Dumitrov v SC Johnson & Son Superannuation Pty Ltd

[2006] NSWSC 1372

CITATION:	Dumitrov v SC Johnson & Son Superannuation Pty Ltd & Anor [2006] NSWSC 1372
HEARING DATE(S):	29/11/06, 30/11/06, 01/12/06
JUDGMENT DATE :	12 December 2006
JUDGMENT OF:	Gzell J
DECISION:	Definition of total and permanent disablement not unusual for the purposes of the Insurance Contracts Act 1984 (Cth), s 37 and reliance upon it not to fail to act with the utmost good faith under s 14. By confining its opinion on a review of reports on file, the insurer addressed the wrong question and the rejection of opinions on file favourable to the plaintiff without further inquiry was to fail to act reasonably, in good faith and fairly to the plaintiff. Opinion of insurer set aside and Court determination that plaintiff totally and permanently disabled substituted.
CATCHWORDS:	INSURANCE -Accident and Sickness Insurance - Superannuation trustee holding insurance policy covering total and permanent disablement of scheme members including plaintiff - Liability of insurer dependent upon its opinion that plaintiff totally and permanently disabled as unable ever to engage in any occupation or work that the plaintiff was reasonably capable of performing by reason of education, training or experience - Reassessment of reports on file without further inquiry - Whether insurer addressed the wrong question - Rejection of opinions of doctors favourable to plaintiff including that of doctor to whom plaintiff referred by insurer - Whether opinion reasonable, in good faith and fair to the plaintiff - Whether definition of total and permanent disablement unusual in terms of the Insurance Contracts Act 1984 (Cth), s 37 - Whether the insurer's reliance on the definition was to fail to act with the utmost good faith in terms of the Insurance Contracts Act 1984 (Cth), s 14
LEGISLATION CITED:	Insurance Contracts Act 1984 (Cth)
CASES CITED:	Wyllie v National Mutual Life Association of Australasia Ltd (1997) 217 ALR 324 Hannover Life Re of Australasia Ltd v Sayseng & Anor (2005) 13 ANZ Insurance Cases 90-123 Ivkovic v Australian Casualty & Life Ltd (1994) 10 SR (WA) 325 Alessi v National Mutual Life Association of Australasia Ltd (1982) 2 ANZ Insurance Cases 60-481 Giles & Giles v The National Mutual Life Association of Australasia Ltd (1986) 4 ANZ Insurance Cases 60-751 Muinos v Johnson & Johnson Retirement Benefits Ltd, unreported, McLelland Cj in Eq, NSWSC, 5 December 1996 Wells v Australian Aviation Underwriting Pool (2004) 13 ANZ Insurance Cases 61-613 Cullinane v Mercer Benefit Nominees Ltd (2006) 152 FCR 1 Edwards v The Hunter Valley Co-op Dairy Co Ltd & Anor (1992) 7 ANZ Insurance Cases 61-113 Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Insurance Cases 61-175 Vidovic v Email Superannuation Pty Ltd, unreported, Bryson J, NSWSC, 3 March 1995 Szuster v Hest Australia Ltd & Anor (2000) 207 LSJS 35 CE Heath Casualty & General Insurance Ltd v Grey & Ors (1993) 32 NSWLR 25 White v Board of Trustees (1997) 2 Qd R 659
PARTIES:	Atilla Dumitrov - Plaintiff SC Johnson & Son Superannuation Pty Ltd - First Defendant Hannover Life Re of Australasia Ltd - Second Defendant
FILE NUMBER(S):	SC 3614/04
COUNSEL:	Ms K Dulhunty - Plaintiff Mr R Horsley - Second Defendant
SOLICITORS:	Legal Aid Commissioner of NSW - Plaintiff Stavropoulos Solicitors - Second Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

TUESDAY 12 DECEMBER 2006

3614/04 ATILLA DUMITROV v SC JOHNSON & SON SUPERANNUATION PTY LTD & ANOR

JUDGMENT

Introduction

1 Atilla Dumitrov, the plaintiff, was employed as a process worker and line setter by SC Johnson & Son Pty Ltd. By virtue of his employment, he was a member of the SC Johnson Superannuation Fund of which the first defendant, SC Johnson & Son Superannuation Pty Ltd, was trustee.

2 The trustee effected insurance with Hannover Life Re of Australasia Ltd, the second defendant, covering members of the fund. Mr Dumitrov sustained an injury at work for which he was entitled to a lump sum payment if totally and permanently disabled in terms of a definition in the insurance policy.

3 Hannover rejected Mr Dumitrov’s claim. In arriving at that decision, Mr Dumitrov claimed that Hannover breached its duty of utmost good faith. He also claimed that the definition of total and permanent disablement in the policy constituted an unusual term requiring notification to Mr Dumitrov before the contract was entered into by the trustee, and Hannover had not done so.

4 Mr Dumitrov also sought relief from the trustee but it was deregistered in 2003 and Mr Dumitrov abandoned that claim.

5 That does not affect the standing of Mr Dumitrov to continue the proceedings against Hannover alone. It is now beyond dispute that an insured, even if not a party to insurance, is owed the duty of utmost good faith by the insurer and may sue the insurer without joinder of the other party to the insurance (Wyllie v National Mutual Life Association of Australasia Ltd (1997) 217 ALR 324, Hannover Life Re of Australasia Ltd v Sayseng & Anor (2005) 13 ANZ Insurance Cases ¶90-123).

Issues

6 The issues in the case are, first, whether the definition of total and permanent disablement in the policy is an unusual term upon which Hannover cannot rely. Secondly, if the term is not an unusual one, whether Hannover breached its duty of utmost good faith in rejecting Mr Dumitrov’s claim. And, thirdly, if it did, whether Mr Dumitrov was totally and permanently disabled in terms of the definition.

An unusual term

7 An insurer may not rely on an unusual term unless the insured was notified of the effect of the provision before the contract of insurance was concluded. The Insurance Contracts Act 1984 (Cth), s 37 is in the following terms:

“An insurer may not rely on a provision included in a contract of insurance (not being a prescribed contract) of a kind that is not usually included in contracts of insurance that provide similar insurance cover unless, before the contract was entered into the insurer clearly informed the insured in writing of the effect of the provision (whether by providing the insured with a document containing the provisions, or the relevant provisions, of the proposed contract or otherwise).”

8 The trust deed of the superannuation fund as amended provided in r 15(1) that a member who retired from employment as a result of becoming totally and permanently disabled within the meaning of the definition in any policy effected by the trustee to secure part or all of the benefits payable in accordance with the provisions of the trust deed should be entitled to a benefit of an amount calculated in accordance with the subsequent provisions of r 15.

9 The policy with Hannover taken up by the trustee contained the following definition:

“ TOTAL AND PERMANENT DISABLEMENT means:
(a) suffering the loss of two limbs or the sight of both eyes or the loss of one limb and the sight of one eye (where limb means the whole hand or the whole foot), or
(b) having been absent from work through injury or illness for an initial period of six (6) consecutive months and in our opinion being incapacitated to such an extent as to render the Insured Person unable ever to engage in or work for reward in any occupation or work which he or she is reasonably capable of performing by reason of education, training or experience.”

Mr Dumitrov did not fall within par (a) of that definition.

10 It was submitted that the definition was unusual in that it required an opinion that an insured person was unable ever to engage in work. It was submitted that this posed a harsher test than a definition that required an opinion that an insured person was unlikely ever to engage in work.

11 Reference was made to Ivkovic v Australian Casualty & Life Ltd (1994) 10 SR (WA) 325 at 351, where Commissioner Roberts-Smith QC, sitting as the District Court of Western Australia, said this was so at 351:

“I should also say in passing that the word “unlikely” in the definition is of some significance. It clearly sets a much lower test than would be posed if an insured had to establish that he was incapable of following his usual or any other occupation. Thus, even if the evidence were to leave open a possibility that in the future an insured might be able to do so, if it nonetheless established that he or she was unlikely to be so able, that would be sufficient to make out the claim.”

12 But the mere fact that the provision in the instant circumstances creates a harsher definition of total and permanent disablement does not mean that the definition is necessarily unusual in terms of the Insurance Contracts Act 1984 (Cth), s 37.

13 No expert evidence was called to establish that the definition in this case was, from an industry point of view, unusual. I was invited to peruse the authorities and compare definitions to arrive at the conclusion that this definition was unusual. I do not think it is appropriate for me to undertake that task. If it be the fact that a definition similar to the one in this case appears infrequently in the decided cases, that will not establish that it is unusual. All it will establish is that there has been limited reported litigation with respect to such clauses.

14 Furthermore, a consideration of the authorities reveals that similar definitions have been included in insurance policies without them being classified as unusual for the purpose of the Insurance Contracts Act 1984 (Cth), s 37.

15 Thus in Alessi v National Mutual Life Association of Australasia Ltd (1982) 2 ANZ Insurance Cases ¶60-481, Wickham J considered a definition that the life assured had become disabled by bodily injury or disease to such an extent that he had been throughout the immediately preceding continuous period of six months, wholly prevented from engaging in his occupation or any similar occupation, or engaging in any other occupation for which he was fitted by his knowledge, training, status and abilities, and would be so disabled for the reminder of his life.

16 In Giles & Giles v The National Mutual Life Association of Australasia Ltd (1986) 4 ANZ Insurance Cases ¶60-751, Pigeon J considered a definition that the life assured had become disabled by bodily injury or disease to such an extent that he was at the relevant time, and had been throughout the immediately preceding continuous period of six months, wholly prevented from engaging (whether or not for reward) in his profession, business, or occupation, or any similar occupation, or from engaging in some other occupation for which he was fitted by his knowledge, training, status and abilities, and would be so disabled for the remainder of his life.

17 The identical definition was considered by the Court of Appeal in Hannover. (See, also, Muinos v Johnson & Johnson Retirement Benefits Ltd, unreported, McLelland CJ in Eq, NSWSC, 5 December 1996, Wells v Australian Aviation Underwriting Pool (2004) 13 ANZ Insurance Cases ¶61-613 and Cullinane v Mercer Benefit Nominees Ltd (2006) 152 FCR 1).

18 In my judgment Mr Dumitrov has failed to establish that the definition of total and permanent disablement in the policy is unusual for the purposes of the Insurance Contracts Act 1984 (Cth), s 37.

The duty of the insurer

19 Both at general law and under the statute a contract of insurance is based on the utmost good faith. The Insurance Contracts Act 1984 (Cth), s 13 is in the following terms:

“A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.”

20 Further, if reliance by Hannover on the definition of total and permanent disablement would constitute a failure to act with utmost good faith, Hannover cannot rely on the definition. In deciding whether reliance on the provision constitutes a failure to act with utmost good faith, the court is to have regard to any notification of the provision given to Mr Dumitrov whether under s 37 or otherwise. The Insurance Contracts Act 1984 (Cth), s 14 is in the following terms:

”(1) If reliance by a party to a contract of insurance on a provision of the contract would be to fail to act with the utmost good faith, the party may not rely on the provision.
(2) Subsection (1) does not limit the operation of section 13.
(3) In deciding whether reliance by an insurer on a provision of the contract of insurance would be to fail to act with the utmost good faith, the court shall have regard to any notification of the provision that was given to the insured, whether a notification of a kind mentioned in section 37 or otherwise.”

Hannover did not give notice of the definition to Mr Dumitrov.

21 The liability of Hannover under the policy depended upon the formation by it of an opinion as a condition of its liability. It is well established that in those circumstances the insurer is bound by its duty of good faith and fair dealing to act reasonably and fairly in considering and determining the matter and, in particular, the insurer is duty bound to have due regard to the interests of the insured in forming or declining to form the opinion upon which its liability is dependent (Edwards v The Hunter Valley Co-op Dairy Co Ltd & Anor (1992) 7 ANZ Insurance Cases ¶61-113 at 77,536, Hannover at [47]-[49], [54]).

22 The duty required Hannover to consider whether it should form the opinion in the definition and that required Hannover to address its mind to the correct question. If it misconceived what was required of it in assessing the claim of Mr Dumitrov, it will not have acted reasonably (Edwards at 77,536, Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Insurance Cases ¶61-175 at 77,999, Vidovic v Email Superannuation Pty Ltd, unreported, Bryson J, NSWSC, 3 March 1995 at 15 - 16, Szuster v Hest Australia Ltd & Anor (2000) 207 LSJS 35 at 45,).

23 In Wyllie at 341-342, Hunter J said that it was not obligatory, but it was desirable, for an insurer to request a medical opinion on the specific question raised by the disability provision of the policy. It was sufficient if the insurer addressed its mind to the correct question when it received the medical opinion. But if insurer chose to be less specific in its quest for medical opinion, it heightened the difficulty of the task confronting it in making its own assessment.

24 In this case the doctors to whom Hannover referred Mr Dumitrov were not asked for their opinion in relation to the definition and it was submitted that Hannover put its mind to the wrong question when it considered those opinions.

25 The duty to act in good faith and to deal fairly with an insured is not limited to the time the opinion is formed. It applies to all stages during the gathering of material relevant to the formation of the opinion and it remains a duty at all stages subsequent to the presentation of a claim, being applicable to all aspects of the performance of an insurance contract (CE Heath Casualty & General Insurance Ltd v Grey & Ors (1993) 32 NSWLR 25 at 39 - 40).

26 Whether an insurer has discharged its duty of utmost good faith will depend upon the particular circumstances. For example, in Chammas at 78,000-78,001, Hodgson J said that it may be considered not fair to an insured for the insurer to have acted on a detailed report without giving the insured any opportunity either to balance it by a similar detailed report from one of the treating doctors, much less giving the insured a chance to answer the adverse report.

27 And in Wyllie at 342, Hunter J concluded that an insurer was obliged to inform the insured of the particulars of the basis upon which its opinion had been reached and so to afford the insured the opportunity of presenting evidence of his actual capacity.

28 The complaint in this case, besides the allegation that Hannover addressed the wrong question, was that it failed to make due inquiry when alerted to the existence of medical reports favourable to Mr Dumitrov. It did not inform him of what he needed to present with his claim to satisfy the definition. And it did not give him the opportunity to respond before it reached its opinion.

29 Mr Dumitrov is an unskilled manual labourer originally from Romania with limited qualifications. English is his second language although he is well versed in it. The definition required the opinion to be formed by reference to his existing education, training and experience. If he required retraining in order to be employable, he is totally and permanently disabled within the definition (Giles & Giles at 74,530, White v Board of Trustees (1997) 2 Qd R 659 at 676).

30 Reference was made to Chammas at 77,999 where Hodgson J took the view that employment must be that which an insured was capable of undertaking having regard to his education, experience and training or, at least, employment that he could become capable of undertaking with further training that it would be reasonable for him to undertake. But as White J point out in White at 675-676, a lump sum was payable to an employee as a disablement benefit in Chammas upon disablement being incapacity for further employment. As her Honour pointed out, that was a rather different form of expression from that with which I am concerned.

Education, training and experience

31 After leaving school, Mr Dumitrov obtained a diploma as a motor mechanic. He had one and half years of army training reaching the rank of tank commander. When he left the army he worked as a motor mechanic and truck driver until he left Romania.

32 Mr Dumitrov arrived in Australia in his early twenties and was employed as an accessory fitter working mainly on Telecom vans. He holds no motor mechanic qualification in Australia, nor is he qualified to drive a truck or a forklift.

33 As a process worker and line setter Mr Dumitrov prepared product. To do so he had to lift 25-kilogram bags of chemicals repetitively.

34 Mr Dumitrov was elected by the factory floor as a safety officer, and he was a first aid officer. He was also a confined places coordinator. He also performed supervisory tasks, but they often involved him lifting heavy bags as those working with him had not been trained to do so. Because of his mechanical background, he was sent to other production lines from time to time to relieve backlogs to adjust machinery. He did a lot of overtime and during overtime he was in charge of other workers on the line.

The injury

35 In early 1996, Mr Dumitrov felt a sharp stab of pain in his right hand from the thumb to the elbow through his wrist. He bandaged it and carried on for the rest of the day. The next day he could not work and he went to see his general practitioner who referred him to Dr Grahame Mahoney, an orthopaedic surgeon. He diagnosed Mr Dumitrov as suffering De Quervains tendo vaginitis in his right wrist. Dr Mahoney injected him with cortisone and, ultimately, operated on his right wrist.

36 Mr Dumitrov returned to light duties in March 1996. In November 1996, he applied for the position of No 1 production coordinator, but was unsuccessful. He started to experience similar symptoms in his left hand. He last worked in March 1997. In November 1997 his employment was terminated. He looked for work unsuccessfully thereafter. Family members said that his mood changed dramatically and he became depressed. His wife and children separated from him, and he went to live with his father. He complained of an inability to do things with his hands. He could no longer service his motor vehicle. He enrolled in a leadership and management course at Granville TAFE, but he could not keep up with taking notes and left after a few weeks. He could not assist his wife with chores about the house, mowing the grass, fixing things, playing ball with his children. He needs his mother to do the shopping for him.

Hannover’s determination

37 Hannover declined the trustee’s claim in March 2001 in a letter addressed to Towers Perrin which carried out administrative services for the trustee. Mr Dumitrov saw a copy of the letter soon afterwards.

38 Hannover relied upon a medical report from Dr Funnel who was of the view that Mr Dumitrov could return to full time work as a process worker with the restriction that he not be required to undertake frequent or heavy lifting and carrying. The letter also referred to a vocational assessment and a functional capacity evaluation that concluded that Mr Dumitrov had valuable transferable skills and had a current working capacity. Copies of the reports were enclosed.

39 In May 2002, Mr Dumitrov’s solicitors sent the trustee a further medical report of Dr Burns which was relayed to Hannover. Hannover re-determined the claim in September 2002. It is that determination that is attacked.

40 The determination was carried out by Alexander Hermann Wagner, the senior claims consultant employed by Hannover. He was instructed to review the file. He assessed the material in that file. He was not instructed to make further inquiry and he did not do so. He did not inform Mr Dumitrov of details of his determination to afford him the opportunity to meet them. He did not inform Mr Dumitrov of what he needed to show in order to come within the definition. It was these failures, it was submitted, that caused Hannover to fail to act reasonably, in good faith and fairly to Mr Dumitrov.

41 Hannover was under a duty to turn its mind to the question whether Mr Dumitrov fell within the definition of total and permanent disablement. It did not reasonably, and fairly to Mr Dumitrov, perform that task by simply reviewing the documents on the file. Mr Wagner said: “I was asked to conduct a review of the file from the trustees. I wasn’t asked to reinvestigate”. But, in my view, Hannover was bound to reinvestigate. In taking the course it did, it failed to address the correct question. It did not reasonably and fairly put its mind to the question whether Mr Dumitrov fell within the definition. Instead it put its mind to the question whether Hannover’s earlier rejection of Mr Dumitrov’s claim was justified on an analysis of the material on the file. Furthermore, Hannover failed to inform Mr Dumitrov of what it regarded as necessary to establish that he fell within the definition, and it failed to inform him of the basis of Mr Wagner’s report and give Mr Dumitrov time to respond.

42 That is sufficient to dispose of the second issue. But there are aspects of Mr Wagner’s report that strengthen the conclusion that Hannover failed to discharge its duty of utmost good faith.

43 Having set out the definition of total and permanent disablement, Mr Wagner discussed the employer’s statement. He noted that Mr Dumitrov’s services had been terminated due to extended absences from work whilst claiming workers’ compensation due to long-term incapacity. He noted that Mr Dumitrov was purportedly unable to resume duties after his extended absence. Mr Wagner noted that an annexure to the employer’s statement was missing.

44 On the file was a confidential medical report of Dr Yasar Oner of April 2000. Mr Wagner summarised that report including a diagnosis of cervical strain with nerve root irritation affecting upper limbs, and that Mr Dumitrov had right and left De Quervains tendo vaginitis. His summary included the words “Unfit from: 6/1997”.

45 No further mention was made of the report of Dr Oner in Mr Wagner’s reassessment of the file. He totally ignored the context in which Dr Oner had expressed his diagnosis. Dr Oner had answered the following question in the negative:

“If you do NOT expect the claimant to EVER return to his/her normal work –
(a) Do you think he/she will EVER be able to do a job for which he/she is reasonably fitted by education, training or experience?”

The next question was:

“If you think that the claimant will NEVER return to any type of work, please give detailed reasons for this.”

The diagnosis was expressed in answer to that question.

46 Having read Dr Oner’s report, Mr Wagner should have recommended that inquiries be made of Dr Oner to establish whether in his opinion Mr Dumitrov fell within the definition and to balance that conclusion against the other reports on file.

47 Furthermore, I am of the view that Mr Wagner did not act reasonably and fairly to Mr Dumitrov by misrepresenting Dr Oner’s report.

48 Having dealt with Dr Oner’s report, Mr Wagner summarised the member’s statement and a letter from Towers Perrin stating that Mr Dumitrov last worked in March 1997 and the company did not get a response from Mr Dumitrov to return to light duties. This was after Mr Dumitrov developed symptoms in his left wrist and he said he was incapable of returning even to light duties.

49 Mr Wagner’s report then dealt with surveillance, some of which he did not sight. Others showed Mr Dumitrov driving a motor vehicle. The surveillance material was not tendered at the hearing.

50 Mr Wagner then dealt with a report from Dr Mahoney of May 1999 in which Dr Mahoney expressed the view that Mr Dumitrov had cervical strain with nerve root irritation affecting upper limbs. He required operative treatment for a right De Quervains tendo vaginitis and required operative treatment for the left side. Mr Wagner noted Dr Mahoney’s opinion: “I would consider him unfit for work”. Mr Wagner added a comment:

“The report of Dr Mahoney does not address the issue of permanency of the unfitness for work. Similarly the report does not address whether Mr Dumitrov meets the TPD definition, in that it does not canvass whether Mr Dumitrov is “unable to ever engage in or work for reward in any occupation or work which he or she is reasonably capable of performing by reason of education, training or experience.”

51 Mr Wagner does not refer to Dr Mahoney’s report again in his assessment of the file. His failure to recommend that Dr Mahoney’s opinion be examined to ascertain whether the doctor was of the view that Mr Dumitrov fell within the definition, and his dismissal of Dr Mahoney’s report out of hand constituted, in my view, a further failure to deal reasonably and fairly with Mr Dumitrov. Dr Mahoney’s report should have been the subject of further investigation. Mr Wagner should have recommended the adoption of this course.

52 Hannover had Mr Dumitrov examined by Dr David Manohar, a specialist in musculo-skeletal medicine. Dr Manohar saw him on four occasions. His first diagnosis was post surgery, probably De Quervains syndrome, strain of forearm flexors, extensors and trapezius. Mr Wagner summarised Dr Manohar’s examination on the second occasion, noting that cervical flexion, extension and rotation were uncomfortable. Side flexion was uncomfortable. Shoulder abduction was reasonably good but uncomfortable and there was swelling of the right wrist. Cervical flexion, extension, rotation and side flexion being uncomfortable was noted with respect to Dr Manohar’s third examination together with the observation that shoulder abduction was within normal limits and Mr Dumitrov was able to make a fist. On fourth examination Mr Wagner noted that Dr Manohar had said that cervical flexion of the cervical spine was reasonably good, cervical extension was within normal limits, rotatory movements were 80% of normal range of motion and flexion bilaterally was restricted and painful, shoulder abduction was within normal limits and Mr Dumitrov was wearing a wrist brace.

53 Dr Manohar was awaiting copies of Dr Mahoney’s reports, which he never got and Mr Dumitrov did not return after his last visit to Dr Manohar in March 1999. Mr Wagner commented on the absence of Dr Mahoney’s reports and said:

“Dr Manohar was unable to comment on Mr Dumitrov’s physical capacity and therefore whether he did, or did not, meet the TPD definition”.

54 Dr Manohar’s report is not referred to again in Mr Wagner’s reassessment. But it did indicate some disability and the question remained whether, in Dr Manohar’s opinion, Mr Dumitrov fell within the definition. That was never explored because of the limited instructions given to Mr Wagner by Hannover. That Hannover dismissed the reports of a doctor to whom it had referred Mr Dumitrov, that was favourable to him, without further inquiry was to act unreasonably and unfairly to the interests of Mr Dumitrov.

55 Mr Wagner’s dismissal of Dr Mahoney’s report on the basis that he was unaware of the definition is curious because the instructions to Dr Manohar did not contain the definition.

56 Dr Manohar’s report indicated that Mr Dumitrov had been treated by Dr Paul Conneely. No mention is made of this in Mr Wagner’s reassessment and no recommendation was made by him that a report should be obtained from Dr Conneely.

57 In circumstances where Hannover had been provided with reports that suggested that Mr Dumitrov was disabled, which contained opinions that Mr Dumitrov was unfit for work, Hannover ought to have further investigated the matter. Its failure to do so constituted, in my view, an unreasonable and unfair approach to Mr Dumitrov and, in the circumstances, it constituted failure by Hannover to act with utmost good faith towards Mr Dumitrov.

58 Hannover sent Mr Dumitrov to Dr Philip David Funnell, a consultant physician in rehabilitation medicine. Again, Dr Funnell’s instructions did not include the definition. Dr Funnell saw Mr Dumitrov in December 2000 and Mr Wagner summarised his report including the doctor’s statement that there was substantial exaggeration by Mr Dumitrov and the doctor’s opinion that there was no reason that he could not return to full time process work with restriction, that he not be required to undertake frequent or heavy lifting or carrying, and that there were no definite or convincing signs of persisting physical injury in the neck or either arm.

59 Dr Mark Burns, an occupational physician, saw Mr Dumitrov in June 2002. Mr Wagner summarised his report and his diagnosis that it would appear that Mr Dumitrov developed a De Quervains tenosynovitis in his right wrist and that it was also likely that he had a similar condition, but less severe, in his left wrist. But there was no evidence that he had a significant organic or structural problem in his elbows, shoulders or neck. Mr Wagner commented on Dr Burns’ report as follows:

“Dr Burns believes that Mr Dumitrov meets the definition of TPD.
Dr Burns believes that Mr Dumitrov is TPD because he cannot return to his former occupations. He also believes that Mr Dumitrov is TPD because he has no education, training or experience in very light or sedentary work.
Dr Burns seems to be under the impression that the decision as to whether Mr Dumitrov can be classified as TPD is based solely on whether he can return to his previous occupations or those in which he has education, training or experience.
I believe that Dr Burns has misinterpreted the TPD definition because very important components of the definition are the words “ any ” in the context of occupational work and “ reasonably ” in the context of being capable of performing by reason of education, or experience.”

60 Dr Burns was provided with the definition and he expressed the view that Mr Dumitrov fell within it:

“I note that the definition of total and permanent disablement in the Group Life Contract states that the insured person must be unable ever to engage in or work for reward in any occupation or work which he is reasonably capable of performing by reason of education, training or experience. Utilising this narrow definition, I believe that Mr Dumitrov would be unable to return to any of his previous occupations. He certainly has no education, training or experience in very light or sedentary work. I therefore believe that using of this definition he would be seen as totally and permanently disabled.”

61 Mr Wagner dismissed Dr Burns’ report in his final summary. He said:

“Doctor Burns provides his opinion that Mr Dumitrov is TPD because he cannot work in his former occupations and because has no education, training or experience in very light or sedentary work.
I believe that Dr Burns has erred in coming to his opinion based on his interpretation of the TPD definition because it seems that he has interpreted it on the basis of whether Mr Dumitrov is singularly, not reasonably, capable of work in his former or other occupations.
The fact is that Mr Dumitrov cannot be defined as being TPD unless he is “unable to ever engage in or work for reward in any occupation or work which he or she is reasonably capable of performing by reason of education, training or experience”. (my emphasis)”

62 To dismiss Dr Burns’ opinion without further investigation on a narrow interpretation of what Dr Burns had said also, in my view, led Hannover into error by acting unreasonably and unfairly towards Mr Dumitrov. Dr Burns had the definition before him. He turned his mind to that definition and he concluded that Mr Dumitrov fell within it because he could not return to his former occupation and there was no light or sedentary work with which he had education, training or experience. I do not understand what Mr Wagner meant when he used the word “singularly”. Dr Burns clearly thought that the only other occupational work for which he was reasonably capable by reason of education, training or experience was light or sedentary work. If an insurer is to act reasonably and fairly to an insured, it must have a better reason for rejecting a medical opinion that addresses the relevant definition and expresses the opinion that the insured fell within it, than Mr Wagner’s reasoning.

63 Mr Wagner finally dealt with two vocational assessments prepared by Margaret Kudas and two functional capacity evaluations prepared by Joan Marie Lawlor concluding that Mr Dumitrov was fit for a range of occupations in the sedentary and semi-sedentary categories of work. Mr Wagner referred to the comments that Mr Dumitrov’s use of pain scale was not appropriate to the clinical signs observed and the degree of pain and disability he reported was not consistent with the natural history of his condition and that it was considered that the pain reported was not proportional to the observed clinical signs.

64 In his summary, Mr Wagner noted in particular that Dr Funnell believed that Mr Dumitrov was substantially exaggerating his symptoms and found no pathology in areas in which Mr Dumitrov complained of significant pain and dysfunction and that, similarly, the functional capacity evaluation also indicated that his degree of pain was not consistent with the natural history of his condition and was disproportionate to the observed clinical signs. Mr Wagner also noted the comment of Dr Burns that there was no evidence that he had significant organic or structural problems in either his elbows, shoulders or neck. Mr Wagner said that all these observations contradicted assertions by Mr Dumitrov when he complained of sustained pain, restriction of movements and incapacity in those areas of his anatomy. Mr Wagner went on to say that in addition to the discrepancies noted between the exaggerated symptoms and clinical findings, the other main issue was whether Mr Dumitorv was unable to ever engage in or work for reward in any occupation or work that he was reasonably capable of performing by reason of eduction, training or experience. He said that in addition to the examination by Dr Funnell, the vocational/functional assessment indicated that Mr Dumitrov was so capable, although it was qualified, in that it seemed Mr Dumitrov was not motivated to do so. Having then dismissed Dr Burns’ report in the manner I have described, Mr Wagner concluded:

“I do not believe that it is unreasonable to require Mr Dumitrov to work in other areas in which he requires minimal retraining. I am of the view that he is quite versatile, albeit that currently he seems unmotivated to return to work and may be exaggerating his symptoms to increase the perception of disability by those required to formally assess him.
I believe that, on the balance of the evidence, Mr Dumitrov does not meet the TPD definition and therefore is not entitled to TPD benefit.”

65 In my view, the reassessment by Mr Wagner placed undue weight upon exaggeration of symptoms and placed little or no weight upon the medical reports that expressed the view that Mr Dumitrov was unfit for work, or that he fell within the definition. In my view the failure of the reassessment to address these issues meant that Hannover did not act reasonably, in good faith and fairly to Mr Dumitrov. Not only did Hannover misconceive its duty and fail to carry out a re-examination, but also the review of the file was unfairly biased against Mr Dumitrov.

66 In my view Mr Dumitrov has succeeded in establishing that Hannover breached its duty of utmost good faith in dismissing his claim.

Reliance on the definition

67 In the absence of evidence that the definition of total and permanent disablement was unusual or unduly harsh, and in light of the decided cases in which similar clauses appear without challenge to their operation, I do not see a basis for concluding that Hannover’s reliance on the definition would constitute a failure to act with the utmost good faith.

68 There is, in my judgment, no basis for the operation of the Insurance Contracts Act 1984 (Cth), s 14.

Total and permanent disablement

69 Since Hannover’s opinion cannot stand, it is for the court to determine whether or not Mr Dumitrov was totally and permanently disabled (Edwards at 77,537).

70 I have already mentioned the medical reports that were available to Hannover. Further evidence was given by the authors all those reports other than Dr Manohar.

71 Dr Funnell and Dr Burns consulted and reached agreement that on the evidence they had reviewed, Mr Dumitrov had the condition of De Quervains tenosynovitis that developed in 1996 and eventually affected both wrists, the right worse than the left. The doctors were content that this was a work-related injury. They were satisfied that when Dr Funnell saw Mr Dumitrov in December 2000 and when Dr Burns assessed him in August 2002, the physical examination findings did not suggest that the pathology was still active. However, they agreed that Mr Dumitrov was not fit in future for heavy or repetitive manual work because of that past history and the likelihood that such heavy occupations could in future flare the condition up again. They agreed that there was no objective evidence at the time of their separate assessments that Mr Dumitrov suffered a disabling musculo pathology elsewhere such as the neck, shoulders or elbows. The doctors agreed that psychological factors in the notion of fear avoidance might have been unduly affecting his presentation.

72 Dr Conneely saw Mr Dumitrov in August 1997. He said that his continued dysfunctions were primarily in the extensor tendons bilaterally with the right worse than the left. The doctor said that Mr Dumitrov had made his elbows and shoulders change the way they work so as to accommodate for the reduced movements in his hands and wrists and that in turn led to their dysfunction. He expressed the opinion that the prognosis was very poor and he doubted that Mr Dumitrov would fully recover in time to resume any gainful employment as a non-skilled worker.

73 Dr Conneely saw Mr Dumitrov again in October 2003. Dr Conneely assessed his position then to be worse and that he fitted the description in the definition of total permanent disablement.

74 Dr Conneely’s assessment of Mr Dumitrov in 2003 differs from the assessments of Dr Funnell and Dr Burns in 2000 and 2002 respectively. This inconsistency was put to Dr Conneely who conceded that one or other of the doctors, including himself, had got it wrong. I prefer the assessments of Dr Funnell and Dr Burns to that of Dr Conneely.

75 Mr Dumitrov was seen by Dr Anthony Dinnen, a consultant psychiatrist, in January 2006. He diagnosed Mr Dumitrov as suffering from severe chronic depression and that the consequences of his long-standing pain and disability resulting from work injury had been personally devastating. Depression was reactive to his circumstances. Dr Dinnen did not believe that Mr Dumitrov’s reaction to his disability under the circumstances was excessive or inappropriate. But it was chronic and sustained. Dr Dinnen expressed the view that Mr Dumitrov would benefit from ongoing treatment involving psychotherapy and medication. Dr Dinnen said that Mr Dumitrov’s depressive illness, in its own right, very much limited his disability to work or to return to the workforce and, if he were to work, the doctor believed that his efficiency would be so poor that he could not sustain employment. Dr Dinnen said that treatment would have the effect that the depressive illness would not worsen and over two to four years one might expect something of the order of a 10 – 50 % improvement.

76 Ms Lawlor said it was not her function to suggest particular jobs and Mr Dumitrov needed further treatment before he could work for longer than 15 hours, in her opinion. Ms Kudas also said it was not her function to find an employer. She saw him only once and no rehabilitation programme was put in place. Before Mr Dumitrov could receive any on-job training, he would need to get a job.

77 Dr Funnell maintained the opinion in his report that he could see no reason why Mr Dumitrov could not return to full-time work as a process worker with no heavy lifting and carrying.

78 On the other hand, Dr Mahoney said that Mr Dumitrov did not exaggerate his symptoms. Dr Mahoney saw Mr Dumitrov again in August 2003 when he referred to Mr Wagner’s reassessment and pointed out that he had not expressed an opinion with respect to the definition as Mr Dumitrov was referred to him for treatment. Having read the definition, Dr Mahoney expressed the view that Mr Dumitrov was totally and permanently disabled under its terms.

79 Dr Burns agreed that Mr Dumitrov behaved as if the condition in his wrists was active when it was not. He agreed that there was an overstatement, but it was real to the individual. Dr Burns said that five years after the event his symptoms were highly entrenched and treatment was highly unlikely to be successful. He maintained the opinion expressed in his report.

80 Dr Oner said he took over the care of Mr Dumitrov in February 1997. He was then under the management of Dr Mahoney. In November 1997, on the termination of his employment, Mr Dumitrov was still under the care of Dr Mahoney who advised release of the abductor pollices longus and the extensor pollices brevis to the left thumb as well as a manipulation of his neck under a general anaesthetic. Dr Oner said that Dr Mahoney’s recommendation was that he was unfit to return to his pre-injury duties and he shared that view.

81 I prefer the evidence of Dr Mahoney, Dr Burns, Dr Oner, Dr Manohar and Dr Dinnen to that of Dr Funnell, Ms Kudas and Ms Lawlor. The symptoms of which Mr Dumitrov complains have now been ingrained for many years. It is highly unlikely that treatment now will improve his condition as consistently described by family members. He exhibits to them the unemployability that the doctors noted.

82 The definition is a hard one to achieve. But in my view the appropriate finding on the evidence adduced at trial is that Mr Dumitrov falls within the definition of total and permanent disablement and is entitled to a declaration to that effect.

Orders

83 In my judgment, Mr Dumitrov has failed to establish that the definition of total and permanent disablement in the policy is unusual for the purposes of the Insurance Contracts Act 1984 (Cth), s 37. In my view, Mr Dumitrov has succeeded in establishing that Hannover breached its duty of utmost good faith in dismissing his claim. There is, in my judgment, no basis for the operation of the Insurance Contracts Act 1984 (Cth), s 14. Since Hannover’s opinion cannot stand, it is for the court to determine whether or not Mr Dumitrov was totally and permanently disabled. The definition of that term is a hard one to achieve. But, in my view, the appropriate finding on the evidence adduced at trial is that Mr Dumitrov falls within the definition of total and permanent disablement and is entitled to a declaration to that effect.

84 I will hear the parties on the terms of appropriate orders and I will hear the parties on costs. I direct the parties to bring in short minutes of order reflecting these reasons.

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