SCT Quarterly - Q2 2019

Chairperson's welcome

Welcome to the final edition of SCT Quarterly.

We reintroduced SCT Quarterly in 2017, and have enjoyed bringing you the latest news and figures from the Superannuation Complaints Tribunal each quarter. However, with the Tribunal closing next year, and our focus squarely on resolving our open complaints, we've decided to farewell SCT Quarterly in this, the Q2 2019 edition.

We're farewelling with a bumper edition. This quarter, we're sharing twice as many case studies as usual. These case studies cover a broad range of complaint types, situations and Tribunal decisions, and they kick off with Case study 1: TTR transfer timing troubles.

In SCT by the numbers, you'll find detailed statistics, including how many complaints we resolved in Q2 2019, at what stages they were resolved, and what decisions were made for those complaints that made it to review.

At 30 June 2019, we had 1,307 open complaints. We resolved 281 complaints in Q2 2019. This was a decrease of 20.6% on Q1; this decrease was expected following the completion of our initial jurisdiction assessments in early Q1. As predicted in our Q1 edition, the number of resolved complaints found to be out of jurisdiction in Q2 2019 dropped to near zero.

All of our complaints have now progressed through an initial jurisdiction assessment and a preliminary information-gathering exercise. We invite all complainants who would like to learn more about their complaint and the processes we'll use to investigate it to visit our page, About my complaint, for more information.

We hope you enjoy this final edition of SCT Quarterly.

Helen Davis, Chairperson

 

SCT by the numbers Q2 2019

As at 30 June 2019, we had 1,307 open complaints, and are working to resolve them all throughout 2019 and 2020.

In Q2 2019, we resolved 281 complaints, a decrease of 20.6% on Q1 2019. This decrease was expected following the completion of our initial jurisdiction assessments in early Q1; in previous quarters, anywhere between 30% and 45% of our resolved complaints would be assessed as out of jurisdiction.

Types of complaints resolved Q2 2019 - top ten

Type of complaint Percentage
Death benefit distribution 41.6
Deduction of insurance premiums 7.5
Account balance 5.7
Fees and charges 3.9
Administration error 3.6
TPD benefit - declined on medical evidence 2.8
TTD benefit - amount in dispute 2.8
Insurance cover in dispute 2.5
Payment of pension benefits 2.1
TTD benefit - declined on medical evidence 2.1
TPD benefit - delay in making a decision 2.1
Delay in transfer of benefit 2.1

 

29.9% of resolved complaints were finalised at review stage. Of the determinations issued, 71.4% affirmed the decision of the trustee, 26.2% set aside the decision and substituted a new decision, and 2.4% varied the decision.

11.0% of resolved complaints were withdrawn by the Tribunal once they were satisfied that the complainant did not wish to proceed. An additional 14.3% were withdrawn by the Tribunal as either lacking in substance, misconceived or trivial, or because it had been dealt with by another statutory body.

44.6% of resolved complaints were withdrawn by the complainant, most commonly following a conciliation conference.

 

Case study 1: TTR transfer timing troubles

Full determination available here: D18-19\137 [2019] SCTA 31 (20 February 2019)

Background: In April 2016, the member contacted the fund to advise his wish to open two accounts with the fund. One would be an accumulation account, and the other a transition to retirement (TTR) account. The latter was to be established with monies rolled in from another fund, in which the member held share investments and a bank term deposit which was due to mature on 14 November 2016.

The member filled in and submitted three forms over the ensuing months and had difficulty having them accepted by the funds. After submitting the third form on 18 August 2016, the member’s account in the other fund was rolled over to his accumulation account on 28 September 2016, prior to the maturity of the term deposit.

The member requested compensation for the early rollover to the incorrect account, and the trustee declined to compensate.

Complaint: The member brought a complaint to the Tribunal, seeking compensation for the transfer being prior to the maturity date of the term deposit, and for the fact that the monies had gone to his accumulation account rather than his TTR account.

The member stated that instructions were given to the trustee to transfer the term deposit on its maturity date, and that the trustee contravened the member’s instructions and intent. He had been guided by the trustee on which forms he needed to complete to effect the transfer.

Further details: The trustee advised that two of the forms submitted, including the third form of 18 August 2016, were forms required to transfer to a superannuation accumulation account. The request was processed and confirmed to the member by letter dated 5 September 2016. The member did not advise the trustee that the transfer should be stopped and the transfer was received on 29 September 2016.

The trustee acknowledged that the complaint was complex, that confusion was caused by the multiple rollover instructions submitted, and that it had not provided the level of service it aimed to provide. It also advised that the member’s balance had performed better in the accumulation account that it would have in the TTR account, as the investment earnings were higher and the fees were lower.

Decision: The Tribunal was satisfied that, while the member’s instructions regarding the TTR account were not followed and he experienced understandable frustration, he did not incur any financial loss as a result of his monies being rolled into the accumulation account. The Tribunal also determined that the member had been clear about not wanting the monies held in the term deposit to be rolled over prior to the maturity date.

The Tribunal affirmed the decision of the trustee to not compensate the member for crediting the monies received from the previous fund to his accumulation account instead of his TTR account. The Tribunal set aside the decision of the trustee to transfer the member’s term deposit prior to its maturity date, and substituted the decision that it pay the member in accordance with the Tribunal’s instructions.

 

Case study 2: In guardians we trust

Full determination available here: D18-19\156 [2019] SCTA 51 (26 March 2019)

Background: The deceased member was 32 years old at the time of his death. He had never married and was survived by a minor son, a father, a sister, a brother and a claimed spouse (who was also the mother of the minor son).

The claimed spouse lived together with the deceased member from July 2010 until the date of death. At the date of death, the minor son was living with guardians (one of whom was the sister of the claimed spouse and therefore the aunt of the minor son) subject to a custody order. A few days after the death of the deceased member, a court made a permanent care order that the guardians have the custody and guardianship of the minor son.

The trustee initially decided to pay the entire benefit to the minor son with a minor’s trust to be established with the public trustee. After receiving objections from the claimed spouse, the minor son and the sister, the trustee decided to pay an amount equivalent to approximately 70% of the benefit to the minor son, with a minor’s trust to be established with the public trustee, and the remainder to the claimed spouse. After receiving further objections, the trustee affirmed this second decision.

Complaint: The minor son (via a representative) and the sister of the deceased member brought complaints to the Tribunal. The claimed spouse also brought a complaint to the Tribunal, but unfortunately passed away while the complaint was being investigated.

The minor son sought that the benefit be paid into a minor’s trust with the guardians to act as trustees. The minor son stated that he and the claimed spouse were the only dependants of the deceased member at the time of death and the only ones with expectations of ongoing financial support.

He stated that the claimed spouse had been clear in her submissions to the Tribunal prior to her passing that the guardians were ‘more than capable of allocating his money for his benefit’. He also raised concerns about the state public trustee, pointing to costs, recent media coverage and ongoing investigations as cause for these concerns. He provided details of how the guardians planned to manage the monies with the assistance of their accountant if they were appointed trustees.

The sister of the deceased member sought that a smaller portion of the benefit be paid directly to the sister of the claimed spouse (as guardian of the minor son), with the remainder to be paid directly to her or to the deceased member’s estate. The sister also questioned the paternity of the minor son.

Further details: In a non-binding preferred nomination dated 19 August 2004, the deceased member nominated his mother and his sister to receive the benefit in equal shares. The trustee noted that the nomination was not binding on the trustee, and that its validity was subject to the nominees being dependants of the deceased member at the time of his death. The mother pre-deceased the deceased member, and the sister had informed the trustee that she was neither financially dependent on, nor in an interdependent relationship with, the deceased member at the date of death.

The trustee considered that there was sufficient evidence on file confirming that the minor son was the son of the deceased member. Following the death of the claimed spouse, the trustee proposed to the Tribunal that the entire benefit be paid to the minor son with those monies being held on trust with the state trustees of the relevant state.

Decision: The Tribunal was satisfied that the sister of the deceased member was not a dependant of the deceased member at the date of death. The Tribunal was also satisfied that the minor son was the biological child of the deceased member, and as such was a dependant of the deceased member at the date of death, and that his submissions regarding the suitability of the guardians to act as trustees for the monies to be held on trust for him were persuasive.

The Tribunal set aside the decision of the trustee and substituted its own decision that the entire benefit be paid to the guardians to hold on trust for the ongoing maintenance, support and education of the minor son until he turned 18 years of age, at which time the balance of the benefit held in trust was to be paid to the minor son.

 

Case study 3: Interdependent or independent tenant?

Full determination available here: D18-19\154 [2019] SCTA 48 (21 March 2019)

Background: The deceased member was 38 years old at the time of her death from brain cancer. She was living with her husband in a house they jointly owned, and her sister also lived with them. The deceased member was survived by the husband, the sister, her mother and her father.

The trustee determined to pay the entire benefit arising on the death of the deceased member to the husband as a dependant, and affirmed this decision following an objection by the sister.

Complaint: The sister brought a complaint to the Tribunal, stating that she was partially financially dependent on the deceased member and that she and the deceased member were in an interdependency relationship.

The sister claimed that she had resigned from her job and moved cities to live with the deceased member and the husband so she could assist with the care of the deceased member. The deceased member paid for the relocation costs, and had waived the sister’s minimal payments for board when she couldn’t afford them. The deceased member paid all of the household bills and paid for groceries and petrol.

The sister stated that, as the deceased member’s health had deteriorated, she had relied heavily on the sister for her personal administration. The sister provided bank statements, authorities completed by the deceased member, emails, text messages and statutory declarations from friends and family members to support her contentions.

Further details: The husband advised that the sister moved in with him and the deceased member following the breakdown of her marriage in another city, and that she had agreed to pay $200 per week in rent. There had been no financial interdependence between the deceased member and the sister, who was merely a tenant in their home. The sister secured a full-time job after moving.

The husband stated that the sister would sit with the deceased member between 6.30 and 8.00pm in the evening on weekdays, and that was the extent of her caring for the deceased member. He advised that his mother looked in on the deceased member during the day, when they were both working, and that the sister provided no personal care for the deceased member when he was at home.

The trustee considered that, although it accepted that the sister lived with the deceased member at the time of death and that they had a close personal relationship, there was insufficient evidence to determine whether the arrangement to live together would have continued into the future had the deceased member not died. The trustee was not satisfied that the sister was in an interdependency relationship with the deceased member at the time of her death.

Decision: The Tribunal was satisfied that when the deceased member was diagnosed, the sister gave up her job and relocated from another city in order to live with the deceased member, and that they continued living together until the deceased member’s death. The Tribunal accepted that the deceased member provided the sister with financial support. In the Tribunal’s view, the care the sister provided, together with that provided by the husband, his mother and the parents of the deceased member and the sister, enabled the deceased member to remain at home almost until her death.

Accordingly, the Tribunal was satisfied that the sister was in an interdependency relationship with the deceased member at the time of her death.

The Tribunal set aside the decision of the trustee and substituted a decision that 75% of the benefit be paid to the husband as a dependant of the deceased member, and 25% of the benefit be paid to the sister as a dependant of the deceased member.

 

Case study 4: Misunderstanding of misrepresentation

Full determination available here: D18-19\128 [2019] SCTA 26 (8 February 2019)

Background: The member completed an application for underwritten life cover, total and permanent disablement (TPD) cover and income protection (IP) cover on 26 February 2013. Based on the answers provided by the member, the insurer went on risk as from 15 March 2013.

The member ceased work on 17 January 2016 and consulted his GP on 21 January 2016. On 31 August 2016, the member submitted a claim for TPD, listing the incapacitating illness as necrotising fasciitis. The insurer denied the TPD claim by avoiding the TPD cover and IP cover, asserting the member had fraudulently failed to disclose and made fraudulent misrepresentations in some of the answers he had provided in his application.

The member disputed the decision, and the insurer maintained the decision on review. The trustee agreed, and the insurance premiums were refunded to the member.

Complaint: The member brought a complaint to the Tribunal, seeking reinstatement of his TPD cover and IP cover and payment of the TPD claim.

The member argued that he had answered the questions honestly and to the best of his ability, and that it was the insurer’s duty to request more information at the time of application rather than at the time of claim. He stated that the insurer cannot assume the customer has the understanding and education of a medical professional or underwriter.

He had cancelled another insurance policy upon being accepted by the insurer; had he been declined, he would have had the opportunity to look for insurance elsewhere. He also stated that his condition was not related to any pre-existing condition.

Further details: The insurer stated that the member failed to comply with his obligations under the Insurance Contracts Act 1984 (ICA), and had clearly misrepresented the extent of the disclosed medical conditions. The member listed back and hip problems, including a hip replacement, but also used the terms ‘mild’, ‘moderate’ and ‘all fine now’ to describe the severity of the problems.

The insurer contacted him for additional information, and received answers that the insurer believes downplayed the problems. ‘(The member’s) multiple musculoskeletal issues (were) heavily underdisclosed on the application and at tele-underwriting… (The insurer) asserts (the member) deliberately concealed the true nature of his back injury.’

The trustee supported the decisions and submissions of the insurer.

Decision: The Tribunal reviewed previous court decisions related to similar matters, and re-examined the application and tele-underwriting in more detail. It found that the member had answered questions honestly and had requested his application be referred to an underwriter for consideration. He answered questions about his hip replacement and, during the tele-underwriting interview, was not asked about his previous modified insurance terms despite having disclosed their existence in the application.

The insurer had applied the following exclusion to both covers: ‘No benefit is payable under this policy for any claim resulting directly or indirectly from any disease or disorder of the left hip or any complications thereof.’

The Tribunal did not find that the member knowingly withheld relevant matters or gave information knowing it was false or reckless without regard to the truth. The Tribunal set aside the decisions of the trustee and insurer and substituted the decisions that the member did not breach his ICA obligations, that the claim could not be denied on the grounds of avoidance of his TPD cover, and that the trustee and insurer must urgently assess the member’s claim, consequent upon the member reimbursing the refunded premiums.

 

Case study 5: TPD = trustee prevents double-dipping

Full determination available here: D18-19\129 [2019] SCTA 20 (5 February 2019)

Background: The member joined the fund by completing an online membership application on 18 June 2014. He was injured at work on 4 February 2015 and ceased all work duties on 12 March 2015. On 17 December 2015, he lodged a number of claims, including a claim for a total and permanent disablement (TPD) benefit.

The trustee approved the member’s permanent incapacity claim on 17 February 2016, thereby agreeing to the partial withdrawal of his superannuation balance. However, the insurer declined the TPD benefit claim on the basis that the member was ineligible for that cover, as he had previously been paid a TPD benefit by another fund.

The trustee agreed with the decision of the insurer and declined to compromise the claim for an equivalent amount.

Complaint: The member brought a complaint to the Tribunal, seeking to be paid the TPD benefit from the insurer or its equivalent from the trustee.

The member stated that he had disclosed in various conversations with the trustee’s staff that he had received a TPD benefit from a previous fund, and that he was never advised that this made him ineligible for TPD cover.

He claimed that if he had been told verbally that he would not be eligible for cover, he would have entered into a tailored insurance arrangement for which he would have been eligible.

Further details: The insurer advised that the member's insurance had notionally commenced from 21 January 2015 following receipt of the member’s first superannuation guarantee (SG) contribution. However, the member was ineligible for cover under the policy as he had previously received a TPD benefit from another fund.

The trustee agreed, stating that under the policy, a person cannot obtain the insurance cover if they have previously received a TPD benefit from another superannuation fund. Eligibility is not considered until the time of a claim.

Eligibility requirements were discussed multiple times in the fund’s product disclosure statement and life insurance guide, both of which were provided to the member upon joining the fund. They were also referenced during phone calls with the member and in his welcome letter. The member did not ask about eligibility being affected by previous TPD claims during these calls, nor was he informed that he was eligible for cover.

Decision: The Tribunal considered the terms of the policy and determined that the member was not entitled to a TPD benefit. The Tribunal considered the written material sent to the member and determined that the eligibility requirements had been properly communicated to the member before he commenced his SG contributions to the fund. The Tribunal also listened to the telephone calls between the member and the fund, and determined that the member did not state that he had previously received a TPD benefit from another fund in clear and unequivocal terms until after he had submitted his claim for the benefit.

The Tribunal affirmed the decisions of the trustee and insurer.

 

Case study 6: Dishonest disclosure

Full determination available here: D18-19\131 [2019] SCTA 25 (7 February 2019)

Background: The member joined the fund on 24 June 2010 and was provided with default cover of two units of income protection (IP) cover and two units of death cover.

On 20 March 2014 the member completed an application and underwriting assessment for five units of IP cover, as well as additional death cover and total and permanent disablement (TPD) cover. She answered ‘no’ on a personal health statement to questions about having suffered from or been treated for depression or mental illness and having experienced any symptoms or treatment for knee injuries.

The member ceased work on 4 September 2015. She lodged a claim for IP benefits in October 2015 with a claimed condition of osteoarthritis in both knees that required a bilateral knee replacement. The member received IP payments based on two units of IP cover from 3 December 2015, but the insurer avoided the member’s increase in cover, stating that the member had made misrepresentations on the application. The member requested a review, and the insurer and trustee upheld this decision.

Complaint: The member brought a complaint to the Tribunal, seeking reinstatement of the underwritten insurance.

She stated that she was not aware of the extent of her problems at the time of application. She was not aware that she suffered from osteoarthritis when she applied for additional cover, and had visited a psychologist once to ‘have a chat and manage stress’. She was shocked to be told the clinical notes from this visit listed an anxiety disorder.

Further details: The insurer presented a 2012 clinical record showing that the member had suffered from an anxiety disorder, and a 2013 note recording that the member had ‘bilateral osteoarthritis and wants cortisone injection’. The insurer stated that if they had known these details at the time the member applied for increased cover, exclusions for mental health and osteoarthritis would have been applied to the TPD and IP covers.

The insurer also advised that the questions in the form were broad, and the member did not need a formal diagnosis of either condition to answer ‘yes’ to the questions about mental illness and knee injuries.

The trustee supported the decisions and submissions of the insurer.

Decision: The Tribunal found that it was possible that each of the diagnoses were made without having been communicated to the member. However, the Tribunal also considered the wording of the questions that had been asked of the member at the time of application and found that they were of a general nature. The questions asked about symptoms, advice and treatment rather than formal diagnoses. The Tribunal determined that the member did not need an official diagnosis of bilateral osteoarthritis to answer ‘yes’ to the question about knee injuries, and that a reasonable person in the circumstances could be expected to know that the medical history relating to her knees was relevant to the insurer due to the nature of the question.

The Tribunal affirmed the decisions of the trustee and insurer.