LIFE INSURER FOUND NOT TO HAVE BREACHED ITS OBLIGATIONS OF GOOD FAITH AND REASONABLENESS
January 16, 2019
On 21 December 2018, Parker J of the New South Wales Supreme Court dismissed proceedings brought against MetLife Insurance Ltd (MetLife) and First State Super (FSS) by Ms Bronwyn Sargeant for a total permanent disability (TPD) benefit. Parker J found that MetLife did not breach its duties in handling the claim, therefore, the court did not consider whether Ms Sargeant was a TPD beneficiary.
The judgment usefully considers issues relevant to claims handling.
The proceedings concerned the now 46 year old plaintiff, Ms Sargeant, is a former officer of the New South Wales Police Force, who was discharged from her role on medical grounds in April 2011.
The chronology of events was:
- 2002 – 2009: Ms Sargeant commenced as a police officer in December 2002. She was promoted to Senior Constable in December 2007. She then joined the detective branch of the Force and in June 2009, was appointed as a Detective Senior Constable.
- Around November 2009, Ms Sargeant sustained a back injury in the course of her employment, resulting in her ceasing work on 19 February 2010
- Around June 2011, Ms Sargeant claimed two TPD benefits from MetLife
- Between June 2011 and July 2015, Ms Sargeant’s solicitors continued serving material on MetLife and FSS in support of her claim
- In the period 2011 – 2013, Metlife obtained medical and vocational reports and investigated the claim
- December 2012: MetLife’s first procedural fairness letter
- March 2014: MetLife’s second procedural fairness letter
- 2 September 2015: Statement of Claim filed on behalf of Ms Sargeant
- May 2018: MetLife rejected the TPD claim.
The relevant definition required six consecutive months absence from work and proof to MetLife’s satisfaction that the Member was incapacitated to such an extent that they were ‘unlikely ever’ to engage in any gainful profession, trade or occupation for which they were reasonably qualified by education, training or experience.
Issues for determination
The only issue determined was whether MetLife had breached its duties in considering and determining the claim by 3 September 2015 (the date the Statement of Claim was filed) or, at the latest, by 12 months from that date (3 September 2016). For reasons that are not explained in the judgment (but which we discuss later in this article), the plaintiff did not seek to preserve an entitlement to challenge MetLife’s claim declinature of May 2018.
Parker J reinforced the two stage approach which required Ms Sargeant to first demonstrate that MetLife’s failure to be so satisfied resulted from a breach of its obligation as insurer, and secondly, whether the conditions of the policy were in fact satisfied.
It was agreed by the parties that disablement was to be assessed as at the end of the six month period of absence from work.
Injuries and evidence
MetLife conceded at trial that Ms Sargeant had a diagnosis of piriformis syndrome, depression and Post Traumatic Stress Disorder (PTSD), but maintained that she was not entitled to the TPD benefit as there was a divergence of medical opinion regarding the extent of disablement, for example:
- In 2011, Metlife obtained a vocational assessment report which identified 28 different occupations for which Ms Sargeant was qualified
- Facebook searches indicated that Ms Sargeant was the club Registrar for a local surf lifesaving club
- Surveillance footage showed Ms Sargeant attending an iron man or paddling training event in September 2012
- Before the TPD claim was made, an orthopaedic surgeon suggested the possibility of exaggeration
- An occupational physician determined that Ms Sargeant was fit to work, taking into account surveillance
- PTSD was not diagnosed by a medical practitioner until May 2015, over five years after she ceased work.
In considering MetLife’s delay, Parker J referred to the cases of Shuetrim and Hellessey v MetLife Insurance Ltd  NSWSC 1284 (Hellessey), where the court indicated the importance of not just looking at the length of the delay, but, more importantly, considering the reasons for an insurer’s delay.
In finding that Metlife had not breached its duties, Parker J referred to the following factors:
- Ms Sargeant continued to serve material on Metlife after initially making the claim and after proceedings were commenced
- The claim was dependent on self-reporting by Ms Sargeant, in circumstances of possible exaggeration and seemingly contradictory surveillance. Metlife had also obtained medical opinions supporting her capacity to work. Given these factors, MetLife was entitled to test her claims, obtain its own medical evidence, and make investigations.
- There was no indication to MetLife, by the plaintiff’s solicitors, that ‘time was of the essence’ in its determination. This finding flowed from comments by Robb J in Hellessey where he rejected that there had been constructive declinature, in the context where the insurer took steps from time to time to assess the claim since neither the plaintiff nor trustee had warned the insurer that if it did not make a decision within a reasonable period of time, its failure to make a decision would be treated as a constructive rejection. Applying that principle here,
Parker J noted that Ms Sargeant’s solicitor had not sought to make time of the essence. Parker J went on to say (in paragraph 126 of the Judgment):
And I do not think it was unreasonable for Metlife to fail to make a formal determination of the claim while the proceedings were continuing and there was no request for it to do so.
- The timing of the PTSD allegation, which first appeared in March 2013 following MetLife’s initial procedural fairness letter
- There were periods of time in which MetLife was waiting on further information from Ms Sargeant
- MetLife, in the context of a letter acknowledging delays in claims assessment, stated that Ms Sargeant could take the matter to the Financial Ombudsman Service (FOS). Parker J considered that Metlife could infer from the fact that Ms Sargeant did not take the matter to FOS that it should continue to consider the claim.
Simultaneous litigation and claims assessment
Insurers frequently face a situation where a plaintiff serves material for use in litigation and, if TPD has not yet been determined, it is unclear whether the same material should be used for assessment of the claim. However, material served in the proceedings (and documents produced on subpoena) should not be used for TPD claims assessment, as case law provides that documents obtained on discovery or subpoena in legal proceedings, and statements served for the purposes of legal proceedings may be used only for the purpose of those proceedings (Hearne v Street (2008) 235 CLR 125, as discussed in paragraph 96 of the Judgment). For such material to be used to determine TPD, the court’s leave must be obtained.
In Sargeant, Parker J considered that a plaintiff could provide clarity regarding the purpose for which material should be used as follows:
- Evidence served for the purpose of legal proceedings should be served on the lawyers acting for the insurer and should refer to the proceedings
- Material served for claims assessment should be served directly on the trustee, for transmission to the insurer (paragraph 116 of Judgment) and the letter serving should not refer to the proceedings.
Implications for assessing TPD claims
- Continued service of material by the plaintiff and ‘time of the essence’ – Parker J reiterated the views of Robb J in Hellessey, stating that where there has been delay in determining a claim in circumstances where proceedings are on foot and the insurer has taken steps from time to time to determine the claim, where a claimant has not put the insurer on notice that ‘time of the essence’, an insurer may not have breached their duty by failing to make a determination.
- In relation to the above point, based on Parker J’s comments, it is unclear whether it was not unreasonable for Metlife to fail to make a formal determination of the claim while the proceedings were continuing and there was no request for it to do so carries the implication that once proceedings are commenced, an insurer does not need to determine TPD unless it is specifically requested to do so.
- Only conduct up to commencement of proceedings is relevant – a party can require that the court only considers, at hearing, its conduct up to the time that the proceedings were commenced. A party’s conduct, including the conduct of an insurer in rejecting a TPD claim after proceedings are commenced, is arguably irrelevant at trial. This is because, at the date the plaintiff files proceedings, it alleges that as at that date, the insurer and trustee have breached their duties. An insurer and trustee can require that the plaintiff prove that by reason of their conduct up to, but not after, the date the proceedings were commenced.
- Test evidence – insurers are entitled to test the evidence submitted – including medical reports – especially when there is evidence of inconsistencies. Parker J held that Metlife was not required to accept the assertions of the plaintiff and her doctors at face value. It was entitled to test those assertions and opinions by reference to independent evidence.
- Determine purpose for which evidence served – where at the time proceedings are commenced and TPD has not been determined, a plaintiff serving material should state clearly the purpose for which evidence is served – namely, for the proceedings only, or alternatively, for the joint purposes of the proceedings and claims assessment. If the purpose if not clear, the court’s leave should be obtained to use the material for claims assessment.
Further information / assistance regarding the issues raised in this article is available from the authors, Catherine McAdam, Partner, and Dilani Patrick, Lawyer, or your usual contact at Moray & Agnew.
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