Trustees and insurers face a dilemma. Recent court trends have been requiring insurers to provide claimants of about-to-be-denied insurance disability claims, copies of medical reports. However, to do so may undermine the insurer’s commercial decision-making ability, based on understood practices, and result in future rises in premiums.
The Privacy Act shouldn’t undermine accepted commercial practices and does provide a number of circumstances where access can be denied, including when to do so would prejudice commercial decision-making ability or breach a duty of confidentiality to another.
The Victorian Health Records Act 2001 states that access to medical records need not be provided where, at the time those records were obtained, it had been requested they be kept confidential. Access can also be denied where it would reveal evaluative information in connection with a commercially sensitive decision-making process. A trustee or insurer may give an explanation rather than access to the information used in assessing the disability claim.
Medical reports considered in determining disability claims are integral to a trustee’s confidential decision-making process and the Privacy Act should not require access.
So long as a trustee considers all the relevant facts and makes a decision supported accordingly, a court should not interfere unless the trustee voluntarily lifts the veil of confidentiality. A trustee must produce copies when proceedings start in a court or the Superannuation Complaints Tribunal (SCT). Production in these circumstances is not a voluntary action of a trustee.
Unless the doctors are bound by confidentiality to an insurer or to the trustee where the trustee has obtained its own reports, members may obtain a copy of reports from them.
However, there is an apparent court trend to require insurers to provide the insured with copies of medical reports by way of due process prior to declining a disability claim.
Insurers have no contractual relationship with members who claim disability. Under the insurance contract, the fund trustee is the insured.
To avoid further litigation on this aspect, some insurers have decided to release medical reports to fund trustees prior to denying disability claims. The trustee must then consider its own position on the potential consequences of voluntarily releasing copies of such reports to members, because there is currently no precedent to force super fund trustees to release such reports.
The trustee’s obligation under the trust deed to assess and decide whether a member qualifies for a disability benefit is separate from the contractual obligation of the insurer to assess and decide under the definition in the policy. Self-insured fund trustees make their own assessment.
If medical reports are to be released, the degree of detail in them may be curtailed, so when the trustee makes its decision, the background information available to it on the member’s condition and circumstances may be limited.
The Investment and Financial Services Association’s (IFSA) submission on the Draft National Privacy Principle Guidelines (www.ifsa.com.au) strongly stated that the life insurance industry was concerned about ensuring that the privacy laws do not require insurers to provide access to information to claimants under disability policies where such information was not previously provided.
“… unscrupulous claimants … will seek to access the personal information that a life insurance company holds about them and will be able to tailor a claim under their … policy … In this environment it will be more difficult for life insurance companies to identify false or fraudulent claims or claims where the life insurance company can avoid the policy under the Insurance Contracts Act 1984 for misrepresentation or non-disclosure. The impact of such claims on these products would be significant.”
IFSA noted that to require access would alter the insurer’s risk analysis because one key criteria in setting premiums for disability policy cover is claims history, with the result that disability insurance premiums would rise and some insurers may exit the market.
Trustees must ask themselves whether a decision to release copies of medical reports is in the best interests of fund members.
See www.askmercer.com.au for an expanded analysis of these issues.
— Coralie Kenny is a principal in William M Mercer’s legal group.
