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.
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:
At trial the Insurer defended the proceeding on the following basis:
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:
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.
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.
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 work(1) 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 TPD(2).
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 TPD(3).
In Wheeler v FSS Trustee Corporation  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:
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) Shuetrim v FSS Trustee Corporation  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  NSWSC 464 at 67