AFCA Determination 717312

Key Takeaways

The fact that an insuring clause refers to ‘usual occupation’ (as opposed to ‘usual occupations’) does not mean that a life insurer can disregard all pre-injury occupations an insured was performing except for the one it considers to be the ‘usual’ or ‘main’ one.

Brief Facts

The complainant lodged a claim under a policy of income protection following a work injury to his back on 24 September 2018. The insurer initially accepted the claim and paid benefits from 25 October 2018 to 24 May 2019, on the basis that the complainant was disabled from his ‘usual occupation’.

The complainant’s pre-injury work consisted of essentially two occupations – that of carpenter, and that of an internet retailer of tools. There was some factual debate about which of these occupations was the more significant one, if any, however the insurer argued that it was the internet retailer occupation that was relevant to the assessment of entitlement to benefits – i.e. the ‘usual occupation’ – on the basis that most of the complainant’s pre-injury income came from that job.

The insurer therefore declined the claim on the basis that the complainant – while not being able to work as a carpenter due to his back injury – was nonetheless able to work in his largely sedentary internet retailer job.

The complainant argued that he had barely any involvement in the online tool business, and that it was predominantly operated by his wife.

In its initial Recommendation, AFCA was not convinced by the assertions from the complainant, but nonetheless found that it was ‘unfair for the insurer to choose one occupation as the usual occupation where his pre-disability income is generated from both occupations’.

On this basis, AFCA recommended that the claim be re-opened by the insurer and the complainant assessed for partial disability. The insurer disputed this decision due to its view that the phrase ‘usual occupation’ could mean only one occupation because a) the phrase is not pluralised, b) the complainant was performing two separate and distinct occupations at the time the claim arose and c) having regard to a) and b), it falls upon the insurer to determine what the ‘usual occupation’ is.

Determination

In its Determination, AFCA upheld the findings made in the Recommendation about the complainant’s ‘usual occupation’ being that of ‘carpenter/internet retailer’:

‘… a reasonable person, reading these provisions, would expect to be paid a total disability benefit if there were unable to do at least one important duty and were not working, and a partial disability benefit if they had a limited ability to do at least one important duty and were working. Treating ‘usual occupation’ as meaning ‘main occupation’ introduces a significant limitation on the benefits which is inconsistent with the policy read as a whole. I do not accept that such a significant limitation can be fairly achieved by stretching the ordinary meaning of ‘usual’’.

Implications

According to AFCA at least, this Determination supports the proposition that where an insured is habitually performing two or more jobs, their ‘usual occupation’ will include all such jobs, not just the primary job (however such job is identified).

The net effect is in circumstances where an insured is disabled from one of their jobs, but not the other(s) they will still be disabled for their ‘usual occupation’.

In most IP policies this will mean, provided an insured is still working in one of their jobs they are capable of performing, a resultant claim will be restricted to one of partial disability rather than total disability.  

Whilst this principle appears straightforward enough, obviously issues will be raised when for example concurrent job(s) are fleeting and unsustained. In such circumstances, it could be strongly argued that such fleeting employment should not be considered part of the ‘usual occupation’ and that some continuity of employment is required.

Critically, it seems to us that the decision will also have relevance to the concept of ‘active employment’ as that term is commonly used in the commencement of automatic group cover. That is, an insured in concurrent employment who is fit for one of their jobs but not the other, will arguably not be in ‘active employment’ because they can only do some, but not all, of the normal duties of their ‘usual occupation’ given the extended definition of that term as used by AFCA in this case.