Key Takeaways

Insurers cannot simply choose to disregard, or place unduly little weight upon, evidence which it considers to be deficient – for example, late-in-time medical reports, pro-forma certificates with little underlying rationale, or ‘on-the-papers’ medical opinions.

If a claimant suffers from a medical condition or incapacity at a time when their cessation from work is obscured by other reasons – for example, termination for misconduct, resignation etc. – it will not be a strain for a court to find that the initial qualifying period is met unless the terms of the policy explicitly say that the initial absence from work must be caused solely by the claimed condition.

Brief Facts

The life insured was a member of IS Industry Fund (the Fund) and accordingly received TPD cover under a group policy held by the trustee of the Fund (the Trustee) with the insurer. The TPD definition was as follows:

Where an Insured Person is gainfully employed and is working fifteen (15) or more hours on average each week within the six (6) months prior to the Date of Disablement they suffer Total and Permanent Disablement if they;

a) are unable to do any work as a result of Injury or Illness for six (6) consecutive months and in our opinion, at the end of that six (6) months they continue to be so disabled that they are in our opinion unlikely to resume their previous occupation at any time in the future and will be unable at any time in the future to perform any Other Occupation...

The life insured’s employment with BWS was terminated on 14 January 2011 due to misconduct, and he made a brief return to work at a business in Tasmania between 27 October 2014 and 11 December 2014 when he resigned from that employment.

A TPD claim was lodged with the Trustee by the life insured, in respect of bipolar disorder and a back condition. The life insured argued that, although the immediate cause of the termination from his employment was misconduct, he nonetheless met the 6 month qualifying period due to his claimed conditions and was TPD, with the subsequent return to work being a failed attempt.

The insurer argued that the cause of the life insured’s inability to work for 6 consecutive months was his termination for misconduct, and his subsequent return to work showed he was not TPD. The insurer declined the TPD claim four times, and an additional time when the life insured attempted to claim with a new date of disablement post-dating the brief return to work in 2014.

The parties to the litigation agreed for the Court to separately determine the question of whether the insurer’s decisions were valid, prior to engaging in the further issue of whether the life insured met the TPD definition.

Judgment

Robb J considered that some aspects of the insurer’s decisions were reasonable, and others were not, with the net effect of moving the proceedings to the stage 2 enquiry at some date in the future. In reaching these conclusions, his Honour held that:

• The TPD definition did not require that the cause of initial cessation of work to be the claimed condition (as opposed in this case to termination for misconduct) – only that the ‘requisite Injury or Illness is present and has the stipulated effect’ at the beginning of and throughout the qualification period (para 86), i.e. as an ‘immediate consequence of the direct cause’ of the termination misconduct. In other words, the Judge found that as long as the relevant illness or injury was a proximate cause of the initial absence from work, it did not need to be the only proximate cause. Accordingly, this aspect of the insurer’s decisions were invalid (para 125). Obviously, in this regard the Judge accepted the important ratio of Mabbett.
• Contemporaneous evidence is not necessarily more reliable than evidence produced at a much later time – ‘It is likely to be unreasonable for an insurer to reject out of hand later evidence solely on the ground of its remoteness in time from the Relevant Date’.
• ‘The Court cannot be too exacting in judging the adequacy of the reasoning process displayed by an insurer’ in circumstances where an insurer has been ‘responding to a series of repeated applications’ made with ‘a substantial body of incomplete and dissociated medical and other related evidence’ (para 179).
• ‘… an insurer considering a TPD claim in the same circumstances as did the insurer is not required to explain its reasoning in the same comprehensive way as would a court deciding the same question. The claims assessor who determines the application may not be legally trained, and is not required to provide an explanation of his or her process of reasoning with the same level of precision as would be expected of a lawyer justifying the decision on legal grounds.’ (para 238)

Despite the above observations, Robb J also held that the insurer breached its duties by rejecting outright certain evidence provided by the claimant rather than allowing the deficiencies in that evidence only to go to the question of weight.

Implications

This case confirms existing authority that insurers’ TPD decisions will not be scrutinized with pedantry by the court. It also pleasingly confirms that insurers will be given some latitude when the claims process, through no fault of a claimant, is made difficult to navigate by the insurer due to, for example, frequent tranches of drip-fed evidence.

Having said this, the case is also a warning that insurers cannot simply reject outright evidence, which it deems to have been improperly obtained, or be otherwise irrelevant. Such evidence in this case included pro-forma medical certificates certifying TPD without any explanation, evidence produced many years after the date of disablement making comment on a state of affairs which was present many years prior, and opinions from doctors based solely ‘on the papers’.

Finally, the decision also confirms that the claimed condition need not be the sole or immediate cause for a person ceasing work – so long as it keeps them from working (unless of course the terms of the policy refer to a ‘sole cause’). In this case, the Judge construed the definition of TPD as allowing termination for misconduct to be the immediate cause of unemployment, but considered that termination to result in an immediate exacerbation of the claimed condition – resulting in a concurrent and contemporaneous inability to work from the relevant date, and thereby satisfying the qualifying period.