Presnell v FSS Trustee Corporation

[2016] VCC 448

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMON LAW DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-14-03525

CORINNE RACHAEL PRESSNELL	Plaintiff
v
FSS TRUSTEE CORPORATION (ACN 118 202 672)	First Defendant
AIA AUSTRALIA LTD	Second Defendant

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JUDGE:

HIS HONOUR JUDGE CARMODY

WHERE HELD:

Melbourne

DATE OF HEARING:

3 March 2016

DATE OF JUDGMENT:

15 March 2016

CASE MAY BE CITED AS:

Presnell v FSS Trustee Corporation & Anor

MEDIUM NEUTRAL CITATION:

[First revision 19 April 2016]

[2016] VCC 448

REASONS FOR JUDGMENT
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Subject:CONTRACT

Catchwords:               Insurance contract – Total and Permanent Disability – has the Insurer acted reasonably and fairly

Legislation Cited:      Insurance Contracts Act 1984

Cases Cited:Finch v Telstra Super Pty Ltd (2010) 242 CLR 254; Edwards v Hunter Valley Co-op Dairy Co Ltd & Anor (1992) 7 ANZ Ins Cas 61-113; Chammas v Harwood Nominees Pty Ltd (No 1) (1993) 7 ANZ Ins Cas 61-175; Auspine Staff Superannuation Pty Ltd v Henderson (2007) 14 ANZ Ins Cas 90-127; Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2011] NSWCA 204; Hannover Life Re of Australasia Ltd v Dargan (2013) 83 NSWLR 246; Sayseng v Kellogg Superannuation Pty Ltd& Anor [2003] NSWCA 945

Judgment:                   Decision by the Insurer to decline the plaintiff’s claim as set out in its letter to the Trustee dated 17 July 2013 is set aside.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Brett SC with Mr D Kelsey-Sugg	Arnold Thomas & Becker
For the Defendants	Mr C Hanson	Turks Legal

HIS HONOUR:

1       At the commencement of the hearing in this proceeding, Counsel for the parties told me that the pleadings, including an Amended Statement of Claim and Defences from both defendants, were not very helpful.  The parties submitted that this proceeding be conducted in two stages.

2       The first stage was to decide whether the decision of the Insurer (“D2”) and the Trustee (“D1”) to reject the plaintiff’s claim for total and permanent disability under the insurance policy should be set aside.  There was no evidence to be called in this stage of the proceeding.  The parties would rely upon oral and written submissions with reference to pages within the 882 pages of the Court Book.  The hearing proceeded for two days of submissions.  I have marked the Court Book as “Exhibit A”.

Background to the Plaintiff’s claim

3       In 2007, the plaintiff commenced employment with Beechworth Health Services as a domestic services assistant.  In 2008, the plaintiff transferred her employment to Bupa Care Services Pty Ltd at Wodonga, where she performed nursing duties.

4       On 22 August 2008, the plaintiff was injured while performing her nursing duties at Bupa Care Services Pty Ltd.  The plaintiff’s injury was to her upper back.[1]  X‑rays demonstrated the plaintiff had sustained compression fractures at T4 and T5.  Initially, the plaintiff was absent from work for a short time and returned to work on light duties for 15 hours per week.  She did some further training and qualified to be able to administer medication to patients.

[1]Court Book (“CB”) 746

5       The plaintiff then changed her employment to Gribbles Pathology, working as a phlebotomist (blood sample collector).  This work was for 15 hours per week and light duties in nature.  The plaintiff’s employment was terminated after two months as she was taking too much time off work due to her injuries.  The plaintiff has not worked since 19 August 2009.[2]

[2]CB 313

The contractual arrangements between the parties

6       The plaintiff became a member of the Health Super Fund in 2007 when she first worked at Beechworth Health Services.  The first defendant, FSS Trustees Corporation, is the Trustee of the Health Super Fund (“the Fund”).

7       The benefits for the plaintiff are set out in the Trust Deed of the Fund.[3]  Relevantly, the Trustee had effected a policy of insurance of Total and Permanent Disablement (“TPD”) for the benefit of the plaintiff with the second defendant, AIA Australia Limited.  In these Reasons, the first defendant will be referred to as “the Trustee” and the second defendant will be referred to as “the Insurer”.  The Trustee is the policy owner.  The plaintiff is a claimant for the benefit under the policy.

[3]CB 119-244

8       The policy document entitled Group Life (Death & Total and Permanent Disablement) Insurance Policy No. MP9875 was contained in the Court Book, at pages 245-283.  The effective date of the policy is 1 August 2007 and was, and is, current for all relevant times.

9       The Trustee’s duties to the plaintiff in this case are separate and distinct from the duties of the Insurer.  The Trustee has to comply with the obligations of good faith and genuine consideration of the claims made by its beneficiary.[4]

[4]Finch v Telstra Super Pty Ltd (2010) 242 CLR 254

10      The Insurer’s obligations are contractual and not fiduciary.  The commercial purpose of the TPD insurance policy was to provide insurance to the plaintiff against the risk of total and permanent disablement.  An express term of the policy is that the Insurer form an opinion as a condition of its own liability under the policy.  Necessarily, that involves the Insurer in a consideration and determination of the correct question.  The Insurer is obliged to act reasonably in considering and determining the claim.

11      The Insurer is under a duty of good faith and fair dealing which requires the Insurer to have regard for the interests of the claimant (plaintiff).[5]  The Insurer is required, on the basis of fairness and reasonableness, to disclose significant material upon which it relies to assess a claim.[6]

[5]Edwards v Hunter Valley Co-op Dairy Co Ltd & Anor (1992) 7 ANZ Ins Cas 61-113

[6]Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175

The TPD clause

12      The relevant TPD clause was set out in the insurance contract which appeared at page 254 of the Court Book.  The relevant part of the TPD definition is as follows:

“‘Total and Permanent Disablement’ (or its abbreviation ‘TPD’) means that:

a)     the Insured Member as a result of injury, sickness or disease:

i)has not performed any work for an uninterrupted period of at least six (6) consecutive months solely due to the same injury, sickness or disease; and

ii)is attending and under the regular care and following the advice of a Medical Practitioner and has undergone all reasonable and usual treatment including rehabilitation for the injury, sickness or disease; and

iii)after consideration of all the medical evidence and such other evidence as the Company may require, has become in the Company’s opinion, incapacitated to such an extent as to render him or her unlikely ever to be able to engage in his or her own occupation and any occupation for which he or she is reasonably suited by education, training and experience.”

13      The definition raises a number of issues.  The first issue is what is the relevant date for the determination of the claimant’s incapacity by the Insurer.  In the unusual manner in which this proceeding was conducted, the parties were like “ships in the night”.  The two defendants, through their counsel, Mr Hanson, submitted that the relevant date was at the conclusion of the six-month period referred to in (i) of the definition clause.  Mr Brett, QC, on behalf of the plaintiff, submitted that the relevant date was 17 July 2013, which was the Insurer’s final decision to decline liability.[7]

[7]CB 681-2

14      The resolution of the dispute as to the relevant date lies in the interpretation of the words of the definition for TPD.  The policy does not have a definition for the relevant date.

15      The definition section refers to three requirements to be met by the claimant before a claim for TPD is made out.  The first requirement is six months’ absence from work.  There was no issue between the parties that that requirement was satisfied.  The second requirement was the claimant was under regular medical care for the injury.  That requirement was not in dispute between the parties.  The final requirement was that “after consideration of all the medical evidence and such other evidence as the Company [Insurer] may require”, the claimant, in the Insurer’s opinion, has become incapacitated to such an extent as to render her unlikely to engage in her own occupation or any occupation she is suited to reasonably perform.

16      The three conditions I have referred to above are conjunctive.  The third requirement, on a plain reading of the definition section, can only take place after a consideration of all the medical evidence which is finalised by the Insurer’s letter dated 17 July 2013.  The language of the definition means the Insurer must consider whether it is presently unlikely that the claimant will ever be able to engage in her own occupation or any suitable occupation.  It follows from that, the Insurer, when making a determination, must consider all the available facts and materials at the time, ie July 2013.[8]

[8]Auspine Staff Superannuation Pty Ltd v Henderson (2007) 14 ANZ Ins Cas 90-127

17      Mr Hanson, on behalf of the defendants, relied on a number of authorities to support his submission that the relevant date was at the end of the six months’ continuous employment.  Each of those cases had different wording from the relevant TPD definition in this case and are distinguishable from this case because of it.  The Insurer could simply rectify the “uncertainty” of the relevant date, if it exists, by defining the date in the definition section of the policy.  It has elected not to do so.  The Insurer, by its own actions of continuing to consider materials throughout the three previous declination letters dated 22 November 2010,[9] 12 July 2011[10] and 1 November 2011,[11] has accepted that it was required to consider the relevant facts and materials in its determination of the claim by the plaintiff.  The letter dated 1 November 2011 from the Insurer to the Trustee has this following paragraph:

“On September 2011, Arnold Thomas & Becker, Lawyers kindly provided additional reports from Dr Jenner and Dr O’Brien.  Ms Pressnell’s claim was reopened and these reports were reviewed by our Claims Review Panel and Chief Medical Officer.”[12]

[9]CB 512

[10]CB 539

[11]CB 556

[12]CB 560

18      This statement in a letter of declination is a clear statement about the continuing obligation to assess the claim by the plaintiff, and that the relevant date is not at the conclusion of the six-month period.  The relevant date is when the Insurer has obtained and considered all of the relevant medical opinions and other materials relating to the claim.  In this case, that is July 2013.[13]

[13]CB 681-2

Has the Insurer acted reasonably and fairly in determining the claim by the Plaintiff?

19      The first relevant consideration is whether the definition of TPD means full-time or part-time work when using the words “engage in his or her own occupation or any occupation for which she is reasonably suited by education, training and experience”.[14]  It is clear that the plaintiff has a wide range of occupations for which she is reasonably suited.  Her résumé sets out a range of occupations, including nurse, domestic services assistant, bookkeeper, manager/ housekeeper and accountant/office manager.[15]  The plaintiff was working part-time as a blood collector after her injury.  The Insurer has properly considered each of these occupations in making a determination of the claim.

[14]CB 254

[15]CB 319-21

20      The Insurer has declined the claim on the basis the plaintiff could work part-time as a blood collector, or accounting/bookwork duties.[16]  The plaintiff had worked on a full-time casual basis in her occupation (Beechworth).  The hours of work varied[17] but the plaintiff was, and had, worked full-time hours. 

[16]CB 681

[17]CB 303-5

21      In Chammas v Hardwood Nominees Pty Ltd (No 1),[18] Hodgson J said:

“… 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.”

[18](Supra) at 12

22      I find that this construction of “employment” is appropriate to “occupation” in this case.

23      In this case, the Insurer has declined the claim on the basis the plaintiff has capacity for part-time work (or occupation).  I find that the Insurer has applied the wrong interpretation on the TPD in this respect and, consequently, has not acted reasonably and fairly in determining the claim.

24      In coming to this conclusion, I have considered the cases of Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd[19] and Hannover Life Re of Australasia Ltd v Dargan.[20]  In the Manglicmot case, the definition is different and uses the word “work” rather than “occupation”.  In Dargan’s case, the definition uses the word “occupation” the same as the instant case.  In Dargan’s case, “occupation” or “other occupation” was defined in the policy to include “part-time occupations”.  The difference in wording in each of these cases distinguishes them from the definition of TPD in this case and consequently are not binding authority on this Court.

[19][2011] NSWCA 204

[20](2013) 83 NSWLR 246

Capacity versus likelihood

25      The Insurer has considered the capacity of the plaintiff to work on a part-time basis as a blood collector or accounting/bookworker.[21]  At the time of the Insurer’s determination, the plaintiff was not working and was certified by her general practitioner, Dr Jenner, as unfit for work.

[21]CB 681

26      Dr Todhunter’s report appears at Court Book 809-812.  His opinion is relied upon by the Insurer to state:

“… is that the Member is fit to work in a suitable role (blood collector, accountancy book work), and that it is in the Member’s interest to work.”[22]

[22]CB 681

27      Dr Todhunter then went on to recommend an opinion be obtained from an occupational rehabilitation specialist to assess any transferable skills with the plaintiff’s current capacity.[23]  A fair reading of the opinion of Dr Todhunter directs the Insurer to capacity and then refers them to the likelihood of engaging in any occupation.

[23]CB 811

28      The Insurer, if acting reasonably and fairly, would have sought the opinion of an occupational rehabilitation specialist after receipt of Dr Todhunter’s report.  It did not do so.

Selective acceptance of medical opinions

29      In its letter of denial, the Insurer listed all of the medical reports it relied upon to decline the claim made by the plaintiff.

30      Dr Jenner’s[24] opinion was the plaintiff had no capacity for work and that her prognosis was guarded.

[24]CB 727

31      Dr Strauss’s[25] opinion was the plaintiff was not suitable for any employment and that the condition was to continue indefinitely.

[25]CB 796

32      Mr Blombery’s[26] opinion was the plaintiff had no capacity for her previous employment (nursing assistant) or any alternative employment, now, and into the future.

[26]CB 707

33      Dr Horsley’s[27] opinion was the plaintiff had no capacity for employment, but after successful involvement in a pain management program, the vocational goal would be a return to work in a graduated fashion up to 15 to 20 hours per week.  There is no evidence of a successful involvement in a pain management program by the plaintiff.  Ms Horsley thought the prognosis for return to work was guarded.

[27]CB 716

34      Dr Dush Shan[28] does recommend further treatment for the plaintiff as set out in the Insurer’s letter of denial dated 17 July 2013.  Dr Shan was not asked for an opinion on the plaintiff’s current work capacity or alternative work capacity.

[28]CB 764-5

35      Dr Andrew Muir’s opinion on the relevant issues is set out as follows:

“Q5:What injury or medical condition does the worker have?---

A:The worker now has a well established chronic pain syndrome.

Q6:In your clinical opinion, what has caused the worker’s injury or medical condition?---

A:The worker’s current state is a consequence of her workplace injury.

Q7:In your clinical opinion, can the worker return to work and their preinjury duties and hours?---

A:No.

Q8:If in your clinical opinion the worker cannot return to their preinjury duties and hours, does the worker have a current work capacity?---

A:I note the report tended (sic) by Dr Horsley and consider the worker’s physical capacities to be in line with the recommendations made in that report.

Q9:In your clinical opinion, can the worker return to work in modified preinjury duties and/or hours?       Alternative duties and/or hours with the worker’s current or another employer?---

A:No.

Q10:If the worker can return to work in modified preinjury duties and/or hours what are your recommendations?---

A:Not relevant.

Q11:If the worker can return to work in alternative duties of hours what are your recommendations?---

A:Not relevant.

Q12:When can the worker return to work whether it is in their preinjury duties, modified preinjury duties or alternative duties?---

A:Given the worker’s long period of unemployment and continuing pain and physical restrictions, it would be prudent to make an assessment of her capacities prior to selecting a particular option.  This may lead one to a conclusion that there is either little potential or guide the worker within her capacities.

Q13:If the clinical opinion is that the worker has no work capacity, please provide your detailed clinical opinion why that is the case.---

A:Not relevant.

Q14:When should the worker’s capacity for work including return to work be reviewed?---

A:This should be done on an annual basis.

Q15:Is there anything other than the worker’s injury or medical condition that is affecting their recovery including their return to work?---

A:No.”[29]

[29]CB 732

36      Dr Sheehan’s opinion about the plaintiff’s capacity for employment is that the plaintiff had at least a partial capacity for employment.  Dr Sheehan’s opinion was the plaintiff required an appropriate rehabilitation program before this capacity for part-time employment would take place.[30]

[30]CB 777

37      I have analysed these various opinions of the medical practitioners listed in the denial letter of 17 July 2013 for the purposes of assessing the reasonableness of the Insurer’s process in making its determination.  The preponderance of the medical opinions is that the plaintiff had no work capacity or required further rehabilitation programs to assist her in obtaining part-time work.

38      I find that the Insurer has not acted reasonably when assessing the medical opinions for the purposes of the claim by the plaintiff.

Procedural fairness in assessing claim

39      In the Insurer’s notes dated 27 May 2013 and 28 May 2013, it is clear the medical opinions of Dr Todhunter (10 May 2013) and Dr Sheehan (8 April 2013) were relied upon by the Insurer to make its determination published on 17 July 2013.  Neither of these reports were sent to the plaintiff or her legal advisers prior to making the decision.  As a matter of fairness, and acting reasonably, it is incumbent upon the Insurer to allow the claimant to make comment on such medical reports.[31]

[31]Sayseng v Kellogg Superannuation Pty Ltd& Anor [2003] NSWCA 945

Conclusion

40      For the above reasons, I order that the decision by the Insurer to decline the plaintiff’s claim as set out in its letter to the Trustee dated 17 July 2013 is set aside.

41      I understand the Trustee and Insurer are both bound by this decision as the submissions made on behalf of them were in harmony.

42      I will hear the parties on the future conduct of the plaintiff’s claim and costs.

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