How to win an insurance
complaint and resolve a
3rd party insurance debt
Denis Nelthorpe
West Heidelberg Community
Legal Service
Project Aim
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Project Aims
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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
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Other aspects of the project
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National Insurance Hotline (Consumer Credit
Legal Centre )
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See fact sheet: Insurance Contracts Act &
Determinations
Australia wide project & project partners
Approach for the day
Session Aim
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Participants will understand
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1.
2.
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
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Powerpoint notes
Fact sheets
Case studies
Key reference material
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ASIC – Corporations Act
Insurance Industry Code of Practice (COP)
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Insurance Ombudsman ‘Terms of Reference’
(TOR)
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http://www.codeofpractice.com.au/
http://www.insuranceombudsman.com.au
Insurance Contracts Act

See Fact Sheet: Insurance Contracts Act and IOS
Determinations
Regulation of IDR & IOS
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Corporations Act 2001 S 912A
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A mandatory obligation for all licensees
s912A(2) a dispute resolution system
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Internal dispute resolution procedures, and
Membership of an approved (EDR) scheme
Corporate Governance
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IOS - Independent Board of Directors
IOS – Reporting to ASIC
COP – Independent Code Compliance Committee
Facts about IDR & IOS
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2,910,419 claims are made to insurers last year
Rejected & Disputed Claims
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63,700 claims rejected
11,800 claims disputed at IDR
1870 claims disputed at IOS
Note massive slippage – includes your clients
Win / Loss Ratio
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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
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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
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Client with letter of demand
Respond to lawyer/debt collector
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Advise client is judgment proof
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Deny liability
Argue Apportionment
(No assets > $5000 & Centrelink income)
Consider case study: legal advice
3rd party debt: classic
outcomes for clients
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Argy-bargy for months
Debt summons to client
Possible bankruptcy
If lucky – A write off
If unlucky - Matter disappears
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Lawyer loses track
Client might borrow or bankrupt
What is your experience?
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Bankruptcy
Write it off – the debt is waived
3rd party debt: new approach
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Advisors
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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
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Will only fix the code complaint with insurer
Bypass the lawyer?
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Is it a breach of professional ethics?
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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
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Internal dispute resolution
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Why would you be wary of referring a client to
IDR?
Facts about IDR & IOS
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IDR is a specialist role within company
IDR statutory requirement
Amounts in dispute
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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
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Insurer pays - consumer free
3rd party debt – new approach
outcomes
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Clearer process
Write off more likely
IDR/IOS avoids Courts & legal costs
Benefits for the client
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Less worry
Client has closure as matter is finalised
Benefits for a lawyer / financial counsellor
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More focused advocacy
Engaged in a process that will lead to systemic
change
David v Goliath
Disputed claims
Case study
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Susan comes to the legal service
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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?
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Disputed claims – Current
Practice
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Lawyer/financial counsellor responses
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Be outraged – wonder what to do?
Look for expert assistance
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Legal aid/pro bono barrister
If unavailable –refer elsewhere
Disputed claims classic legal
outcomes
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Clients lose
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Claims are not pursued in Court or ADR
Clients are out of pocket
Clients lose faith in insurance
Advisors lose
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Clients are uninsured
Poor insurance practice not addressed
Disputed claims – What to do?
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Claim refused: get instructions on basis for refusal
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Refer dispute direct to CCLC Hotline
Then refer to insurer’s IDR – See draft letter
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See Fact Sheet: Insurance Contracts Act and IOS
determination
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
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System is paper based
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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
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IOS Process for dispute
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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
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Basis for decision – IOS TOR 11:13
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Fair and reasonable
Good insurance practice
Terms of policy
Established legal principles
Exclusions: cross examination – testing of
evidence
Outcomes – is it binding?
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IOS is binding on insurers not consumers
Consumers retain the right to litigate
If the client thinks its unfair
IOS might too!
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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
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S13 Insurance Contracts Act 1984
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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
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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
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Code of Practice for claims
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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
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All reference to days= business days
Illustrative case study – Customer service standards
 Mary’s case
The law: Your client did
something wrong
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Just because your client has breached the
Act or contract doesn’t mean the claim won’t
succeed at IOS
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Disclosure Requirements
Degree of Prejudice
Fair & Reasonable – IOS TOR
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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
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Insured has a duty to disclose relevant
information
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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
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Consumer may challenge a rejected claim where:
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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:
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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
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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:
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CLCC HOTLINE 1300 66 34 64
IOS 1800 078 078