Federal Court dismisses Resolution Life AFCA appeal

The Federal Court has affirmed the Australian Financial Complaints Authority’s (AFCA) determination in relation to Resolution Life’s handling of a total and permanent disability (TPD) insurance claim dispute.

Following a complaint to AFCA by Gregory Teagle over a dispute related to a spinal injury that was not covered through his superannuation TPD insurance, the complaints authority determined in June 2023 that Resolution Life must make a “gratuitous payment” as it had failed to “signpost” the ability for Teagle to review an exclusion in his policy.

According to the AFCA determination, the panel agreed with much of Resolution Life and trustee NM Super’s decisions, saying that declining to pat a TPD benefit was “in its operation in relation to the complainant, fair and reasonable in all the circumstances” due to the lumbar/sacral spine exclusion defeating the claim.

However, it still awarded a payment to Teagle because the panel was not satisfied that declining any compensation was fair and reasonable.

“This is because [AMP Life] failed to signpost to the complainant that he had an opportunity to have his exclusion reviewed after three years of cover,” the determination found.

“This failure has led to the complainant being deprived of a meaningful opportunity that has had a material effect on his TPD claim. The panel understands [the appellant] has taken over responsibility for complaints relating to [AMP Life] as part of the transfer of [AMP Life’s] life insurance business. Therefore, [the appellant] is responsible for compensating the complainant.”

Having taken the decision to the Federal Court last year, Resolution Life was unsuccessful in attempting to overturn AFCA’s determination, leading to its appeal to the Full Federal Court.

Last week, the court dismissed the appeal, which largely hinged on Resolution Life’s contention that AFCA “fell into legal error in finding that the scope of the insurer’s implied duty extended to a duty to signpost a right to seek a review of the exclusion clause”.

AFCA had found this to be a breach of the duty of utmost good faith, noting that the failure of Resolution Life to advise Teagle of the opportunity to request a review of the exclusion from TPD cover as being a departure from “commercial standards of decency and fairness”.

The counsel responding to the appeal submitted that “insurers are required to do more than just sit on their hands” and that the initial injury giving rise to the exclusion, and the injury that gave rise to the TPD claim 18 years later, were entirely unrelated.

The Federal Court agreed with the original decision, with the judgment affirming AFCA’s role in determining “fairness and reasonableness, and that its reasons should be read fairly and broadly”.

“Like the primary judge, we see no error in AFCA’s approach,” the judgment said.