Court Ruling Highlights Why TPD Wording Matters for Business Owners

The dispute involved a chef who had TPD cover through Club Super. AIA had declined the claim on the basis that he had not continuously worked at least 15 hours per week in the three months before disablement, as required by the policy wording. The Queensland Court of Appeal dismissed the insurer’s appeal, finding that the work-hours issue did not define the essential insured risk in the way AIA argued. The court also considered section 54 of the Insurance Contracts Act, which can restrict an insurer’s ability to refuse a claim because of certain post-contract acts or omissions.

For business owners, the practical point is not that every exclusion or eligibility condition will be overcome. Court outcomes are fact-specific, and the result turned on the particular wording, timing and circumstances of the claim. However, the decision does underline a common weakness in business protection planning: cover is often reviewed by headline benefit amount, while definitions, waiting periods, work tests, ownership and claim evidence receive less attention.

That matters where an owner, director or specialist employee is central to revenue, client relationships or loan servicing. A disability claim may need to support the business while a replacement is found, while a TPD or death claim may interact with succession plans, debt guarantees or buyout funding. If the cover sits inside superannuation, through a group arrangement, or outside the business structure altogether, the policy may not align neatly with the commercial purpose the business assumes it will serve.

SMEs reviewing business protection arrangements may wish to consider several general issues:

• whether the insured person’s actual duties, hours and employment status match the policy definitions;
• whether group or default cover is being relied on for business debts or ownership succession;
• whether records would clearly show work history, income, duties and the timing of illness or injury;
• whether key person insurance, buy-sell funding or debt protection requires separate structuring;
• whether the business has a documented plan for who controls claim proceeds and how they would be used.

The ruling is ultimately a reminder that insurance planning is more than buying a sum insured. For owner-led businesses, the strength of the arrangement often depends on whether the policy wording, business structure and claim pathway have been tested before a crisis occurs.