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How to win an insurance complaint and resolve a 3 rd party insurance debt

How to win an insurance complaint and resolve a 3 rd party insurance debt. Denis Nelthorpe West Heidelberg Community Legal Service. Project Aim. Project Aims Propose a different process for dealing with insurance disputes

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How to win an insurance complaint and resolve a 3 rd party insurance debt

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  1. How to win an insurance complaint and resolve a 3rd party insurance debt Denis Nelthorpe West Heidelberg Community Legal Service

  2. Project Aim • Project Aims • Propose a different process for dealing with insurance disputes • Improve lawyer’s capacity to resolve insurance disputes through IDR & IOS • Propose advocacy & a systemic solution for 3rd party debt

  3. Project history • Other aspects of the project • National Insurance Hotline (Consumer Credit Legal Centre ) • See fact sheet: Insurance Contracts Act & Determinations • Australia wide project & project partners

  4. Approach for the day • Session Aim • Participants will understand • How to use IDR & IOS to solve disputed claims and 3rd party debts • How to use Industry Code to resolve claims & write off debts • Materials • Powerpoint notes • Fact sheets • Case studies

  5. Key reference material • ASIC – Corporations Act • Insurance Industry Code of Practice (COP) • http://www.codeofpractice.com.au/ • Insurance Ombudsman ‘Terms of Reference’ (TOR) • http://www.insuranceombudsman.com.au • Insurance Contracts Act • See Fact Sheet: Insurance Contracts Act and IOS Determinations

  6. Regulation of IDR & IOS • Corporations Act 2001 S 912A • A mandatory obligation for all licensees • s912A(2) a dispute resolution system • Internal dispute resolution procedures, and • Membership of an approved (EDR) scheme • Corporate Governance • IOS - Independent Board of Directors • IOS – Reporting to ASIC • COP – Independent Code Compliance Committee

  7. Facts about IDR & IOS 2,910,419 claims are made to insurers last year Rejected & Disputed Claims 63,700 claims rejected 11,800 claims disputed at IDR 1870 claims disputed at IOS Note massive slippage – includes your clients Win / Loss Ratio 28% consumers win at IDR 36% consumers win at IOS Court comparison

  8. Not Again! Dealing with 3rd party debt

  9. Case study • John comes to the legal service • Read the case study and answer the following question: • What is the classic legal strategy for dealing with a matter like this?

  10. 3rd party debt: classic legal strategy • Client with letter of demand • Respond to lawyer/debt collector • Deny liability • Argue Apportionment • Advise client is judgment proof • (No assets > $5000 & Centrelink income) • Consider case study: legal advice

  11. 3rd party debt: classic outcomes for clients • Argy-bargy for months • Debt summons to client • Possible bankruptcy • If lucky – A write off • If unlucky - Matter disappears • Lawyer loses track • Client might borrow or bankrupt • What is your experience? • Bankruptcy • Write it off – the debt is waived

  12. 3rd party debt: new approach • Advisors • Bypass lawyers and debt collectors • Go to Insurance company internal dispute resolution process (IDR) • Refer to Code – Financial Hardship • Ask IDR for write off – draft letter • If unsuccessful – CCLC Hotline or IOS Code complaint – draft letter • If still unsuccessful – CCLC or IOS intervention • Will only fix the code complaint with insurer

  13. Bypass the lawyer? • Is it a breach of professional ethics? • No – The Code requires referral to IDR • Lawyers are subject to the Code • Refer to Code of Practice • 3:10 refer to ASIC & ACCC guidelines • 3:11 Financial Hardship • 3:12 financial counsellors/ IDR

  14. Internal dispute resolution • Why would you be wary of referring a client to IDR?

  15. Facts about IDR & IOS • IDR is a specialist role within company • IDR statutory requirement • Amounts in dispute • 51% of disputes less than $5,000 • 66% of disputes less than $10,000 • Figures do not include 3rd party debt • If matter referred to IOS • Insurer pays - consumer free

  16. 3rd party debt – new approach outcomes • Clearer process • Write off more likely • IDR/IOS avoids Courts & legal costs • Benefits for the client • Less worry • Client has closure as matter is finalised • Benefits for a lawyer / financial counsellor • More focused advocacy • Engaged in a process that will lead to systemic change

  17. David v Goliath Disputed claims

  18. Case study • Susan comes to the legal service • Read the case study and answer the following question: • What would you do if a matter like this came into the service? • Would you expect the claim to be paid?

  19. Disputed claims – Current Practice • Lawyer/financial counsellor responses • Be outraged – wonder what to do? • Look for expert assistance • Legal aid/pro bono barrister • If unavailable –refer elsewhere

  20. Disputed claims classic legal outcomes • Clients lose • Claims are not pursued in Court or ADR • Clients are out of pocket • Clients lose faith in insurance • Advisors lose • Clients are uninsured • Poor insurance practice not addressed

  21. Disputed claims – What to do? • Claim refused: get instructions on basis for refusal • See Fact Sheet: Insurance Contracts Act and IOS determination • Refer dispute direct to CCLC Hotline • Then refer to insurer’s IDR – See draft letter • Ring IOS or CCLC Hotline for IDR phone number and contact • See Fact Sheet: Insurance claims and dispute timelines • If no decision from insurer in 30 days refer to Hotline or IOS – See draft letters

  22. Benefits of new approach • System is paper based • Submissions by lawyers • Appearances discouraged • Avoids a Court process • Cost free to consumer and advisor • Decision made in favour of the consumer is binding on the insurer

  23. IOS process for disputes • IOS Process for dispute • TOR 8.1: Consumer Referral to IOS – 3 months • TOR 8.3: Insurer has 15 days to respond • TOR 8.3: insurer/ consumer exchange documents • IOS Benchmark: IOS to make decision – 3-4 months • IOS Benchmark: 95% resolved within 4 months • See IDR/IOS Timelines Handout & Draft letters of complaint

  24. IOS basis for decision • Basis for decision – IOS TOR 11:13 • Fair and reasonable • Good insurance practice • Terms of policy • Established legal principles • Exclusions: cross examination – testing of evidence • Outcomes – is it binding? • IOS is binding on insurers not consumers • Consumers retain the right to litigate

  25. If the client thinks its unfair IOS might too! • Utmost good faith - The Act • Good industry practice – The Code • Fair and reasonable - IOS TOR • IOS decisions are based on more than the law

  26. Insurance Contracts Act – Utmost good faith • S13 Insurance Contracts Act 1984 • A contract of insurance is based on the utmost good faith requiring each party to act towards the other party, with the utmost good faith. • The duty requires • insurers to act with due regard to the insured's interests in situations where there is a conflict of interest. • the insured to act honestly when dealing with the insurer

  27. The Code - good insurance practice Code of Practice for claims See Fact Sheet: Insurance claims and dispute timeline Defines time to processes Code 3.1: Accept or reject simple claims - 10 days Code 3.3: Update on complex claims - every 20 days Code 6.0: Claim refused – refer for IDR decision - 15 - 30 days Code 6.9: IDR Unsuccessful – referral to IOS All reference to days= business days Illustrative case study – Customer service standards Mary’s case

  28. The law: Your client did something wrong Just because your client has breached the Act or contract doesn’t mean the claim won’t succeed at IOS Disclosure Requirements Degree of Prejudice

  29. Fair & Reasonable – IOS TOR • In arriving at a determination a Panel, Referee or Adjudicator shall have regard to what is fair and reasonable in all the circumstances; regard must also be had to good insurance practice, the terms of the policy, and established legal principle. • Determination referral: 24746 “The Panel has focussed on what it believes is fair and reasonable in the circumstances and good industry practice.”

  30. Insurance Contracts Act - Disclosure • Insured has a duty to disclose relevant information • S 21A – The insurer to ask specific questions of the insured; • S 22 The insurer to provide written warning about the consequences of non disclosure • Philip’s case

  31. Insurance Contracts Act – Breach of Contract • Consumer may challenge a rejected claim where: • A term or condition of the policy is breached • An alleged act or omission has occurred • BUT the Insurer has NOT suffered prejudice • Insurer’s decision is subject to: • S13 & S14 “utmost good faith” • S35 standard cover requirements • S37 requirements to notify insured of unusual policy conditions • S46 & 47 forgive pre existing defect, sickness or disability due to lack of knowledge • S54 Payment based on lack of prejudice to the insurer

  32. Conclusion • Project Aim: Ensure that clients are given the best advice when dealing with an insurance dispute • Insurer’s IDR and IOS provide an under utilised avenue for consumers to appeal insurer decisions • Still not sure what to do? Ring: • CLCC HOTLINE 1300 66 34 64 • IOS 1800 078 078

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