What does this mean for my claim on my TPD, Trauma or Income protection insurance?

Have you made a claim on your TPD, Trauma or Income Protection insurance? Both you (as the claimant) and the insurance company have an obligation to act towards the other with the utmost “good faith”.

What does “good faith” mean?

Good faith involves fairness, reasonableness and regard to community standards of decency and fair dealing. It has come to mean fair dealing in which one party puts the interests of the other at least at the same level of protection as his or her own.

A claimant or insurance company does not have to go so far as to act dishonestly to breach their obligation to act in good faith, they will breach their duty if they fail to act reasonably.

What does it mean for your claim?

You have the following obligations towards the insurance company as part of your obligation to act in good faith (even if these obligations are not specifically stated in the insurance contract):

• Give full and frank disclosure in applying for a policy. (For example, to answer questions the insurance company questionnaires honestly);

• Provide sufficient information to the insurance company so it can decide whether to indemnify your claim;

• Provide sufficient information to the insurance company so the insurance company can decide the payout amount of the claim; and

• To take reasonable steps to minimise your loss. (For example, a claimant who refuses to undertake certain treatment which might improve their recovery could be considered to have to failed to take reasonable steps to mitigate their loss).

What does it mean for the insurance company?

The duty involves at least the following obligations on the part of insurance companies:

• To draft policies which are easily understood.

• To bring unusual terms in the insurance policy to the claimant’s attention.

• To decide your claim in a timely manner.

• To pay you promptly.

• To communicate within a reasonable time whether it accepts or rejects the claim. (An insurance company must not string out an investigation by conducting enquiries that are not genuine in an attempt to delay payment of the claim).

• To avoid taking advantage of the relatively weaker position of the claimant.

The duty does not, however, prevent the insurance company from:

• Testing a claim where the insurance company is suspicious or does not believe it is obliged to indemnify the claim. For example, if there is a genuine dispute, and the insurance company incorrectly refuses to meet the claim, it will not be a breach of this duty as long as it does so reasonably and in good faith).

• Relying on an assumption that goes against the interests of the claimant after enquiries are made of the claimant and no information is provided to the insurance company (that is, where no information is provided which contradicts the assumption).

• Prohibit the insurance company from declining indemnity if the claim falls outside the policy’s cover or from relying on a contractual term of the policy.

Where to from here

If you are thinking about making a claim on your TPD, Trauma or Income Protection insurance (or have been denied indemnity by your insurance company) we can assist you with the process.

Please call us on (07) 3063 2268 or email info@deneslawyers.com.au for your FREE consultation today.