The Australian Financial Complaints Authority acted within its powers when handling a total and permanent disability insurance claim dispute, a court has ruled.

AFCA had determined that Resolution Life must make a gratuitous payment to Gregory Teagle, who made a claim on his superannuation-held cover after suffering a spinal injury. 

Resolution Life challenged the AFCA decision in the Federal Court and lost in December last year, then appealed in the Full Federal Court.

AFCA’s panel found in March last year that the insurer’s decision not to pay the TPD benefit was fair and reasonable because Mr Teagle had a back condition that fell within the policy’s lumbar/sacral spine exclusion.

But it later determined that Mr Teagle had been deprived of a “meaningful” opportunity to have the exclusion reviewed, which had a material effect on his claim. It ruled in June last year that the insurer must make a gratuitous payment.

The Full Court ruling says the appeal centres on issues of statutory construction around key provisions in the Corporations Act, including ones relating to super complaints.

Resolution Life argued AFCA fell into “legal error” in finding the insurer’s implied duty extended to “a duty to signpost a right to seek a review of the exclusion clause”.

The Full Court says it sees “no error” with the ombudsman’s approach under the Corporations Act’s section 1055, which sets out how AFCA is empowered to determine a superannuation dispute.

“AFCA’s duty is to determine whether a decision or conduct in relation to the complainant is fair and reasonable,” the court says. “If so, it may take the steps open to it in [1055] in order to place the complainant, as nearly as practicable, in such a position that the unfairness or unreasonableness no longer exists.”

The court has also rejected the insurer’s other contention, that AFCA was restricted under corporate laws to reviewing only the decision of Mr Teagle’s super trustee.

“In our view, the argument … is not correct,” the court says. “The legislative intention … is to provide a consumer, who may not (and in this case did not) understand the complexity of the identity and relationship of the parties who provided superannuation services and TPD products within that superannuation, a ‘one-stop shop’ to review decisions which, in their operation in relation to the consumer, were unfair and unreasonable.”

The court adds: “Once the insurer is a party [to the complaint], and the decision in its operation in relation to Mr Teagle was found by AFCA to be unfair or unreasonable, AFCA has jurisdiction in relation to that decision.”

Resolution Life told insuranceNEWS.com.au today it “is sympathetic to Mr Teagle's circumstances and made payment to him in full on December 22 2023. We acknowledge the Federal Court decision and will now take the time to work through the details.”

Click here for the court ruling.