A decision in the Supreme Court of New South Wales challenges the accepted orthodoxy that the applicable date of assessment in a standard form definition total and permanent disablement (TPD) claim is at the end of the initial waiting period following a claimant's cessation of work.

In this case the Court accepted that a subsequent medical condition, not present or diagnosed when the Plaintiff initially ceased work or in the subsequent three month waiting period, had nonetheless rendered the Plaintiff unable to perform his occupation. It held that the Plaintiff satisfied the TPD definition in respect of that condition from the date of its diagnosis.

Facts

The Plaintiff held an accident and sickness policy with the Defendant, OnePath Life Limited (the Insurer), which covered him for TPD. The policy was obtained in 2008.

In June 2015 the Plaintiff commenced work as a Call Centre Manager for a parcel delivery service. On 2 August 2015 he was injured in a motor vehicle accident and suffered a fracture of his left wrist and two fractures in his right leg (the Injuries).

The Plaintiff returned to work with his employer for a short period in October 2015 and then again in early November 2015. He resigned from employment in February 2016 as he was not coping with the work required of him.

On or about 30 August 2016 the Plaintiff made an application for a TPD benefit with the Insurer. He also made a claim for income protection benefits.

On 1 September 2017 the Insurer declined the TPD claim and advised that whilst the Plaintiff had submitted claim forms for his IP claim which stated he had recently been diagnosed with secondary anxiety and depression (psychiatric conditions), the Insurer was not able to consider those conditions for the TPD assessment "until it was able to establish his response to treatment in a reasonable period of time".

In further correspondence of 15 November 2017 the Insurer stated that the TPD claim was based on whether the Plaintiff met the TPD definition as at the date of assessment which it had determined was 2 May 2016, three months after he ceased work. The Insurer contended that the Plaintiff's psychiatric conditions were not present as at 2 May 2016 and therefore it was not able to consider those conditions "until a reasonable time had passed for him to respond to treatment". It reaffirmed its determination that the Plaintiff did not satisfy the TPD definition as a consequence of his physical injuries.

The Plaintiff subsequently issued proceedings in the Supreme Court of New South Wales seeking payment of the TPD benefit on the basis that the Insurer's decision to decline the claim was unreasonable. In his statement of claim he pleaded that due to his physical injuries and psychiatric condition he was prevented from engaging in his own occupation from February 2016 and continuing.

At trial the Plaintiff argued that:

  1. As at May 2016 he was physically incapable of performing his own occupation on a full time basis;
  2. As at May 2016 he was suffering a psychological impairment. He gave evidence that he noticed a change in his mood shortly after the accident as well as other symptoms such as sleeping issues.
  3. The proper construction of the TPD clause did not confine the Insurer's analysis only to May 2016, nor was it permitted to ignore evidence that after May 2016 he was suffering a psychological condition.

At trial the Insurer defended the proceeding on the following basis:

a.The Plaintiff had exaggerated the extent of the physical demands of his job to the medical doctors who examined him for the purposes of his claim;

b. There was no evidence that the Plaintiff was suffering from a psychiatric condition as at May 2016;

c.The only period the Court should have regard to was the plaintiff's condition as at May 2016;

d.The Plaintiff could only succeed if he established that as at May 2016, he satisfied the second limb of the TPD definition;

Issue

The TPD definition under consideration by the Court was an 'Own Occupation' definition which relevantly provided:

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

  1. Has been absent from and unable to engage in their 'Own Occupation' for three consecutive months; and
  2. 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'

The definition was objective and did not require the Insurer to form its own opinion as to TPD.

The Insurer maintained that the only relevant date that the Court could consider when assessing TPD was 2 May 2016.

The Plaintiff contended that proper construction of the TPD definition did not restrain the Insurer or the Court from considering whether or not he satisfied the TPD definition at a later point in time.

Judgement

The Court accepted the Insurer's contention that when the Plaintiff ceased work in February 2016, and at the end of the three month period in May 2016, the Plaintiff was not TPD as a consequence of his physical injuries. It also accepted that the Plaintiff had exaggerated the physical aspects of his employment to doctors retained on his behalf. As a consequence the Court was unable to place weight on the evidence which supported the Plaintiff's argument that he was TPD by reason of those physical injuries.

The Court also accepted that there was no expert medical evidence that established that the Plaintiff was, as at 2 May 2016, suffering from the psychiatric conditions.

However, while the Court accepted that the waiting period clause did not permit a date of assessment to be chosen long after the expiry of three months of absence from work, it declined to find that the waiting period could only commence on 2 February 2016.

The Court noted that in April 2017 the Plaintiff was diagnosed with the psychiatric conditions which prevented him from working in his occupation and that by September 2017 he had not been working for three months because of that condition.

The Court noted that the Insurer did not dispute the Plaintiff had, at least by September 2017, developed the psychiatric conditions. The Court also noted that the vocational evidence obtained by the Insurer did not consider the psychological aspects of the roles. At trial the Insurer did not seek to argue the Plaintiff had exaggerated the nature or impact of his psychiatric injuries on his ability to engage in his own occupation.

The Court seized upon the Plaintiff's pleaded case that from February 2016 'and continuing' his injuries prevented him engaging in his own occupation and held that he had a continued inability to work.

The Court held that the construction of the TPD clause did not limit the waiting period to any particular date or point in time and the Court was not persuaded that there was 'any reason to read into the clause any limitation on its scope'.

Accordingly the Court held that the Plaintiff had established that as at September 2017 and due to his psychiatric condition, he was TPD and entitled to the TPD benefit.

Analysis

This decision represents a novel way of interpreting standard form TPD clauses and at first blush appears to be somewhat inconsistent with the authorities that have examined the issue of the date of assessment.

However, the policy terms extracted in the judgment do not appear to include a temporal link between the commencement of the absence from employment due to injury/illness and the start of the waiting period.

It has been accepted as conventional understanding that the incapacity must arise from the medical conditions which caused the absence from work1 and that medical evidence which prognosticated about those medical conditions, even if those reports came into existence after the end of the waiting period are still relevant to assessing TPD2.

Courts have also held that medical evidence regarding conditions which were not present as at the date of assessment, such as the subsequent onset of a psychiatric condition, are not relevant.

In Shuetrim Justice Stevenson noted that it was 'implicit' in the TPD definition that the ongoing inability to work must arise from the injury or illness that caused the first absence from work and that the TPD definition directs the insurer's attention to the claimant's capacity at the end of that waiting period. To construe otherwise, Stevenson observed, would mean it was open to a claimant to satisfy an insurer, at any time after being absent from work, even many years later, that they were at that time so incapacitated as to be TPD3.

In Wheeler v FSS Trustee Corporation [2016] NSWSC 534, Associate Justice Garde noted the authorities established that the point in time at which the TPD definition must be satisfied was at the end of the period of absence from occupation through illness or injury.

In this instance the Court did not analyse its finding as to the proper construction of the TPD provision against those earlier decisions or distinguish its reasoning against those decisions.

It is unclear whether the Court would have reached a different view if:

  1. The Policy wording had specific provisions that imposed a temporal link between the date of cessation of employment and the commencement of the waiting period within the TPD definition. Most modern TPD definitions will include clauses or definitions that link the cessation of employment due to injury/illness to the waiting period;
  2. The subsequent medical condition was a new and distinct physical injury entirely unrelated to the initial injury. In this case, the Plaintiff had led evidence that his psychiatric injuries were secondary to the physical injuries so this may have provided sufficient latitude for the Court to hold that there was an ongoing disability temporal to and caused by the initial physical injury;
  3. In its decline letters, the Insurer had stated it would not consider the psychiatric conditions at all, rather than declining to consider the disability arising from those conditions until a "reasonable time had passed";
  4. The Policy had a provision which provided that TPD cover would cease to be in force once the Insured was no longer employed or at work.

The decision has potential ramifications for insurers assessing TPD claims as it is often the case that TPD claims are made several years after the initial cessation of work. In those cases there is often a claimed continuing inability of a claimant to work, due to both their original injury/illness and the onset of new medical conditions. Often those medical conditions have arisen long after the cessation from work, this is especially so with psychiatric conditions.

Pending any appeal of this decision, insurers and their claims assessors should consider the following matters when assessing a TPD claim:

  1. Identify whether the policy wording includes any temporal requirements. This is less likely to be an issue in recent policy wordings but it may arise in legacy policies;
  2. Specify and outline in decline letters whether it has determined that certain medical conditions are excluded from its assessment of TPD and the provisions of the policy it says support such a construction of the TPD definition;
  3. Consider whether to obtain evidence which assesses a claimant's capacity to work against all claimed conditions;

Footnotes

1 Shuetrim v FSS Trustee Corporation [2015] NSWSC 464 at 67

2 TAL Life Limited v Shuetrim , MetLife Insurance v Shuetrim [2016[ NSWCA 68 at 150

3 Shuetrim v FSS Trustee Corporation [2015] NSWSC 464 at 67

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