson & Son Superannuation Pty Ltd (No 2) [2007] NSWSC 42
Federation Insurance Ltd v Banks [1984] VR 525
Hornsby v Military Superannuation & Benefits Board of Trustees (No 1) [2003] FCA 54; 126 FCR 484
Mercer Superannuation (Australia) Ltd v Billinghurst [2016] FCA 1274
Nguyen v QBE Insurance Ltd [2007] SASC 454; 215 FLR 447
Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330; 48 ATR 359
Date of hearing: Determined on the papers Date of last submissions: 12 May 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance
Insurance ListCategory: Catchwords Number of paragraphs: 48 Counsel for the Applicant: Mr D Villa Solicitor for the Applicant: TurksLegal Counsel for the First Respondent: The First Respondent did not appear beyond the first case management hearing Counsel for the Second Respondent: The Second Respondent did not appear ORDERS
NSD 122 of 2017 BETWEEN: AIA AUSTRALIA LTD
Applicant
AND: RONAN LANCASTER
First Respondent
MARITIME SUPER PTY LTD
Second Respondent
JUDGE:
ALLSOP CJ
DATE OF ORDER:
18 AUGUST 2017
THE COURT ORDERS THAT:
1.The determination of the Superannuation Complaints Tribunal dated 6 December 2016 be set aside.
2.In lieu thereof, order that:
(a)The decision of the applicant be affirmed.
(b)The decision of the second respondent be affirmed.
(c)The complaint made by the first respondent to the Superannuation Complaints Tribunal otherwise be dismissed.
3.There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
ALLSOP CJ:
This is an appeal by the applicant insurer, AIA Australia Ltd, against a determination by the Superannuation Complaints Tribunal (the Tribunal)…
Continue reading AIA Australia Ltd v Lancaster
Sign in free to access the full text
Details
- AGLC
- AIA Australia Ltd v Lancaster [2017] FCA 962
- Case
- [2017] FCA 962
- Decision Date
CaseChat Overview and Summary
AIA Australia Ltd (the applicant) appeals against a determination of the Superannuation Complaints Tribunal (the Tribunal) which set aside the decision of the applicant and the trustee of the Maritime Super Fund (the second respondent) to reject a claim by Mr Lancaster (the first respondent) for an income protection benefit to be calculated by reference to his actual salary at the date of disablement, rather than the salary that was notified to the applicant at the date of disablement. The case concerns the interpretation of the terms of an insurance policy and the process by which benefits under that policy are calculated.
The legal issue before the court was whether the Tribunal's determination was inconsistent with the terms of the insurance policy. The key question was whether Mr Lancaster's salary increase, which was not notified to the insurer or trustee at the time it occurred, should be taken into account when calculating the benefit payable under the policy. The court was required to consider whether the Tribunal's decision to order that the benefit be calculated based on the increased salary was consistent with the terms of the policy, and whether the Tribunal had the power to make such an order.
The court found that the Tribunal's determination was inconsistent with the terms of the insurance policy. The policy required the insured member to provide evidence of insurability in respect of any changes to income, and it was clear that Mr Lancaster had not done so. The court held that the Tribunal's order to calculate the benefit based on the increased salary was contrary to the terms of the policy and therefore contrary to law. The court also found that the Tribunal did not have the power to make such an order, as it would be inconsistent with the governing rules of the fund and the terms of the insurance contract. The appeal was therefore allowed, and the decision of the applicant and the trustee was affirmed. The complaint made by Mr Lancaster to the Superannuation Complaints Tribunal was dismissed, and there was no order as to costs.
The legal issue before the court was whether the Tribunal's determination was inconsistent with the terms of the insurance policy. The key question was whether Mr Lancaster's salary increase, which was not notified to the insurer or trustee at the time it occurred, should be taken into account when calculating the benefit payable under the policy. The court was required to consider whether the Tribunal's decision to order that the benefit be calculated based on the increased salary was consistent with the terms of the policy, and whether the Tribunal had the power to make such an order.
The court found that the Tribunal's determination was inconsistent with the terms of the insurance policy. The policy required the insured member to provide evidence of insurability in respect of any changes to income, and it was clear that Mr Lancaster had not done so. The court held that the Tribunal's order to calculate the benefit based on the increased salary was contrary to the terms of the policy and therefore contrary to law. The court also found that the Tribunal did not have the power to make such an order, as it would be inconsistent with the governing rules of the fund and the terms of the insurance contract. The appeal was therefore allowed, and the decision of the applicant and the trustee was affirmed. The complaint made by Mr Lancaster to the Superannuation Complaints Tribunal was dismissed, and there was no order as to costs.
Orders
Orders of the court
1. The determination of the Superannuation Complaints Tribunal dated 6 December 2016 be set aside.
2. In lieu thereof, order that:
(a) The decision of the applicant be affirmed.
(b) The decision of the second respondent be affirmed.
(c) The complaint made by the first respondent to the Superannuation Complaints Tribunal otherwise be dismissed.
3. There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
This is an appeal by the applicant insurer, AIA Australia Ltd, against a determination by the Superannuation Complaints Tribunal (the Tribunal) dated 6 December 2016 setting aside a decision by the insurer as affirmed by the second respondent, Maritime Super Pty Ltd (as trustee of the Maritime Super Fund) rejecting a claim by the first respondent, Mr Lancaster, to have the benefit payable to him under a policy of income protection insurance determined by reference to his actual salary at the date of disablement, rather than that which was properly notified to the insurer at the date of disablement.Background The facts surrounding this appeal were not the subject of any major disagreement between the parties. Mr Lancaster commenced employment as a stevedore with Patrick Stevedores Holdings Pty Ltd on 2 June 2006. He was a member of the Maritime Super Fund from 1 December 2004. Maritime Super Pty Ltd, as trustee of the Maritime Super Fund, was the owner of an income protection insurance policy issued by the applicant for the benefit of members of the Maritime Super Fund. That policy was effective from 31 March 2012. In January 2013, Mr Lancaster suffered a back injury during the course of his work, described by his doctor as “disc prolapse and degeneration of [the] lumbar spine”. He ceased work in May 2013 as a result of this injury and lodged a claim for income protection benefits under the policy. The insurer and trustee accepted Mr Lancaster’s claim, and paid him the income protection benefits it considered him to be entitled to under the policy. The insurer accepted 3 May 2013 as the date of Mr Lancaster’s disablement. The payments made to Mr Lancaster were payments that were determined by reference to an “Amount Insured”, which was based on an annual salary of $44,849. This had been Mr Lancaster’s annual salary up until 3 September 2012, where it increased to approximately $97,000 due to a change in the category of his employment. This salary increase was not notified to the insurer or to the trustee by either Mr Lancaster or his employer when it occurred. The policy that applies in Mr Lancaster’s case was the subject of several items of correspondence sent to Mr Lancaster as a member of the Maritime Super Fund both prior to and after his disablement. On 2 April 2012, a letter was sent to members of the Maritime Super Fund advising of the income protection insurance policy that had been taken out with the applicant that was effective from 31 March 2012. The letter enclosed an “Insurance Update” which contained the following relevant information:Salary detailsUnder the new rules, the premiums for cover are based on occupation and the sum insured, and not on a percentage of contributions. Refer to the definition of Income on the following page for information about the type of salary amounts you can insure.If we don’t have a salary recorded for you, a default cover level reflecting a salary of $4,000 per month (which will provide a benefit of $3,000 per month) will be used. It’s important to let us know your salary so you don’t end up over- or under-insured. To update your salary details, complete the AIA Australia Insurance Variation form and return it to us.…New definitions of Income…In the event of a claim, Income will be calculated at the date of disability.…For many members, the new definition may effectively increase the Income we use to calculate their Income Protection benefit. However, please note that the Income Protection benefit payable will be limited to the sum insured, so it is important that you advise us of your correct salary to take advantage of the potential increase in benefit.(emphasis added)
Evidence
Evidence Before The Court
Clause 4.3(c) refers to the “Insured Member” providing “Evidence of Insurability” in respect of any changes to “Income” after 30 June 2012. This phrase was defined as follows in cl 3:Evidence of Insurability means such evidence of health and such other particulars of a Member as the [insurer] may require at the time the Member first becomes an Insured Member and at any subsequent time when the Amount Insured of that Insured Member is increased or reinstated, to enable the [insurer] to determine whether an Insured Member is to be accepted for any insurance and the terms of such acceptance. In addition, the “General Conditions” that governed the policy were contained in cl 5. The relevant clauses from the “General Conditions” were as follows:5 General Conditions…5.7Application for Cover & Cover Termsa)Where an Insured Member:…i) has an Amount Insured which has increased by more than 30% in the previous 12 month period (in respect of Default and Voluntary Cover);…the Insured Member must make application for cover to the [insurer] by:1.completing the required form;2.providing the [insurer] with Evidence of Insurability, including but not limited to evidence of health condition by medical test(s) (including those determined by the [insurer] as mandatory based on the Insured Member’s age and the total amount of cover sought); and3.meeting any other Evidence of Insurability requirements as determined by the [insurer] from time to time.…5.8Commencement of Cover…f) The following:…v) Where the Amount Insured has increased by more than 30% in the previous 12 month period;…(other than Existing Cover at the Effective Date) will commence upon:i. the [insurer’s] acceptance of the risk following assessment of the Insured Member’s application; orii. the [insurer] advises the Policy Owner of acceptance of the Insured Member’s agreement in writing of any special terms or conditions applied by the [insurer].g)Where the Insured Member’s cover increases as a result of an increase in the Insured Member’s Income and the new cover amount is no more than:i) In respect of Default Cover, the Automatic Acceptance Limit; orii)Any Forward Underwriting Limit determined by the Company (including under takeover terms) in respect of income replacement insurance in respect of the Insured Member (including under the Previous Insurance Arrangements);and the increase is no more than 1.3 times the Amount Insured at the later of the cover commencement date and the date 12 months earlier, the increase in cover will commence from the date the increase in cover is notified to the Policy Owner in a form acceptable to the Policy Owner. …The Tribunal determination Mr Lancaster’s complaints were under s 14 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) (the Act). The powers of the Tribunal in dealing with such complaints are provided for in s 37 of the Act. Section 37(2)(a) requires the Tribunal to review the decisions of both the trustee and the insurer. For that purpose, the Tribunal has all the powers, obligations and discretions conferred upon the insurer: s 37(2)(b) of the Act. Under s 37(6), the Tribunal must affirm a decision of the trustee or insurer if it is satisfied that in its operation in relation to the complainant the decision was fair and reasonable in the circumstances. And, critically, in making its determination under s 37(3) of the Act, s 37(5) provides that the Tribunal cannot do anything that would be “contrary to law, the governing rules of the fund concerned and, if a contract of insurance between an insurer and trustee is involved, to the terms of the contract.”
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
Full text does not contain this section.