aluca cmg / vic · 2018-07-09 · aluca cmg / vic melbourne legal session 19th april 2018. aluca...
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ALUCA CMG / VIC Melbourne Legal Session
19th APRIL 2018
ALUCA Life insurance Excellence Awards
• 10 categories: Leadership x 2, Claims x 2, Underwriting x 2, Rehab x 1, Education x 1, Innovation x 1 and Service x 1 .
• Prizes for winner & logo for all finalists to use.
• Nominations close April 20th
• Early bird tickets for black tie event $125+ GST@ aluca.com/events/event-calendar
turkslegal.com.au
TPD - How should you deal
with events between the date
of assessment and trial?
Darryl Pereira, Partner
Sofia Papachristos, Partner
Subsequent Events – how should they be treated?
Subsequent Deteriorations
Subsequent Injuries
Subsequent Job Applications
Subsequent Work
Summary
Overview
| 5
1
2
3
4
5
Regulatory Landscape - TPD definitions
| 6
PJC Report March 2018
▪ Committee recommended standardising TPD definitions
▪ Insurance in Superannuation Code of Practice be updated to reflect this
recommendation
APRA Deputy Chairman Helen Rowell's speech 'APRA Update:
What can you expect in 2018'
▪ Acknowledged Insurance in Superannuation Code was a significant industry-
led effort and an important step forward
▪ However, APRA consider Code should be strengthened including by
standardising definitions for disability
a) absent from work through illness or injury for six consecutive months;
and
b) in the opinion of the insurer, the life insured has become incapacitated
to such an extent as to render the life insured unlikely ever to engage
in or work for reward in any occupation or work for which [he/she] is
reasonably capable of performing by reason of education, training or
experience
▪ Whilst the words ‘Date of Assessment’ rarely appear in the definition, it is
the contractually agreed marker when the opinion on the likelihood of a
return to ETE work is to be formed.
▪ The DOA is generally accepted as being at the end of the qualifying
period – 3 or 6 months continuous absence from work.
Standard TPD Definition
| 7
Date of
Injury or
Illness
6 months qualification
period
Date of
Assessment
Date Claim
Lodged
Date opinion
formed
Subsequent deterioration
Subsequent injuries
Subsequent Job Applications
Subsequent Work
Timeline of a Claim Assessment
(past)
Subsequent events
The TPD Flow Chart
| 9
H
E
A
L
T
H
Good
PoorTIME
Health
ou
tco
mes
Date of Assessment Date Opinion Formed
Return to
Work Point
Injury
▪ The DOA will invariably be a date long past by the time the insurer is ready
to form an opinion on likelihood of a return to ETE work.
▪ The misalignment of these two dates will throw up complexities for insurers:
▪ in obtaining evidence which will need to deal with historical events and the
subsequent events which occur between the two bookend dates
▪ how is the DOA prognostication impacted by events that are no longer future
possibilities but actual events occurring after the DOA – the “subsequent events”
The subsequent events complexity
| 10
Subsequent Deteriorations
Subsequent Injuries
Subsequent Job Applications
Subsequent Employment
Summary
| 11
1
2
3
4
5
Tower v Farkas
| 12
One issue the CoA raised was how it should deal with the fact that the insured was in remission at the time the insurer’s decision
was made.
Lower court found that the insured met this definition and the insurer appealed to CoA.
Definition of TI was ‘an illness or condition which is highly likely to result in death within 12 months’ .
Dispute over whether the insured was TI under a life policy (non-Hodgkins lymphoma).
1 Deteriorations
‘…the evidence in question in the present case must relate to the insured’s prognosis as at the date of diagnosis/occurrence of the relevant disease… But it is only the prognosis as at that date that governs entitlements under the Policy… evidence that the insured did or did not survive for 12 months casts no relevant light on that prognostic matter. For the Court to have regard to facts which could not be known at the contractually agreed date for assessment would effectively deny the bargain struck between the parties.’
Tower v Farkas
| 13
Mason P
1 Deteriorations
Tower v Farkas
| 14
Mason P
‘… to pay regard to later events, except those reflecting on the prognosis that was or ought to have been formed on 1 May 2002, would be to depart from the relevant bargain which was necessarily forward-looking in a prognostic sense’
1 Deteriorations
Halloran v Harwood Nominees
| 15
‘If an employee is not disabled as defined at the relevant date, a subsequent deterioration in his or her condition would not qualify him [or her] for a disablement benefit. Conversely, if he or she is disabled as defined at the relevant date, a subsequent improvement in his or her condition does not retrospectively disqualify the employee from the benefit’.
1 Deteriorations
McArthur v Mercantile Mutual
| 16
‘As the Court’s role is to determine whether the definition of total and permanent disablement has been fulfilled… there is no reason why the Court performing that task, should be confined to the evidence before the respondent on 14 October 1996.
Medical reports coming into existence after the relevant time will be admissible provided that they are pertinent to the determination of the appellant’s condition at the relevant time’
Muir J
1 Deteriorations
TAL v Shuetrim
| 17
Approved of this is comment in Finch v Telstra [2010]
Approved of the phrase ‘the court does not speculate when it can know’- used in Willis v the Commonwealth [1946]
The Court approved of the reasoning above in McArthur(para 150)
Issue arose as to how one of the insurers dealt with medical reports coming into existence after the DOA - they were given less weight
1 Deteriorations
TAL v Shuetrim
| 18
‘What matters is that that state of affairs arose while I was a Telstra Employee. It does not matter that the symptoms of that state of affairs emerged more clearly after I left Telstra’s employment.’
1 Deteriorations
Wheeler v FSS
| 19
• Former NSW Police officer
• Medically discharged due to PTSD
• chronic psychiatric illness – years for condition to stabilise/reach a
point where reliable psychiatric prognosis can be given
1 Deteriorations
Wheeler v FSS
| 20
However, the question is whether the insured person is in fact incapacitated in the relevant way, and all evidence probative of that
question that is brought into existence between the date of assessment and the date of the determination must be
taken into account.’
The required incapacity must exist as at the end of the period.
Later evidence cannot be discounted in favour of evidence contemporaneous with the date of assessment.
1 Deteriorations
Hellessey v MetLife
| 21
• Former police officer
• Witnessed numerous traumatic events during course of
employment
• Medically discharged on basis developed PTSD, Major Depressive
Disorder and Anxiety
• Insurer decline strong emphasis on preferring evidence closer in
proximity to DOA
1 Deteriorations
Hellessey v MetLife
| 22
‘The question is whether the claimant’s incapacity satisfies the clause at the assessment date, not whether the prognosis as at the assessment date suggested that the ETE clause is satisfied’.
‘Consequently, where time elapses after the assessment date before the insurer decides whether it is satisfied that the TPD definition has been established, the insurer must have due regard to all medical and other evidence concerning the likely consequences of the claimant’s incapacity as at the assessment date that becomes available.’
1 Deteriorations
Hellessey v MetLife
| 23
• In the case of psychological injuries such as PTSD, some
members will recover and others’ psychological injuries
will become chronic, and they will not recover
• The evidence available as at the assessment date may
be an unsound basis for determining whether the TPD
clause has been satisfied
• The consequences of later and particularly longitudinal
evidence may be a more reliable guide to the true nature
of the claimant’s incapacity as at the assessment date
1 Deteriorations
• Subsequent deterioration that could not have been in the reasonable
contemplation of the decision maker at the DOA should not be
considered. The concept that the ‘court does not speculate when it can
know’ has no application here where there is a contractually agreed date for
the prognostication
• A deterioration should be taken into account if it is simply a detectable
manifestation of what is already happening with the insured at the
relevant date
• Evidence can be dated well past the DOA but still be pertinent
• A decline based on the likelihood of an improvement in the underlying
condition as at the DOA will be vulnerable when there is evidence the
improvement has not occurred between DOA and opinion formation
Implications
| 24
1 Deteriorations
Subsequent Deteriorations
Subsequent Injuries
Subsequent Job Applications
Subsequent Work
Summary
| 25
1
2
3
4
5
Fresh Injury
| 26
Fresh injury (unrelated to existing condition)
Deterioration
(in existing condition)
Date of Assessment
Date of Assessment
Date Opinion Formed
Date Opinion Formed
Fresh injury not
considered ✔
Should the Deterioration be
taken into account?
2 Subsequent Injury
▪ Events need not be taken into account if not indicative of true state of affairs
at DOA
▪ e.g. the occurrence of a wholly unrelated frank injury does not need to be
taken into account for the TPD question because it cannot be relevant to
true state of affairs as at the DOA
▪ However, will be trickier where it is possible to link the new injury to the
existing condition at DOA
Implications
| 27
2 Subsequent Injury
Subsequent Deteriorations
Subsequent Injuries
Subsequent Job Applications
Subsequent Work
Summary
| 28
1
2
3
4
5
• Insured’s submitting failed job applications (often occurring
years after DOA) as evidence TPD
• How should they be treated in context of the likelihood of the
insured returning to a suitable occupation as at the DOA?
Job Applications
| 29
3 Job Applications
Case Examples
| 30
3 Job Applications
Case Insured’s Evidence Judgment
Erzurumlu v
Kellogg
Superannuation
Pty Limited
[2013]
• Insured argued can’t do
alternative work as shown by
fact unsuccessfully applied
for over 700 IT jobs
▪ Insured entitled to discount evidence
because it was evidence of the reaction of
employers in a different industry at a different
time.
Birdsall v MTAA
[2014, first
decision, Hallen
J)
• Unsuccessfully applied for
50 jobs as shown in workers
compensation file
• Court determined unsuccessful applications
were relevant and insurer failed to
demonstrate had regard to it in its decision-
making process.
• However, unsuccessful job applications did
not lead to conclusion insured was TPD
because steps insured took in submitting
application not known.
Robert Long v
United Super Pty
Ltd [2014]
• Insured argued failure to
obtain a job despite 130
weeks of professional job
seeking assistance was a
key guide that he was TPD
• Limited weight on the unsuccessful job
search because details on positions applied
for and reasons not successful were scant.
• ‘…different conclusion might have been
reached had the plaintiff provided a detailed
work attempt diary’
• Unsuccessful job applications should be treated as a factor relevant to
whether insured TPD as at DOA
• Court’s reasoning appears to be that failed job applications cast light on the
insured’s employability as at (and since) the DOA
• However, the extent of its relevance will depend on what is known about the
failed job applications weighed against the medical evidence
• Failed job applications that are well past the DOA should not be a significant
factor absent compelling evidence
Implications
| 31
3 Job Applications
Subsequent Deteriorations
Subsequent Injuries
Subsequent Job Applications
Subsequent Work
Summary
| 32
1
2
3
4
5
• Focus on returns to ETE work after DOA but before opinion
formed
• How far is such subsequent employment relevant?
Returns to Work
| 33
4 Subsequent Work
Case Examples
| 34
4 Subsequent Work
Case Facts Judgment
Halloran v
Harwood
Nominees Pty
Ltd [2007
NSWSC]
• Insured ceased working as
a greaser in May 1996 due
to back problems
• Requalified and returned to
work outside of DOA ETE 3
years later
• ‘If Mr Halloran had returned to
work as a greaser or had
returned to heavy labour that
would prove that he could
not have been permanently
disabled for work for which he
was suited as at the relevant
date for assessment’
Panos v FSS
Trustee
Corporation
[2015
NSWSC]
• DOA November 2011
• September 2012 - Insured
completed a return to work
trial nursing home
• October 2012 - offered
casual position in that role
• Judge found insured was not
TPD given the subsequent work
performed:
o was within ETE at DOA;
o proved the insured was
capable of doing that work
at the DOA
SCT Example
| 35
4 Subsequent Work
Case Facts Determination
SCT
Determination
– D14-15\165
• Insured returned after DOA
to employment within ETE
• Insurer denied claim based
primarily on return to work
• Insurer’s decision fair and
reasonable
• ‘May take account of actual
events arising after the qualifying
period, providing those events
follow a probable course of
events arising from the
complainant’s condition at the
end of the qualifying period’
Williams v Mercer Super (QDC, Dec 2017)
| 36
4 Subsequent Work
Facts Judgment
Plaintiff ceased work with a
merchant bank in October
2009
Claimed TPD due to health
problems including
fibromyalgia
Subsequently worked an hour
or so per week for husband’s
business
Commenced a law degree in
2012, received credits and
distinctions whilst claim being
considered
2015: completed her law
degree
• More significant emphasis on the study
undertaken than the work performed
• ‘Because the plaintiff demonstrated
tenacious resilience for three years in
spite of those symptoms, it is likely that
she can summons the same tenacious
resilience if called upon to do part-time
administrative work. That causes me to
doubt the pessimism of the plaintiff, her
husband and Dr Stringer. The plaintiff’s
academic achievements make more
credible the opinions of doctors…who
each accept the plaintiff has an ability
to handle part-time work, at least’
Carroll v United Super (SC, 4 April 2018)
| 37
4 Subsequent Work
Facts Insurer’s Arguments Insured’s Arguments
• Insured ceased work
as a carpenter due
bilateral hip dysplasia
in March 2012
• Work involved
demanding physical
activity
• DOA 9 June 2012
• 2015 evidence showed
had involvement in
small importing
business owned by his
wife
• Return to work in 2015
meant insured not TPD
• Insured’s activities in the
business (such as answering
phones, emails, listed as
point of contact) showed had
capacity to engage in day to
day running of business
• Showed medical evidence
was correct that the insured
had capacity to work within
ETE
• The work he did for his
wife’s businesses was
intermittent and
voluntary to help out
his wife
• Did not demonstrate he
was doing or capable
of doing regular
remuneration work
• Business was
unsuccessful
Judgment
| 38
Judgment
• The work performed by insured was relevant to TPD question
• Held the work performing in the business was unprofitable and of an intermittent
nature did not qualify as regular remunerative work
• Evidence only showed had capacity to undertake some tasks in an undemanding
situation
• Determined insured was TPD
4 Subsequent Work
Judgment
| 39
‘…And the Court concludes that he underplayed his involvement in the business. But the cross-examination did not establish that this business…was capable of providing regular remunerative work for Mr Carroll. Nor did it establish that Mr Carroll was sufficiently regularly involved in the administration of the business that his activity could be used as a signpost of his capacity to perform regular remunerative work’
4 Subsequent Work
• Returns to ETE work clearly relevant and may be decisive
• Critical issue is whether the return to ETE work demonstrates one can
continue that work on a sustained basis
• Returns to work in a family business will be more closely scrutinised as to
whether such work truly reflects ability to cope with day to day stresses of
work or attend work on a sustained basis
• Returns to work outside of ETE may still be relevant to showing capacity as
at DOA
Implications
| 40
4 Subsequent Work
Subsequent Deteriorations
Subsequent Injuries
Subsequent Job Applications
Subsequent Work
Summary
| 41
1
2
3
4
5
▪ Qualification for DSP includes a requirement that the person has a continual
inability to work as defined under the Social Security Act 1991
▪ Authorities accept that issue must be considered based on the applicants
situation as it was at the time of the application for the DSP
▪ How have DSP cases treated subsequent events which occur after the DSP
date of assessment ?
| 42
Disability Support Pension5 Summary
Leading Principles:
• Subsequent events relevant if “referable to the Applicant’s condition during the
qualification period.”
• Evolution of a medical condition relevant to weight place on competing opinions:
• ‘Any subsequent evolution of a particular condition might be relevant to any
weight the Tribunal places on competing prognostications…is not open in law for
this Tribunal to use any evidence of such progression [of a medical condition] to
directly award a DSP because of those changed circumstances’.
[Bobera and the Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012]
• Shouldn’t use hindsight!
• ‘While hindsight may suggest that treatment did not result in improvement within
two years, that is not the question for the Tribunal to determine…For that reason,
evidence of treatment, and the efficacy of that treatment, after the qualification
period is not directly relevant to the Tribunal’s decision.’
[Fanning and Secretary, Department of Social Services 2014]
DSP approach to subsequent events
| 43
5 Summary
Key Takeaways – Deteriorations
| 44
✓ A deterioration should be taken into account if it illuminates an existing
state of affairs. Courts will strain to classify subsequent events in this
longitudinal way
✓ The key is whether subsequent evidence is “pertinent to the determination
of the appellant’s condition at the relevant time”
✓ Avoid discounting evidence well past the DOA in favour of evidence closer
to the DOA just because of the temporal difference
✓ Use language which demonstrates subsequent changes were considered
to determine the true state of affairs at the DOA
5 Summary
✓The occurrence of a wholly unrelated frank injury or illness is not required to
be taken into account because cannot be indicative of the true state of
affairs as at the DOA
✓If this applies, ensure documentation reflects new conditions are not relevant
to the state of affairs at the DOA
Key Takeaways – Subsequent Injury
| 45
4 Returns to Work5 Summary
Key Takeaways – Job Applications
| 46
✓Ensure assessment documentation reflects took into account
unsuccessful job applications as relevant to TPD question
✓In terms of weight to give to such unsuccessful applications
consider:
✓Types of roles applied for – were they realistically within
insured’s ETE?
✓Evidence regarding depth and breadth of job seeking effort
✓Unsuccessful applications are of limited importance absent
compelling evidence regarding roles applied for, efforts to obtain
those roles and reasons for rejection
5 Summary
Key Takeaways – Subsequent Work
| 47
✓Consider if return to work demonstrates ability to work on a
sustained basis such that continued employment is not in jeopardy
✓Returns to work in a family business requires closer scrutiny
✓Where failed return to work due to medical conditions can be a
strong factor in favour of TPD
✓Subsequent work outside of ETE may still be relevant but only as a
signpost of the true state of affairs at DOA
While every care has been taken in its preparation of this presentation, it does not constitute legal advice and should not be relied upon for this purpose.
TurksLegal does not accept responsibility for any errors or omissions from this publication.
5 Summary
For more information,
please contact:
turkslegal.com.au
Darryl Pereira
Partner
02 8257 5718
Sydney 02 8257 5700 Melbourne 03 8600 5000 Brisbane 07 3212 6700 Newcastle 02 8257 5700
Sofia Papachristos
Partner
03 8600 5049
TPD Claims – The Next FrontierCMG ALUCA Presentation
Presented by Nicholas Matkovich and Diren Fernando
19 April 2018
Overview
What’s next? Unresolved issues in TPD assessments
• The duty of utmost good faith – what are its implications?
• Determining the Date for Assessment
• Issues re ETE
• The trustee’s duty
• Making use of Section 29(6) ICA
51
Court’s reviewing Insurer’s (-and Trustee’s) Decisions
• Stage One Enquiry
– Whether the decisions to decline a claim can be set aside because the decisions have been made in breach of the duties owed by the trustee and the insurer.
52
Court’s reviewing Insurer’s (-and Trustee’s) Decisions
• Stage Two Enquiry– Assuming the decisions to decline a claim can be set
aside, the Court will then reserve to itself the assessment of whether the claimant is entitled to the TPD benefit on the basis of the whole of the evidence including events which have occurred after the insurer’s decision to decline the claim.
Hannover Life v Sayseng [2005] NSWCA 214
Birdsall v MTAA Superannuation Fund Pty Ltd [2015] NSWCA 104
53
Separate Determination
• The Court can determine the First and Second Stage enquiries separately.
• In fact, Courts in NSW have been prepared to order separate determinations of the First and Second Stage issues. In reviewing the First Stage, the Court will usually limit its review to the material which was before the insurer.
Note: Wild v FSS [2017] NSWSC 237
Annan v FSS [2017] NSWSC 1453
54
Duties of Decision Makers
• Trustee– The trustee is required to act in good faith, on a real
and genuine consideration of the material before it, for the purpose for which it was conferred, for sound reasons where reasons are disclosed, although the trustee is not obliged to give reasons for its decision.
Hannover Life v Sayseng [2005] NSWCA 214
55
Insurer
• Duty of Utmost Good Faith / Good Faith
– Imposes an obligation on the insurer to exercise its rights and discharge its obligations under the insurance contract with utmost good faith.
Ziogos v FSS [2015] NSWSC 1385
56
Insurer
• Duty to Form an Opinion– Subjective TPD Definition
• The insurer is obliged to act reasonably in considering and determining the issue. Test of reasonableness is whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in consideration of the claim.
• The assessment of reasonableness is based on the material before the insurer at the time. The assessment of reasonableness does not require the Court to undertake a review of the merits of the insurer’s decision.
Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113
Hannover Life v Jones [2017] NSWCA 233
57
Insurer
• Duty to Give Reasons
– Insurer should give reasons for its decisions
Ziogos v FSS [2015] NSWSC 1385
58
Issues around duty of good faith
• The claims handling process
• “Investigating” the Claim
• The evidence presented in support of a Claim Decline
• What standard is expected in a Decline Letter?
59
Focus on the Trustee’s duty
Superannuation Industry (Supervision) Act 1993 (Cth)
(7) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:
(d) to do everything that is reasonable to pursue an insurance claim for the benefit of a beneficiary, if the
claim has a reasonable prospect of success.
What does this mean?
60
Interpretation of ETE Clause
• ETE Clause– ‘Reasonably fitted by education, training or
experience’, expresses notion of a link or connection between future work and the insured’s past education, training or experience.
Hannover Life v Jones [2017] NSWCA 233
61
Interpretation of ETE Clause
• ‘Unlikely Ever’
– No real chance of employment, as distinct from a remote or speculative possibility of employment.
TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439
62
Interpretation of ETE Clause
• ‘Regular Remuneration Work’– Capacity to perform ‘regular remunerative work’ is
different from the capacity to perform a particular work task.
– The physical capacity to perform one or more work tasks does not mean a person has the ability to engage in remunerative work.
Hannover Life v Colella (2014) VSCA 205
Jones v United Super [2016] NSWSC 1551
63
Interpretation of ETE Clause
• ‘Regular Remuneration Work’
– A person can be reasonably fitted for ‘Regular Remuneration Work’ by reason of education ortraining or experience, or a combination of them.
Hannover Life v Dargan [2013] NSWCA 57
64
Interpretation of ETE Clause
• ‘Regular Remuneration Work’– Part-Time Work– Regular Casual Work
– BUT NOT Irregular and occasional casual/intermittent work
Hannover Life v Dargan [2013] NSWCA 57
Manglicmot v CBOSC Pty Ltd [2011] NSWCA 204
65
Unanswered Questions re ETE
• Need for the insurer to adduce evidence of the local labour market
• What to do with pre-career occupations
66
Date for Assessment of TPD Status
• The date for assessment to determine TPD Status is the expiration of the applicable qualifying period as the relevant date.
Halloran v Harwood Nominees [2007] NSWSC 913
67
Difficulties in determining the Date for Assessment
• How to address repeated cessations of work?
ADD TIMELINE GRAPHIC
68
Use of Subsequent Medical and Other Evidence
• Later expert opinions may be relevant to and may be taken into account when the Court is considering the probability of claimant being able to engage in suggested occupations at the date for assessment.
TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439
69
Difficulties in interpreting later medical evidence
• How to deal with retrospective ‘prognoses’
• How to think about ‘likelihood’
70
Remedies for Misrepresentation and Non-Disclosure
Section 29
(6) If the insurer has not avoided the contract or has not varied the contract under subsection (4), the insurer may, by notice in writing given to the insured, vary the contract in such a way as to place the insurer in the position (subject to subsection (7)) in which the insurer would have been if the duty of disclosure had been
complied with or the misrepresentation had not been made. ...(7) The position of the insurer under a contract (the relevant contract ) that is varied under subsection (6) must not be inconsistent with the position in which other reasonable and prudent insurers would have been if:
(a) they had entered into similar contracts of life insurance to the relevant contract; and
(b) there had been no failure to comply with the duty of disclosure, and no misrepresentation, by the insureds under the similar contracts before they
were entered into.
71
Use of Section 29(6)
• What evidence needs to be marshalled to use the remedy?
• What consideration needs to be given to section 29(7) at an early stage?
72
QUESTIONS?
73
Team Contacts
Nicholas Matkovich
Partner
P +61 2 9334 8531
Diren Fernando
Special Counsel
P +61 2 9334 8641
74
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