Key Takeaways

If the words of a TPD definition permit, an insured will not be restricted to asserting one particular time period as being the so-called TPD qualifying period. In short, as long as they are insured at the relevant time (and the wording permits) the qualifying period can be a floating concept.

Brief Facts

Mr Standley, a former Customer Experience Manager, was insured for Own Occupation TPD under a retail policy of life insurance issued to him by the life insurer.

The definition of TPD was relevantly as follows:

Own Occupation TPD definition

Own Occupation means the occupation in which the life insured was engaged immediately prior to the date of disability.

…

Own Occupation TPD means that, as a result of illness or injury, the life insured:

1. a) has been absent from work and unable to engage in their Own Occupation for three consecutive months; and   

  b) is disabled at the end of the period of three consecutive months to such an extent that they are unlikely ever again to be able to engage in their Own Occupation

Mr Standley suffered a motorcycle accident in August 2015, resulting in right ankle and left wrist injuries, as well as secondary anxiety and depression. He ceased work and lodged a claim for TPD with the life insurer in September 2016, claiming to have become TPD from 2 February 2016.

The life insurer rejected the claim in November 2017, and Mr Standley commenced proceedings in the NSWSC before Justice Rein shortly thereafter.

Despite agreeing with many aspects of the life insurer’s decline including on many credit issues and specifically that Mr Standley was not relevantly TPD from February 2016 being the date continually asserted by him as the start date of his claim (i.e. making the date for assessment three months later in May 2016), Justice Rein still found Mr Standley to be TPD.

His Honour did so on the basis of his finding that Mr Standley had met the qualifying period and was TPD as defined, by the beginning of September 2017.

The September 2017 date was selected despite the fact that by this stage Mr Standley had been off work for over a year and a half and despite the fact that the presumptive start of the qualifying period being June 2017 did not seem on the evidence as a whole, to be a date of any medical significance.

The life insurer appealed this decision to the NSWCA on the basis that (a) the date for assessment could not be later than the end of the three month qualifying period following the initial cessation of work and (b) that Mr Standley was not TPD in any event.

Judgment

The NSWCA unanimously upheld the decision of the NSWSC.

Crucial to the NSWCA’s decision was that:

…the first element of Part 1 of the definition is satisfied if the life insured has not worked in their most recent occupation…for a period of three consecutive months because they have been unable to do so as a result of illness or injury. That will remain so irrespective of whether, between the illness or injury and the commencement of that period, the insured’s employment in that occupation has ended for whatever reason. (Our emphasis added).

The Court therefore effectively stated that it did not matter that Mr Standley – when he first ceased work – did not cease work because of his claimed condition. It also did not matter that he did not become unable to work immediately after he ceased work, so long as at some point whilst he still had cover under the policy (although unemployed the whole time) he would meet the first limb of the TPD definition by being unable to work.

Implications

The implications of the NSWCA’s findings are very narrow given the nature of the TPD definition in this particular policy of life insurance.

In many any/own occupation TPD policies (particularly in group cover), the sustained cessation of work for reasons other than illness or injury will have the effect of flipping cover to more restrictive ADL or similar types of cover. In such scenarios, the success or failure of a claim will generally be dependent upon the acceptance of the commencement of the claim or ‘date of disablement’ as concurrent with the cessation of work.

This decision indicates however, that where full TPD cover continues notwithstanding work cessation, there is no need for alignment between work cessation and the ‘date of disablement’ or the ‘date for assessment’. That is, absent cover altering upon work cessation, the qualifying period can be met at any time during coverage and claimants can simply align the start and end of their qualifying period with the medical evidence that best suits their case.