Key Takeaways

An insured’s occupation for the purposes of determining whether they obtain standard or ADL TPD cover in relevant policies will be determined by the factual reality of their occupation not their job title. Occupational Rating Guides which by reference can form part of a relevant policy in this regard can obviously be highly determinative of what type of TPD cover an insured receives, however, they need to be accurately identified by the policy and provide a complete set of consistent rules for dealing with jobs which do not lend themselves to a straightforward rating classification in order to do their intended job.

Brief Facts

The issue in this case was whether the plaintiff’s TPD claim fell to be assessed under a standard ‘any occupation’ definition or a more onerous ADL definition. In turn, this issue came to be determined by the interpretation of the insurer’s group life policies and the plaintiff’s occupational classification.

The plaintiff held the position of ‘Client Services Officer’ at an Immigration Detention Centre. In nominating the plaintiff for cover, his employer classified his occupation category as ‘white collar’, which would attract standard cover. At trial, the insurer argued that the plaintiff’s occupation, in substance, was either that of a ‘security guard’ or a ‘prison officer/warden’ which were both ‘heavy blue collar’ and attracted ADL cover.

There was also disagreement between the parties as to the version of the policy that should apply to the plaintiff’s claim:

• Under the earlier policy, ADL cover was triggered if the plaintiff’s occupation was listed in the ‘ADL definition list’ (the ADL List) which placed jobs into ‘occupational categories’ (white collar, blue collar, heavy blue collar).
• Under the subsequent policy, the trigger for less expansive cover was whether the plaintiff’s ‘primary duties relate to an occupation’, classified as ADL in the Fund’s ‘Occupations Rating Guide’ (the Rating Guide). Plaintiff’s counsel contended that changes in the subsequent policy ‘represent a retrospective re-assessment of eligibility by employment category, and are void and of no effect’.

Judgment

At the outset, the Court had reservations about whether the subsequent policy amendments applied to this case. Ultimately, however because the Court found that the plaintiff was entitled to standard cover under either policy it did not need to consider the issue in detail nor to determine it.

However, the Court made the obiter comments that:

‘the retrospective alteration of employment classifications, without notice, which results in the avoidance of claims which would otherwise be honoured, may well breach the insured’s duty of utmost good faith’.

Ultimately the Court made a call on the fact that the plaintiff’s occupation was in reality not such to place him in ADL territory under either version of the policy noting that common sense dictates that ‘relevant occupation’ should be determined by what the duties were and not the person’s job title. In coming to this factual finding the Court noted that the lack of precision in the documents asserted by the insurer as being the relevant occupational list made it difficult to support its contentions on how the plaintiff’s actual occupation should be classified.

Implications

This case illustrates two very real legacy issues confronting group life insurers who largely, to keep premium rises sustainable over time, moved from wider TPD cover to narrow the availability of standard TPD cover to those it classified as being in high-risk occupations.

The first issue is determining from when the new restricted cover applied and the second is giving contractual effect and precision to the ubiquitous Occupational Rating Guides, being the documents referred to in the relevant policy and which inter alia identified the excluded high-risk occupations.

In terms of the amended cover start date, regardless of policy terms and absent special circumstances, a court will generally not allow an accrued right to a benefit to be expunged by a retrospective contractual amendment. If the right has accrued after the agreed start date of the amended cover between insurer and trustee but before formal documentation has been executed, the insurer can still assert the earlier start date but it will need to produce strong documentary evidence supporting the pre-formal documentation start date. The difficulties in obtaining such evidence (which can often be buried within standard business emails and the like) long after the relevant date, should not be underestimated.

In terms of the Occupational Rating Guides, they must both be precisely identified by the relevant policy and have detailed provisions and guidance notes within them which allow conflicts over which job falls under which rating (such as occurred in this matter) to be resolved one way or another. In short these documents need to cover the field and allow the reader to classify every conceivable job in a consistent way. Ambiguity and imprecision should be avoided. For example there must be a way of categorising a job which either is not identified at all, or neatly fits under multiple definitions.