Understanding your TPD insurance
Published on June 6, 2017 by Thomas Felizzi
TPD insurance is a type of life insurance which pays the insured a specified lump sum in the event of Total Permanent Disablement (TPD).
The key words are total and permanent.
There are some important considerations when making a claim for a TPD benefit.
It is important to determine whether or not the policy is a contract between the insured and the insurer or whether the insured is a member or beneficiary of a policy between the insurer and a trustee or nominee. This affects who the claim is made against, where proceedings are commenced and what relief is sought.
TPD insurance can be categorised as “group” or “retail”.
Group Life insurance is taken out by either an employer or superannuation fund and the terms of the relationship are governed by a trust deed. The obligations of a trustee in group TPD insurance are found in the trust deed governing the policy. The trustee has contracted to the insurer, the owner of the policy, and the insured is therefore a beneficiary. The trustee is an intermediary between the insured and the life insurer. Therefore in the event a TPD claim was denied by a “group” policy and proceedings were being considered then an insured would need to commence proceedings against both the trustee and the insurer.
Retail life insurance is instead sold directly to the insured and governed by the policy terms. An insured whose claim is denied by a “retail” policy would initiate proceedings against the insurer only.
When considering making a claim for TPD it is important to determine whether the insured has satisfied the waiting period. This is defined in the TPD policy and generally, the insured must have been continually absent from employment for six months due to an illness or injury before being eligible to make a claim for a TPD benefit.
The insured must be under the care of a medical practitioner and this is usually satisfied at the commencement of a claim after the six-month waiting period. When a claim form is lodged for TPD benefits, a pro forma medical certificate/claim form must be completed by the treating medical practitioner of the insured certifying that he or she will be unable to work ever again. Some policies will require two medical practitioners to certify this.
The definition of TPD will vary between policies, although generally, can be considered as either “any occupation” or “own occupation”.
With an “any occupation policy”, the ultimate question is usually whether or not, having suffered the injury or illness, the insured is “unlikely ever to engage in work for award in any occupation or work for which he/she is reasonably capable of performing by reason of their education, training or experience”.
For an “own occupation” policy the same definition applies but the consideration of whether the insured will be ever able to engage in work again will be made in relation to their own occupation.
The use of the word “ever” cannot be forgotten. This allows the insurer to look into the future and focus on the duration of the occupational incapacity or inability to engage in work for reward. (Birdsall v Motor Traders Association of Australia Superannuation Fund Pty Ltd  NSWSC 632)
When considering the definition it is important to consider that the policy “is a commercial contract and should be given a business like interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses and the objects which it is intended to secure.” (McCann v Switzerland Insurance Australia Ltd & Ors  HCA 65; (2000) 203 CLR 579 at 589 )
In Birdsall the Supreme Court considered the reasonableness of the decision of the insurer and trustee to refuse a claim for a TPD benefit. The plaintiff was a 20 year old qualified motor mechanic who suffered an injury to his wrist in the course of his employment. The TPD policy contained an “any occupation” definition.
The insurer and trustee relied on medical evidence which:
a) Suggested that the plaintiff’s condition did not prevent him from engaging in other work such as sales; and
b) Which supported the availability of alternative employment which he could perform.
The plaintiff served further evidence in support of his application that he had made over 50 unsuccessful job applications which demonstrated that he was unlikely to ever be able to engage in work which he was “reasonably capable of performing by reason of his education, training or experience”
The Court made its own decision, did not refer the matter back to insurer and ultimately determined that the plaintiff did not satisfy the TPD definition.
Birdsall is clear demonstration that insurers/trustees should be diligent in considering every relevant issue and document and ensuring that each of these are referred to and discussed if the application is to be declined. If the Court is required to interpret the same information then it will do so in a businesslike manner.
Review and dispute
The insured will need to wait for a decision to be made by the insurer. If an adverse decision has been made, review it carefully and make a procedural fairness application with the insurer. The insured should request all the documents that the insurer included in the making of their decision so they can see what was contained in the letter.
The dispute can be referred to the Financial Ombudsman or proceedings can be commenced in the District Court, Supreme Court, Federal Court or in the Superannuation Tribunal.
- The most common elements of TPD policies are:
- The insured must be absent from work for six months;
- The cause of the absence must be injury or sickness;
- The insured must be under the care of a medical practitioner;
- The trustee or insurer must form an opinion as to the likelihood that the insured will never return to work which they are qualified or suited to by reason of their education, training or experience;
Therefore in the early stages of a claim it is important to identify the following:
- what the injury is and its permanency – look to medical evidence while remembering the words “unlikely ever”;
- how the injury prevents the client from doing their previous occupation (medical evidence and occupational therapy evidence);
- what the client might be able to do by way of work outside their previous occupation (vocational consultant and medical evidence);
- why the client would not or could not reasonably do any alternate occupation;
i. Does it require significant retraining?
ii. Does the job exist in theory but not practice, does the job exist in practice but is practically impossible to find, is the job only available on a part-time or casual basis or is the job unpaid?