Court finds member was TPD before he ceased work
November 23, 2015
Harrison v Retail Employees Superannuation Pty Ltd and Anor  NSWSC 1665, 10/11/2015
The NSW Supreme Court recently found that a member of a superannuation fund met the definition of total and permanent disablement (TPD) in April 2001 (two months before his cover ceased), even though he did not actually cease work until November 2001.
The court also found that, even if TPD fell outside the period of cover, the insurer was not entitled to refuse the claim on that basis by operation of s54 of the Insurance Contracts Act, as there had been an omission on the part of the member to make an application to extend the period of cover.
The TPD definition
The TPD definition was as follows:
disablement where we are satisfied on medical or other evidence that an insured member:
- has been absent from employment for 6 consecutive months because of sickness or injury; and
- is so disabled at the start of those 6 months and continuously since that time that the insured member is unlikely to ever engage in any reasonably suitable occupation …
The key facts were summarised briefly in the judgment as follows:
- The member’s TPD cover ended on 5 June 2001
- Medical evidence identified 1 April 2001 as the date on which the member became permanently incapable of gainful employment
- Despite this medical evidence, it was common ground that the member had ‘soldiered on’ at work until he left on 6 November 2001
- It was common ground that the member was not employed between 6 November 2001 and 6 May 2002 because of injury
- The insurer refused the TPD claim on the ground that the member was no longer covered when TPD occurred on 6 May 2002, being the expiration of the six month period under the first limb.
When did TPD occur?
Judge Lindsay said the time of the ‘disablement’ could be said to have occurred at four different times:
- 1 April 2011 – the date on which the member became ‘medically disabled’
- 6 November 2001 – the date on which the disablement manifested itself in an absence from work
- 6 May 2002 – the expiration of the six month period under the first limb of the TPD definition; or
- The date on which the insurer was satisfied that the member was TPD.
The insurer’s primary case focussed on the third date, being the expiration of the six month period under the first limb. However, the judge was concerned that:
any ‘event’ defined by the time frame it embraces (namely, the end of a six months absence from employment) will be likely, in some if not all cases, to have occurred outside an insured member’s period of employment and therefore, quite possibly, outside the period of any available insurance cover. On the second defendant’s case, an ‘event’ might routinely occur only outside a period of cover.
Ultimately, the judge concluded that:
the choice to be made, in construction of the definition of ‘total and permanent disablement’, is between the first two time perspectives.
In my opinion, the first time perspective (that which favours the date 1 April 2001) is to be preferred. The requirement for a six months absence from employment is essentially an adjectival (administrative or evidentiary) requirement, not one that controls the meaning of the substantive concept of ‘disablement’. The grant of insurance cover by reference to “disablement” cannot be derogated from by machinery provisions directed towards an assessment whether or not there has been ‘disablement’.
As such, the court found that TPD occurred on 1 April 2001 (the date on which the member was ‘medically disabled’), even though he continued working for a further seven months following that date. This finding meant that TPD occurred prior to the cessation of cover on 5 June 2001.
The judge said if, contrary to his finding, the member became TPD on 6 November 2001 (after the member’s cover ceased), then s54 of the Insurance Contracts Act would preclude the insurer from refusing to pay his claim. In this regard, the judge stated that, if the member’s claim was based on an event (TPD) that occurred outside ‘the period of cover’, this arose by reason of an ‘omission’ on the part of the member to make, and an ‘omission’ on the part of the trustee to obtain from the member, an application to become a full ‘insured member’ beyond 5 June 2001.
On the face of it, the insurer appeared to have a sound defence, given that the member ceased work five months after his TPD cover ceased. Despite this, the court found two ways home for the member. Both appear to be contentious.
While there was medical evidence that the plaintiff was TPD in April 2001 (two months before the cessation of cover), the member nonetheless had a demonstrated capacity to continue working until November 2001 (five months after the cessation of cover). On the face of it, the finding that TPD occurred seven months prior to the cessation of work is a strange outcome.
In addition, the finding that, even if the claim fell outside the period of cover, the insurer would have been precluded from refusing the claim involved a very broad interpretation of s54. The authorities indicate that s54 does not operate to relieve an insured of restrictions or limitations that are inherent in the policy’s scope of cover. The period of cover would normally be considered to be a limitation that is inherent in the policy’s scope of cover and hence one that the member could not be relieved of under s54.
Authored by Gerry Davies, Partner, Melbourne.