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Case Study : Susan Buswell v TAL Life Limited

Susan Buswell v TAL Life Limited [2018] NSWSC 1507

For injured workers’ receiving income protection payments through their superannuation fund or life insurer, the general principle at law has always been that they cannot double dip or be unjustly enriched. In practice, that means an individual cannot be “better off” or be double compensated from two different sources for the one period of loss.

For some time, income protection insurers have attempted to apply this no double dip rule to individuals who also receive lump sum damages payments. Often, an insurer will attempt to seek income protection payments made to an individual as a refund from a common law compensation settlement. Or, as in the case that will be discussed below, the life insurer will attempt to reduce or offset the future income protection benefits payable by reference to any common law payment that has been received by way of a settlement or judgement.

TAL, is one of Australia’s largest life insurer and has regularly attempted to engage in this practice. It is important to note that each case needs to be assessed by reference to the policy of insurance, however this case serves as a key reminder that the life insurer cannot always reduce future benefits payable by offsetting the amount received by way of common law settlement.

The question in this case was whether TAL, the insurer, was entitled to deduct from the plaintiff’s monthly income benefits the value of a sum received by the plaintiff upon settlement of a claim for damages.

TAL took the view that the settlement of the plaintiff’s claim for psychological injuries would constitute ‘Other Disability Income’ and would therefore affect her income protection benefits. Essentially, TAL claimed that this sum was a ‘benefit offset’ which applied under paragraph 1.9 of the policy.

The clause TAL sought to rely upon is set out below:

1.9.1 the amount of any benefit payable in respect of an insured person for a month will be reduced by any other disability income which accrues to that person during that month’ * “Other Disability” income was defined in the policy to include: “ Any benefit under any workers compensation, statutory compensation, pension, social security or similar schemes or other similar State, Federal or Territory legislation…”*

TAL argued that settlement sum was ‘income’ derived as a result of a benefit under the workers’ compensation scheme.

The court disagreed and concluded that the sum received in settlement of the plaintiff’s claim for work injury damages was not income. Rather, it was characterised as compensation for loss of a capital asset, being the earning capacity. His honour therefore concluded that the settlement monies did not fall within the definition of ‘Other Disability Income’ as claimed by TAL.

Take away points

  • Depending on the proper construction of the policy and wording, an insurer cannot deduct lump sum damages from future income protection benefits.
  • Depending upon the wording of the policy, the insurer cannot seek a refund from a common law damages claim.
  • Prior to settlement in a personal injuries claim, it is crucial to review income protection policies to ascertain whether the settlement monies will be considered a ‘benefit offset’. In the absence of the word ‘common law’ or ‘any time of compensation’ in the policy definition, this case is likely to apply.

Disclaimer: At the time of writing this blog, this case was still within the period of possible Appeal and therefore this advice may change.

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Written by Shine Lawyers. Last modified: October 24, 2018.

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