Post on 06-Jan-2018
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How to win an insurance complaint and resolve a 3rd party insurance debt
Denis NelthorpeWest Heidelberg Community
Legal Service
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
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
Approach for the day Session Aim
Participants will understand1. How to use IDR & IOS to solve disputed claims and 3rd
party debts2. How to use Industry Code to resolve claims & write off
debts Materials
Powerpoint notes Fact sheets Case studies
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
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
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
Not Again!Dealing with 3rd party debt
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?
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
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
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
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 guidelines3:11 Financial Hardship3:12 financial counsellors/ IDR
Internal dispute resolution Why would you be wary of referring a client to
IDR?
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
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
David v GoliathDisputed claims
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?
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
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
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
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
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
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
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
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
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
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
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.”
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
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
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