Kelly v HCF Insurance Company Pty Ltd - [2001] WADC 231

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: KELLY -v- HCF INSURANCE COMPANY PTY LTD [2001] WADC 231

CORAM: MULLER DCJ

HEARD: 27-28 AUGUST 2001

DELIVERED : 10 OCTOBER 2001

FILE NO/S: CIV 294 of 2000

BETWEEN: JOHN PATRICK KELLY
Plaintiff
AND
HCF INSURANCE COMPANY PTY LTD (ACN 001 831 250)
Defendant

Catchwords:

Contract - Meaning of definition of total and permanent disablement in insurance policy - Insured injured in mining accident - Nature of injuries such as to preclude insured from returning to work as an underground fitter or automotive mechanic - Insured had retained capacity to perform other work of a non-physical nature - Interpretation of "occupation" in policy document - Whether policy exclusion extended to a retained capacity to do work other than in an occupation in which insured habitually engaged - Alleged procedural unfairness by insurer in considering and rejecting insured's claim - Whether insurer's decision to reject insured's claim was unreasonable on material available.

Legislation:

Insurance Contracts Act 1984 (C'th)

Result:

Plaintiff's claim allowed

Representation:

Counsel:

Plaintiff: Mr P R Shanahan
Defendant: Mr G R Brooksby

Solicitors:

Plaintiff: Butcher Paull & Calder
Defendant: Greenland Brooksby

Case(s) referred to in judgment(s):

Allan v National Mutual Life Association of Australasia Ltd (1993) 9 SR (WA) 68
Beverley v Tyndall Life Insurance Co Ltd (1999) 21 WAR 327
Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61‑175
Edwards v The Hunter Valley Co‑op Dairy Co Ltd & Anor (1992) 7 ANZ Ins Cas 61‑113
Heitman v Guardian Assurance Co Ltd & Anor (1992) 7 ANZ Ins Cas 61‑107
Riley v National Mutual Life Association of Australasia Ltd & Anor (1986) 4 ANZ Ins Cas 60‑684
Tillotson v ANZ Life Assurance Company Ltd, unreported; DCt of WA; Library No 5013; 9 August 1996
Wyllie v National Mutual Life Association of Australasia Ltd & Ors, unreported; SCt of NSW; BC9703063; 18 April 1997

Case(s) also cited:

Flegeltaub v Telstra Super Pty Ltd [2000] VSC 107
Karger v Paul [1981] VR 161
Re Beloved Wilke's Charity (1851) 3 Mac & G 440; 42 ER 330
Distillers Company Biochemicals (Australia) Pty Limited v Ajax Insurance Company Limited (1973-4) 130 CLR 1
De Britt v Frew (1992) 7 ANZ Ins Cas 61-140
WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489
White v Board of Trustees [1997] 1 Qd R 659

MULLER DCJ:

Background to the claim

On 21 February 1992 the plaintiff entered into a contract of insurance with the defendant under which he was entitled to a 100 per cent benefit if totally and permanently disabled as a result of an accident.
The schedule to the policy defined disablement in the following terms:
"Total and permanent disablement which has lasted for at least 12 months and completely prevents and is likely to completely prevent for the rest of the life of the person disabled from engaging in any occupation for which he is fitted by reason of his education, training or experience."
On 4 April 1995 the plaintiff, while working as a miner at Gossam Hill in Western Australia, was injured in an underground roof collapse. On 21 May 1996 he made a claim against the defendant under the policy by completing a claim form and submitting it to the defendant together with a medical certificate provided by Mr F G Bell, an orthopaedic surgeon. On 28 June 1996 the defendant asked the plaintiff to provide full particulars of his education, training and occupational history. The plaintiff responded to this letter and provided the necessary details by letter dated 19 July 1996. On about 30 August 1996 the defendant notified the plaintiff that it declined liability under the policy.
On 28 August 1997 the plaintiff commenced proceedings against the defendant by writ of summons in action number 3219 of 1997. After the action had been commenced the plaintiff supplied the defendant with a series of additional medical reports for its further consideration and invited the defendant to reconsider the claim he had made. The defendant agreed to this suggestion but by letter dated 16 August 1999 again declined to accept liability to the plaintiff under the policy.
Given the series of events that had occurred the plaintiff discontinued action number 3219 of 1997 and on 7 February 2000 commenced a new action against the defendant which is the subject of the current proceedings.

The plaintiff's claim

In his accident insurance claim form dated 21 May 1996 which the plaintiff sent to the defendant he described his occupation as that of an underground miner and claimed he had sustained crushed ribs, a collapsed lung, upper and lower back injuries and post accident trauma as a consequence of his accident at Gossam Hill. He claimed he was totally and permanently disabled within the definition in the insurance policy and claimed a 100 per cent benefit. His application was accompanied by a "Permanent Disability From Accident Insurance Claim Form" completed by Mr F G Bell who had treated him for his injuries. In this form Mr Bell described the plaintiff's disability as "neck ache, back ache, crushed minor T6 left ribs 2‑9, minor L1 and major L2". In the section of the form containing the question whether the claimant could perform the duties of his regular occupation or any other occupation Mr Bell said:
"No mining. Capable of light work. Storeman, shop assistant, light manual work."
In that section of the report which contained the question whether the medical practitioner considered the claimant to be totally and permanently disabled from his regular occupation and, if so, why the medical practitioner was of that opinion, Mr Bell wrote:
"Has had significant injury. Psychological trauma."
Mr Bell went on to indicate in the form that he expected the plaintiff to return to work in the near future.
After receiving the plaintiff's claim, the supporting Accident Insurance Claim Form completed by Mr Bell and a Permanent Disability from Accident Insurance Claim Form completed by the employer, the defendant requested further details of the plaintiff's education, training and occupational history. On 19 July 1996 the plaintiff sent the defendant a list of the previous occupations he had held. This list assumed some significance during the trial of the action. The first entries in the list, under the heading of "Occupational History", were as follows:
"1978‑1985 Ron Barrett Pty Ltd (NRMA), High Street, Penrith.
Apprentice motor mechanic ‑ 4 years.
Duty mechanic NRMA service truck.
1985‑1986 Central Motors Pty Ltd, High Street, Penrith.
Motor mechanic, spare parts manager, repairs assessor.
1986‑1988 Qantas Airways Limited.
Ground engineer…"
The remainder of the occupational history given by the plaintiff showed he had basically worked as an underground fitter until the date of his accident.
I should point out at this stage that the occupational history provided by the plaintiff to the defendant contained several significant errors. The plaintiff subsequently informed the defendant the list he had provided was incorrect to the extent that it asserted he had worked as "a duty mechanic NRMA service truck, a spare parts manager and a repairs assessor". At the trial of the action the plaintiff introduced evidence that he had not worked in those positions and that this material in his occupational history had been given to the defendant in error. None of this evidence was challenged by the defendant and I accept the plaintiff did not work in those positions.
By letter dated 30 July 1996, before being told by the plaintiff of the errors made in the list of occupations he had provided, the defendant informed Mr F G Bell of the plaintiff's claim that he was permanently and totally disabled within the meaning of the policy and set out the occupational history of the plaintiff in the following terms:
"Motor mechanic
Spare parts manager
Repairs assessor
Duty mechanic service unit
Underground fitter for various mining companies."
Having acknowledged that Mr Bell believed the plaintiff was able to return to work "on a part‑time basis" the defendant went on to ask whether he would consider the plaintiff to be totally and permanently disabled and, if not totally and permanently disabled, requested him to say which occupation the plaintiff was capable of performing in accordance with his training and experience.
Mr F G Bell replied to the defendant by letter dated 6 August 1996. I will set out this letter in full:
"Thank you for your letter of the 30th July. As I have indicated on the form, this man had a frightening accident from which he is still recovering. It is only a matter of some fifteen months since his injury and his injuries are predominantly spinal. I believe he will improve over the next three to six months and have discussed with him what he might do.
He has ideas of undertaking something in the paramedical field such as physiotherapy, radiography or health and safety officer. However, I have indicated in your pro forma report that I believe he is capable of work as a storeman in light industry, shop assistant and in light manufacturing conditions in a factory. I do not therefore consider him totally and permanently disabled. He could certainly work as a spare parts manager, a repairs assessor and in time I think would be able to work as a duty mechanic in an NRMA service unit, which I believe would need to start on a part time basis and gradually increase towards fulltime work as his psychological and physical injuries recover."
This report makes it very clear, as indeed the plaintiff conceded, that the plaintiff had a substantial retained capacity to work in the various jobs described. It is equally clear that Mr Bell did not consider the plaintiff fit to return to his former occupation as an underground fitter and only expressed what seemed to be a tentative opinion that he would in time be able to work as a duty mechanic in a NRMA service unit on a part‑time basis.
By letter dated 30 August 1996 the defendant notified the plaintiff that his claim had been refused. The terms of this letter are significant because the defendant paraphrased the policy definition of total and permanent disablement and this was the subject of considerable argument during the course of the trial.
Following the refusal of his claim the plaintiff by letter dated 16 September 1996 asked the defendant to explain the basis upon which he was not considered to be totally and permanently disabled in terms of the policy definition. The defendant replied by letter dated 30 September 1996 saying its decision was based on Mr Bell's report and his opinion that the plaintiff will be able to return to the "work force" at some time in the future.
It was shortly after this that the plaintiff commenced an action against the defendant and the events I have already described leading to the discontinuation of those earlier proceedings and the commencement of the current proceedings occurred.

Duties of Insurers

A review of the cases referred to by counsel for the plaintiff reveals that, in making a decision that affects both its own interests and those of the insured, the insurer is required to act fairly and in good faith with due regard to the interests of the claimant. The duties of the insurer to the insured are analogous to those of trustees to beneficiaries but, whereas the trustee's obligations are based on a fiduciary relationship, which limits the circumstances in which they can be judicially reviewed, those of the insurer are based on a mutual obligation of good faith rather than being of a fiduciary nature. Edwards v The Hunter Valley Co‑op Dairy Co Ltd & Anor (1992) 7 ANZ Ins Cas 61‑113 at p 77,536:
"It is next necessary to examine the nature and content of Zurich's relevant obligations under the policy. Those obligations were contractual and not fiduciary. Zurich was an insurer, not a trustee. Since the commercial purpose of the policy was, relevantly, to provide insurance against the risk of total and permanent disablement, and since the policy was expressed in terms requiring the formation by Zurich of a particular opinion as a condition of Zurich's own liability, there was clearly an implied obligation on Zurich to consider and determine whether it should form that opinion. That involved a consideration and determination of the correct questions. …Furthermore, in the exercise of powers affecting the interests both of itself and the claimant, Zurich was under a duty of good faith and fair dealing which required it to have due regard for the interests of the claimant. …This duty is in my opinion analogous to the duty to which a mortgagee is subject in exercising a power of sale of mortgaged property, and to the duty to which a controlling shareholder of a company is subject in exercising a right to procure the passage of a resolution affecting the interests of the shareholders at a general meeting of the company."
The distinction between the duties owed by a trustee and those of an insurer were highlighted by the Court of Appeal in Beverley v Tyndall Life Insurance Co Ltd (1999) 21 WAR 327 at 331 and 337. At p 331 Malcolm CJ contrasted the position of the insurer with that of a trustee in the following terms:
"The position of the respondent in the present case differs from the position of a trustee. An insurer to whom a claim is made is called upon to adjudicate on the merits of the claim to determine whether the circumstances are such to give rise to the insurer's own liability to indemnify the insured against a loss. One reason for the requirement that the insurer must act with the utmost good faith is that in the assessment of a claim under a policy the insurer is in a very real sense acting as a judge in the insurer's own cause. As the cases referred to by Ipp J demonstrate, in these circumstances the duty of good faith must extend to a duty to act fairly and reasonably in the assessment and determination of the question whether the insured has made out a claim under the policy which the insurer is bound to indemnify."
In the same case at p 337 Ipp J discusses the effect of s 13 of the Insurance Contracts Act upon contracts between an insured and an insurer and concludes that the legislation requires the insurer to act towards the insured, in making a decision under the contract of insurance, with the utmost good faith. This meant, according to Ipp J, that:
"…the insurer is required to exercise its discretion upon 'real and genuine consideration' and on sound reasons."
Ipp J went on to emphasise that the decision made by an insurer is essentially in the nature of a discretionary judgment which, while capable of being legally challenged, does not entitle a court to substitute its own view for that of the insurer unless it can be shown that the decision reached by the insurer was, on the material placed before it, clearly unreasonable.
The insurer's obligations to exercise its discretionary judgment fairly and reasonably has been described as a condition precedent to the validity of the decision made by the insurer. This principle was expressed in the following way in Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61‑175 at p 78,001:
"It would seem that in relation to opinions to be formed by trustees, the normal course would be for the Court to refer the matter back to the trustee, to be reconsidered by the trustee. In the case of the opinion of an insurer, it seems that the appropriate course may rather be to regard the formation of the opinion as a condition of the contract protecting the insurer, so that if the insurer fails to act fairly and reasonably in forming the opinion, the insurer in effect loses the benefit of that condition, and it becomes appropriate for the Court to consider the matter itself. This seems to be the approach adopted by McLelland, J in Edwards. Particularly that would be so in this case, where an entitlement is given to the member under cl 18.1 to receive a benefit if he in fact satisfies a definition, and that entitlement is then qualified in cl 18.2 by making the opinion of the trustee or insurer conclusive on the question of whether disablement is shown."
The same approach was adopted by the Supreme Court of New South Wales in Wyllie v National Mutual Life Association of Australasia Ltd & Ors, unreported; SCt of NSW; BC9703063; 18 April 1997 where Hunter J said at p 62:
"It was submitted on behalf of the insurer that, in the event that this Court determined that the insurer was in breach of its obligations in its assessment of the plaintiff's claim, then it was not open to the Court to proceed to its own determination of the plaintiff's disability: that the opinion of the insurer as to the plaintiff's disability was a condition precedent to his entitlement and that it followed from that construction of the policy provision that the plaintiffs present entitlement was to have his claim reconsidered by the insurer. I do not agree. I think both Edwards and Chammas are authorities to the contrary. In any event, I consider that the insurer has precluded itself by its breach from relying upon the condition precedent of its opinion as to the plaintiff's disability. With that condition precedent removed, it is simply a question of determining the disability or assessing damages for breach, a possible difference in approach which has no practical distinction in this case, in my opinion."
In dealing with the duties of an insurer counsel for the plaintiff sought to draw distinctions between the procedural requirements of that duty and the obligations of the insurer to exercise its discretion fairly and reasonably in determining liability under the policy. The obligation on an insurer to act fairly and reasonably in the procedural steps it takes leading to the consideration of the insured's claim were illustrated in Beverley v Tyndall (supra) where the insurer, after initially rejecting the insured's claim that she was totally and permanently disabled within the meaning of the policy of insurance, subsequently agreed to reconsider her claim in the light of additional medical evidence presented by the insured. Before reaching a decision in its reconsideration of the claim the insurer, pursuant to a clause in the policy, obtained additional reports on the insured's condition from two doctors of its own choice. Without disclosing the contents of the medical opinions it had obtained to the insured the insurer purported to reconsider the matter and again rejected the insured's claim. By failing to disclose the medical evidence it had obtained to the insured and provide her with the opportunity to address the additional material the Court of Appeal concluded that the insurer had failed to conform with its contractual obligation to act fairly and reasonably in the consideration of the insured's claim.
Much the same situation arose in Chammas v Harwood Nominees Pty Ltd (supra) where, after considering the insured's claim under the policy, the insurance company arranged for the insured to be examined by another medical practitioner and subsequently rejected the claim under the policy without giving the insured the opportunity of addressing the medical opinion it had obtained. In ruling that this failure constituted a breach of the insurer's duty to act fairly and reasonably the Court said at p 7800:
"Thirdly, beyond asking the plaintiff to see a doctor instructed by the defendant because 'further medical evidence is necessary to support your claim' the defendant did not invite the plaintiff to put any additional evidence to support his claim…much less did they give the plaintiff an opportunity to answer the adverse report of Dr Watts. I do not understand the authorities to require that natural justice in the full sense be given by an insurer considering this sort of case, but it does seem to me that some attention to the requirements of natural justice is part of fairness and reasonableness in dealing with such a case. It seems to me that it may be considered not fair to the plaintiff for the defendant to have acted on a detailed report obtained in the circumstances I have outlined, without giving the plaintiff any opportunity either to balance it by a similar detailed report from one of the treating doctors, much less, as I have said, giving the plaintiff a chance to answer the adverse report."

In par 7 of the statement of claim the plaintiff focuses on the alleged failure of the defendant to act fairly and in good faith in the procedural steps it took leading up to its ultimate rejection of the plaintiff's claim. Without repeating all the allegations made by the plaintiff the substance of his argument is that the defendant, in addition to applying the wrong definition of disablement, failed to identify to the plaintiff the material it relied upon in rejecting his claim, failed to notify him of the reasons why his claim was rejected and did not give him the opportunity, before rejecting his claim, to respond to the material it was relying upon. While acknowledging that the dispute is contractual and that the defendant was not bound by the rules of natural justice the plaintiff submitted the procedural irregularities inherent in the way the claim was dealt with were of such a serious nature as to constitute a breach of the defendant's contractual obligations and vitiate both the initial and subsequent determination it reached.
In support of this argument the plaintiff referred to the two letters he had received from the defendant or its representatives notifying him of the defendant's first and later determinations. The first letter dated 30 August 1996, which is to be found at p 36 of the book of agreed documents, simply informed him that his claim could not succeed on the ground that he was not totally and permanently disabled in terms of the policy document definition. The same letter also purported to paraphrase the definition of total and permanent disablement in the policy and, as will be seen later, the definition purportedly relied upon to reach that conclusion differed from the definition set out in the policy. The plaintiff's complaint in relation to the alleged procedural irregularity, however, is that this initial decision was reached by the defendant, presumably on the basis of Mr Bell's report dated 6 August 1996 which the plaintiff had not seen, and that the plaintiff was given no opportunity to respond to the material relied upon by the defendant before being notified of its decision to reject his claim.
Much the same argument applies to the later determination reached by the defendant on 16 August 1999. Although, by this time, the plaintiff had seen all the medical reports contained in the book of medical reports introduced as an exhibit in the trial it was submitted on his behalf that, as on the first occasion, he was never told by the defendant of the reasons why it considered he was not totally and permanently disabled and did not get the opportunity to respond. The letter from the defendant's lawyers notifying the plaintiff of the second determination simply stated that the defendant had reviewed all the medical reports and could not accept that he fell within the total and permanent disablement provisions in the life insurance policy. This, the plaintiff argued, was simply unacceptable and constituted a breach of the defendant's contractual obligations. In support of this submission counsel for the plaintiff relied upon the decision of the Full Court in Beverley v Tyndall Life Insurance (supra), and, in particular, on the remarks of Malcolm CJ at p 333 where he said:
"It follows from all this that any duty of the respondent to disclose to the insured any medical reports obtained by it in connection with its consideration of the appellant's claim cannot be based on any mutual duty of disclosure as such. The duty must be an aspect of the mutual obligations of good faith. This requires the implication of a term in the contract of insurance to the effect that the mutual obligation of good faith required that the appellant be given an opportunity to respond to any adverse medical reports obtained by the respondent in the context of the consideration by the respondent of the appellant's claim under the policy, which was itself supported by medical reports. Recognition that the duty of good faith required the respondent as insurer to act fairly and reasonably in the consideration of the appellant's claim would seem to require both disclosure of the medical reports obtained by the insurer and an opportunity being given to the appellant to answer them, as suggested, by Hodgson J in Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61‑175 at 78,000‑78,001; and by Bryson J in Wyllie v National Mutual Life Association Ltd.
In the present case the medical opinions obtained by the respondent were clearly matters which were material to the recoverability of the appellant's claim under the policy. In my view, for these reasons and the reasons to be published by Ipp J there was a duty upon the respondent to disclose the contents of the opinions to the appellant. In my opinion it follows from this conclusion that the respondent's duty to act fairly and reasonably in the consideration of the appellant's claim in the discharge of its general duty required the respondent to disclose the existence of the opinions it had obtained to the appellant and give her an opportunity to comment or make representations about them before making a decision whether or not to accept liability under the policy.
As Ipp J points out in his reasons for judgment the imposition of this duty on an insurer is consistent with the duty imposed upon a person who, by contract is required to carry out a quasi‑judicial function: that person must 'act honestly, bona fide, and reasonably': see WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489 at 501 [46], per Ipp J, with whom Kennedy and White JJ agreed.
I agree with Ipp J that it would be prejudicial to an insured if the insurer was not required to disclose the adverse medical reports on which it relied to reject the claim only after it had decided to reject the claim. This would be unfair to the insured because it would deny him or her the opportunity to answer the medical reports."
See also remarks of Ipp J at p 347‑p 349.
Counsel for the defendant submitted that the decision in Beverley (supra) was distinguishable. In that case, unlike the one before this Court, the insurer had obtained additional medical reports that were adverse to the appellant and, without disclosing the contents of those reports to the appellant, purported to rely upon them to dismiss his claim. This case, it was submitted, is quite different. The medical reports relied upon by the defendant in reaching its final determination were provided by the plaintiff himself. Those reports all form part of the book of medical reports introduced into evidence. The defendant neither sought nor obtained any additional reports relating to the plaintiff's condition. Since the defendant relied upon material provided by the plaintiff, and did not go outside that material in reaching its final determination, there was nothing it could disclose to the plaintiff before reaching its decision. Any suggestion that it ought to have notified the plaintiff it was considering rejecting his claim, and notifying him of the basis of that decision so that he could respond to it, would, it was submitted, be going too far and impose on the defendant an obligation which went beyond the duty of good faith required of any insurer.
I agree with this submission. I am satisfied Beverley's case is distinguishable for the reasons given and I do not believe there was any obligation on the defendant to go as far as the plaintiff suggested.
I am unable to accept that there were any procedural irregularities on the part of the defendant that were serious enough to constitute a breach of its contractual duties. I should emphasise that there was no onus on the defendant to seek material relevant to the plaintiff's claim. As is said in Sutton's "Insurance Law in Australia", 3rd ed at 742‑743 the insurer is under no duty to consider any evidence apart from that presented by the insured and the onus is on the insured to provide whatever evidence is necessary to lead to the conclusion that total and permanent disablement has been established. This onus includes the presentation of medical evidence as to the extent of the injured person's incapacity and evidence precluding the likelihood of the insured permanently engaging in any occupation for which he is fitted by reason of his education, training or experience. Heitman v Guardian Assurance Co Ltd& Anor (1992) 7 ANZ Ins Cas 61‑107 (SCt of WA) at 77,487. This is exactly what happened in this case. The defendant notified the plaintiff what it required and the plaintiff arranged for the necessary documentation, including a Permanent Disability From Accident Insurance Claim Form completed by his medical practitioner, Dr F G Bell, to be sent to the insurer. Nothing more could be expected of the insurer up to this point. While the Permanent Disability From Accident Insurance Claim Form required to be completed by Mr Bell did not define what was meant by total and permanent disablement, and while it might have been helpful if the policy definition had been included in the form, the insured was certainly under no obligation to provide that definition.
The same reasoning applies to the other alleged procedural irregularities on the part of the defendant. The plaintiff has not shown that any of the steps the defendant took leading up to either its initial decision or its later reconsideration constituted a breach of its duty of good faith. Unlike the situation in Beverley (supra) and Chammas (supra) the defendant relied entirely on the material provided by the plaintiff in reaching its decision and did not obtain other medical reports or material which, on the strength of the authorities referred to, ought to have been referred to the plaintiff or his experts for consideration and comment.
The plaintiff has not proved that the defendant breached its contractual obligations in any of the procedural steps it took before reaching both its initial and subsequent decisions to reject the plaintiff's claim.

Alleged breach by insurer in reaching determination

Counsel for the plaintiff submitted that in the exercise of its discretion to determine liability under the policy the defendant was required to act in good faith, reasonably and honestly and upon a fair consideration of the material before it. It was recognised, however, that there are limitations on a court's ability to interfere with a decision made by an insurer. In Edwards v The Hunter Valley Co‑op Dairy Co Ltd & Anor (1992) 7 ANZ Ins Cas 77‑531 it was said at 77,536:
"To say that an insurer must act reasonably in forming or declining to form an opinion is not to say that a court can substitute its own view for that of the insurer. As North J pointed out in Doyle at 529, 'reasonable persons may reasonably take different views'. Unless the view taken by the insurer can be shown to have been unreasonable on the material then before the insurer, the decision of the insurer cannot be successfully attacked on this ground."
There are, of course, two decisions of the defendant that are under consideration in this action. While counsel for the defendant has submitted that the defendant's initial decision to reject the plaintiff's claim is of little, if any, relevance, and that only the second determination, based on the additional medical evidence supplied by the plaintiff, ought now to be considered, the plaintiff has argued that the error which, it claims, tainted the initial decision made by the defendant must, on the material before the Court, be inferred to have been carried over and tainted the second decision as well.
The plaintiff's line of argument is as follows. In initially rejecting the plaintiff's claim the defendant, by letter dated 30 August 1996 addressed to the plaintiff stated:
"To be classified as totally and permanently disabled the claimant must be incapacitated to such an extent as to render the insured person thereafter unable to engage in or work for reward in any occupation or work which he or she is reasonably capable of performing of (sic) reason of education, training or experience.
Based on the information obtained in relation to your claim it is apparent that you are not total (sic) and permanently disabled in terms of the policy document definition.
Accordingly liability is denied for the claim you have made under Policy No PDA527384."
By informing the plaintiff of its decision in these terms it was submitted that the defendant applied the wrong definition of total and permanent disablement. The definition it purported to have relied on was not the definition in the insurance policy. The definition it set out in its letter advising the plaintiff that his claim had been rejected was wider than the definition in the policy. It omitted any reference to the disablement preventing a person working for the rest of his life, and, most significantly of all, it referred to a person being incapacitated to engage in any occupation "or work" which he or she was reasonably capable of performing by reason of education, training or experience. The insertion of the words "or work" was said to have widened the scope of the exclusion in the policy definition.
I believe the plaintiff's submission is correct. The word "occupation" is defined in the new shorter Oxford Dictionary as meaning, among other things ‑
"What a person is (habitually) engaged in, espec. to earn a living; a job, a business, a profession; a pursuit, an activity."
Counsel for the plaintiff went on to submit that the defendant applied the wrong definition, not only in its initial determination, but also, by inference, in its re‑determination communicated to the plaintiff in the letter from the defendant's solicitors dated 16 August 1999. I believe this submission is also a valid one. The evidence is silent as to what criteria the defendant applied in the second determination. Apart from the hand written notes made by its employee, Mr Brian Paterson, who considered the application on behalf of the defendant, there is nothing to indicate what definition it applied. The handwritten notes reveal that Mr Paterson comprehensively analysed the medical reports submitted for the defendant's consideration. There is nothing in those notes, however, to indicate what definition of total and permanent disablement was relied upon. In the absence of such evidence I believe the more probable inference is that the definition which the plaintiff was told the defendant had relied upon at the time it made its initial decision on 30 August 1996 must have been relied on again in its re‑determination on or about 16 August 1999.
Given this finding the next question is whether the probable application of the wrong definition really matters. The defendant submits it does not. Counsel for the defendant has submitted there is no substantial difference between the definition in the policy and that set out in the letter from the defendant dated 30 August 1996. What the defendant was endeavouring to do in that letter was simply to paraphrase the policy definition. Counsel for the defendant went on to submit that the definition of total and permanent disablement in the policy, and that applied by the defendant in its consideration of the plaintiff's claim, has been the subject of judicial consideration in a line of cases both in this and other States. A convenient starting point is the decision in Tillotson v ANZ Life Assurance Company Ltd, unreported; DCt of WA; Library No 5013; 9 August 1996 where, in considering the meaning of the expression "total and permanent inability to follow any occupation due to accident", Viol DCJ referred to a line of authorities identifying two general views as to the construction to be placed on those words. The broad view was said to be that adopted by L A Jackson DCJ in Allan v National Mutual Life Association of Australasia Ltd (1993) 9 SR (WA) 68 where his Honour said at p 71:
"When the Policy speaks of total inability to engage in or attend to a remunerative occupation it does so in the context of the Policy and the purpose behind it. It does not require that the insured be reduced to a state of total helplessness… In my opinion, if the plaintiff can demonstrate that he is, as a result of illness or bodily injury, unable to earn a sum sufficient to reasonably afford the mortgage repayments, then he comes within the terms of the Policy and is entitled to recover."
The second approach, which Viol DCJ categorised as the strict view, was adopted in a number of decisions referred to in Tillotson's case including Riley v National Mutual Life Association of Australasia Ltd& Anor (1986) 4 ANZ Ins Cas 60‑684 where Cosgrove J said at p 74,063:
"In my opinion the test is to be paraphrased as follows: is the incapacity of the plaintiff such as to render it unlikely that he will every again become a regular member of the work force (ie, available for work and able to work) in any suitable occupation?"
Whether the broad or strict construction is adopted counsel for the defendant submitted that on the evidence before the Court the plaintiff clearly had a retained capacity to work and fell outside the scope of the definition in the policy. I will review the medical evidence at a later stage but, for the moment, it is correct to say that the plaintiff has a residual capacity to work in a number of areas such as spare parts manager, repairs assessor, instrument man, geologist's assistant and other similar jobs. This residual capacity has never been denied by the plaintiff. The issue, however, is whether it excludes him from the benefit conferred by the policy.
While total and permanent disablement clauses in policies seem to differ from case to case, and each clause must be interpreted in the context of the policy in which it appears, I believe some guidance as to how the disablement clause in this policy ought to be interpreted can be gained from previous decisions on similar clauses. In Chammas v Harwood Nominees Pty Ltd (supra) the Supreme Court of New South Wales (Equity Division), in interpreting a definition of total and permanent disablement not dissimilar to the one under consideration, said at 77,999:
"However, I do think that employment must be given a reasonable construction; and I think employment should be limited to full‑time employment and to employment which is reasonably open to the member. That is, I think, the employment must be employment which the member is capable of undertaking, having regard to his education, experience and training, or at least employment which he could become capable of undertaking with further training which it would be reasonable for him to undertake."
If this interpretation is accepted the first point that emerges is that the employment must be full time employment. This is significant in relation to the initial determination made by the defendant. Assuming, at least for the time being, that the only occupations for which the plaintiff was fitted by reason of his education, training or experience were that of a miner or motor mechanic, the report of Mr Bell dated 6 August 1996, upon which the defendant relied in reaching its initial determination, only refers to the possibility that in time the plaintiff would be able to work as a duty mechanic in an NRMA service unit and initially would need to start on a part‑time basis. This opinion, it was argued by counsel for the plaintiff, took the plaintiff outside the first limb of the test applied in Chammas (supra). As to the second limb of the test applied in Chammas, counsel for the plaintiff submitted that there was simply no evidence as to what further training it would be reasonable for the plaintiff to have undertaken or what type of work he could have been trained for. Without this evidence no reasonable decision could possibly have been made by the defendant.
The question whether the defendant's refusal of the plaintiff's claim was so unreasonable as to constitute a breach of its contractual obligations seems, in the end, to turn on the interpretation placed on the definition of total and permanent disablement in the policy of insurance. I have referred to previous decisions which counsel relied upon in deciding what meaning ought to be given to the definition in the policy. I really do not believe much assistance can be obtained from these authorities. The clause I have to interpret must be given a meaning consistent with the intention of the contracting parties. The context of the policy is relevant to this interpretation. What is also relevant, as counsel for the plaintiff emphasised, was the conduct of the parties both before and at the time of the initial and second determinations because such conduct may be a reliable indicator of the intention of the parties.

I believe the logical starting point is the letter dated 30 July 1996 from the defendant to Dr F G Bell. In this letter the defendant says:
"Mr Kelly is claiming permanent and total disablement which is likely to completely prevent him for the rest of his life from engaging in any occupation for which he is fitted by reason of his education, training or experience.
Mr Kelly gives an occupational history of:
Motor Mechanic
Spare Parts Manager
Repairs Assessor
Duty Mechanic NRMA Service Unit
Underground Fitter for various mining companies
Whilst we are aware that you would consider Mr Kelly able to work on a part‑time basis, would you consider him to be totally and permanently disabled.
If Mr Kelly is not totally and permanently disabled would you advise which occupation he is capable of performing in accordance with his training and experience."
Several significant points emerge from this letter. In the first place the defendant appears to have accepted that the plaintiff previously held the occupations referred to in the letter. It is also significant that the defendant did not ask Mr Bell what occupations or work he considered the plaintiff was totally and permanently disabled from doing. By setting out the occupations the plaintiff had followed in the past the defendant was, by necessary implication, seeking an opinion from Mr Bell whether he considered the plaintiff to be totally and permanently disabled, not for any type of work, but for one or more of the occupations listed in the letter. If there is any ambiguity it is removed by the last sentence in which Mr Bell is asked to advise which occupation ‑ by implication referring to one of those listed in the letter ‑ be believes the plaintiff is not totally and permanently disabled from performing in accordance with his training and experience.
The conclusion I have drawn from this letter is that the defendant accepted that the plaintiff was limited to the occupations it listed in the letter. It accepted that, if not totally and permanently disabled, it would still have to be satisfied, on reasonable grounds, that he was capable of performing one or more of the occupations referred to in that letter.
I have already indicated that I have gained little assistance from other decisions dealing with similar clauses in insurance policies. This is particularly so because the definitions vary from policy to policy. The one decision that is of assistance, and which is binding on this Court, is that of the Full Court of the Supreme Court in Beverley v Tyndall Life Insurance (supra). In that case the appellant had worked as a cook but had stopped work just before her accident and was engaged in full time unpaid domestic duties. Her policy contained a provision entitling her to payment if, having been unemployed for 12 months or more immediately before becoming totally disabled, she was considered to be totally disabled, solely because of sickness or injury, because she was unable to perform any occupation for which she was reasonably suited by education, training or experience. This definition was not significantly different from the one under consideration in this case. In dealing with the meaning of this provision Ipp J said at p 337:
"It follows that, ignoring matters which were common cause, for the appellant to establish that she was totally disabled whilst unemployed (within the meaning of condition 2.38 read with condition 3A.18), she was required to show that, because of injury, she was unable to perform any occupation for which she was reasonably suited by education, training or experience. The only occupation for which the appellant was so reasonably suited was that of a cook (or, arguably, a person 'wholly engaged in full‑time domestic duties'). It seems to me that, having regard to the terms of condition 2.38, a person will be regarded as being unable to perform any occupation for which she is reasonably suited if she is 'not capable of doing the important duties' of that occupation. It does not appear to have been disputed that the appellant was totally disabled whilst unemployed, within the meaning of condition 2.38 read with condition 3A.18. The policy confers certain benefits on a person who is totally disabled. Greater benefits are payable to a person who is totally and permanently disabled. The fundamental question on which the trial proceeded (and with which this Court is concerned) was whether the appellant was totally and permanently disabled within condition 2.39.
I shall leave aside those elements of the definition of total and permanent disability which were not in dispute. On this basis, the appellant was entitled to the benefits payable for total and permanent disability upon her providing proof to the respondent's satisfaction that she was 'unlikely to ever resume work' or attend to 'full‑time unpaid domestic duties'. Again, it seems to me, that in determining this issue, the critical question for the respondent was whether the appellant was unlikely ever to be capable of doing the important duties involved in her 'work' or in carrying out full‑time domestic duties. As to the meaning of 'unlikely' in this context, I would, with respect, adopt the conclusion arrived at by White J in White v Board of Trustees [1997] 2 Qd R 659 at 673 when construing a not dissimilar provision. Her Honour applied the ordinary meaning of the term which she considered to be 'no real chance or even improbable'."
The conclusion I draw from this is that the word "occupation" must be interpreted strictly. In Beverley's case it was limited to the one job the appellant had habitually engaged in. Whether she was to be regarded as incapable of performing any occupation for which she was reasonably suited depended on whether she was "not capable of doing the important duties" of that occupation. In this case the only occupations for which the plaintiff was reasonably suited by education, training or experience were those of an underground fitter or a motor mechanic. The other occupations of spare parts manager and repairs assessor had erroneously been included in his curriculum vitae. The defendant was later told this and seemed to accept it. It was certainly accepted to be the position at the trial. The question to be decided is whether there was evidence upon which the defendant, exercising its discretion upon "real and genuine consideration" and on sound reasons, could conclude he was likely to be capable of doing the important duties of an underground miner or motor mechanic. (Beverley v Tyndall (supra) p 338). The focus must be on the occupation to which the plaintiff was fitted by reason of his education, training or experience. It must not be on his retained capacity to do work other than in an occupation he had habitually performed.
I propose to adopt this meaning of "total and permanent disability" and go on to review the medical evidence in deciding whether the defendant has been shown to have been unreasonable in the decision it made.

The medical evidence

I have already referred in general terms to the medical evidence which showed that the plaintiff had a residual capacity to do certain types of work. I now propose to analyse the medical evidence contained in the book of medical reports introduced as an exhibit with a view to deciding whether the plaintiff is totally and permanently disabled within the meaning of the policy definition from engaging in the occupation of an underground fitter or automotive mechanic.
A convenient starting point is the evidence of Dr P Marsh which is to be found at pp 8, 12, 19 and 29 of the book of medical reports. In a report dated 9 May 1995 Dr Marsh describes the plaintiff's injuries as rib fractures of the left first eight ribs, haemopneumothorax and left pulmonary contusion and fracture of the first lumbar vertebrae.
After receiving initial treatment in this State the plaintiff went to Sydney where his brother lived. He was seen by Dr Audrey Gathy who arranged for him to be seen by a consultant orthopaedic specialist named Dr Loefler. As a result of his examination and the advice she received from the specialist, Dr Gathy concluded that the plaintiff's injuries were both significant and traumatic and that, despite intensive treatment and a strong motivation to recover, his progress towards recovery had been slow and that he continued to suffer from pain in his chest, back and groin resulting in impaired mobility and a reactive depression secondary to his injuries and slow recovery. In her report Dr Gathy expressed concern that the plaintiff might be left with some chronic disability preventing him from returning to his former occupation. In a later report dated 22 September 1995 Dr Gathy expressed the view that, while the plaintiff might be able to return to office/administrative type duties by the end of that year, she was of the opinion that he would never be able to return to work as a miner because of his chronic pain and disability.
The reports of Dr Loefler, the orthopaedic specialist to whom the plaintiff was referred by Dr Gathy, reveal that the plaintiff's fractures had stabilised and that he was highly motivated to assist in his own recovery and to this end was diligent in following a programme involving exercise and swimming. When seen by Dr Loefler on 20 July 1995 the plaintiff continued to complain of groin pains and, on examination, was found to have a stiff lumbar spine and other musculature abnormalities. At this time Dr Luefler was of the view that he was not ready to return to work and expressed the tentative opinion that he might not be able to return to his pre‑injury occupation. When next reviewed on 20 October 1995 Dr Luefler noticed that the plaintiff had a restricted range of forward flexion and that there were still abnormalities in his paraspinal musculature. He certified the plaintiff fit for full time work not involving heavy lifting. In his final report dated 2 January 1996 Dr Luefler referred to his final examination of the plaintiff on 20 October 1995 which led him to conclude that, while the plaintiff would continue to improve, it was likely he would be left with a disability flowing from his spinal injury and there was a possibility his back pain would gradually increase. As a consequence of his findings Dr Luefler was of the view that the plaintiff would not be able to return to his pre‑injury work and would only be fit to carry out work involving light or moderate lifting.
On his return to Western Australia the plaintiff was seen by Prof Taylor, a specialist in spinal medicine. An examination in March 1996 led Prof Taylor to conclude that the plaintiff's injuries had resulted in restriction of his lumbar spinal movements and that, on palpation, he was still tender at levels T8, L1 and L4/5. Later consultations led Prof Taylor concluded that the plaintiff's thoracic pain at the T4/5 and T5/6 levels remained constant and was exacerbated by prolonged standing and extension movements. Bilateral facet joint injections at T4/5 and T5/6 resulted in some reduction in the plaintiff's dorsal pain but his low back pain remained unchanged when next seen by Prof Taylor on 23 May 1996.
I have already referred to the reports of Mr F G Bell, the orthopaedic specialist who treated the plaintiff from the outset. Mr Bell, like most of the other medical practitioners, believed the plaintiff had recovered sufficiently to work in a number of non‑physically demanding areas. In his last report dated 16 January 1997 he outlines his clinical findings on examination and expressed some surprise that the plaintiff continued to have extensive spinal pain involving all segments of his spine. He attributed the plaintiff's painful state in no small part as due to his continuing anger in relation to the accident, the medical treatment he had received and the efforts that had been put into his rehabilitation. While unable to point to any clinical signs of serious spinal pathology Mr Bell believed the plaintiff's consuming anger would need to be addressed before he was fit to return to the work force. He concluded his report with the following observation:
"From a physical point of view I cannot find any good reason why Mr Kelly cannot go back to a reasonable level of work but I do not think it would be reasonable to expect him to return to his pre‑accident work for both physical and psychological reasons."
This conclusion is significant. Mr Bell had previously been given a list by the defendant of the plaintiff's pre‑accident occupations. These occupations included those of an underground miner and an automotive mechanic. Given this information his conclusion seems to rule out the likelihood of the plaintiff every being able to return to either of those occupations.
Apart from the plaintiff's physical injuries there was also evidence that he suffered from a recognised psychological illness. Without going through the medical reports in any great detail he was diagnosed by Dr Arthur Ouzas, a consultant psychiatrist, as suffering from a fairly severe form of post‑traumatic stress disorder. When seen by Dr Ouzas in 1995 the seriousness of the plaintiff's psychological symptoms was such that, in the opinion of the psychiatrist, he was largely precluded from any form of useful work or even re‑training. His situation did not really improve after that. Later reports from Dr Ouzas confirmed that the plaintiff continued to suffer from post‑traumatic stress disorder and depression. This mental state was, in the opinion of the psychiatrist, caused by his physical injuries. In his final report of 8 June 1995 Dr Ouzas expressed the belief that the plaintiff will be unable to return to mining and that even work as a motor mechanic might trigger his symptomatology. In his concluding paragraph of that report Dr Ouzas says:
"In conclusion whilst working as a motor mechanic may involve a range of mutual activities which may be tolerable the potential for exposure to a range of very powerful triggers reminiscent of the original trauma is quite high and would more than likely be poorly tolerated (if at all) without triggering his difficulties. Again there would be a concern for the safety of others with whom he may be working (as well as for himself)."
The conclusions of Dr Ouzas were supported by two clinical psychologists, Jennie Connolly and Peter Curry. Other evidence, however, was not so favourable to the plaintiff. Counsel for the defendant drew the Court's attention to what can only be described as a largely negative report of Dr Zelko Mustac, a consultant psychiatrist, who was unable to find any evidence of either major depression or post‑traumatic disorder. He concluded the plaintiff was fit from a psychiatric perspective to resume work but had no desire to do so. Dr Mustac went as far as to say the plaintiff was able to return to his pre‑accident work or any other work but doubted that he would do so in the light of his antagonistic and self‑pitying attitude.
I am conscious of the conflict in the psychiatric evidence which, of course, does present a difficulty. None of the medical witnesses were called to give evidence. This makes it difficult to reach a decision where, as in this case, there is conflicting evidence. All I can say is that I was unimpressed by the contents of Dr Mustac's report. I believe it was highly subjective in its terms and that many of the conclusions he reached fell outside the range of his expertise and, in any event, were, in some instances, seemingly unwarranted. I do not propose to isolate those particular passages in his report for comment. All I need say is that I am not prepared to attach the same weight to his opinions as I do to those of Dr Ouzas.
I have not attached much significance to the reports and findings of the work rehabilitation specialists. Some reports are positive and others are negative. I do not consider it necessary to consider these reports in detail given the nature of the medical evidence I have already referred to.

Conclusions

The conclusions I have reached are as follows:
1.The policy definition, when it refers to an insured person's occupation, must, in the context of this action, be limited to an underground fitter or an automotive mechanic.
2.The plaintiff's physical injuries, in conjunction with his psychiatric condition, permanently precluded him from returning to work in either of those occupations.
3.The defendant did not apply the policy definition of total and permanent disablement to the plaintiff's condition.
The decision made by the defendant that the plaintiff was not totally and permanently disabled within the meaning of the policy because he had a retained capacity to engage in work other than his pre‑accident occupations was, in my judgment, a misinterpretation of the policy.
I am satisfied the plaintiff has proved to the required standard that he was totally and permanently disabled within the meaning of the policy definition.