Banicevich v AMP Services (NZ) Limited - [2015] NZHC 2273

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-5272 [2015] NZHC 2273

BETWEEN
GREGORY IVAN BANICEVICH

Plaintiff

AND

AMP SERVICES (NZ) LIMITED First Defendant

THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED

Second Defendant

Hearing: 10-14 November 2014 and 10-12 December 2014

Appearances:

M Black and S I Perese for the Plaintiff
D McLellan QC and D Durovich for the Defendants

Judgment:

21 September 2015

JUDGMENT OF WOODHOUSE J

This judgment was delivered by me on 21 September 2015 at 4:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar
……………………………………

Counsel/Solicitors:
Mr M C Black, Barrister, Auckland
Mr D Dennis (plaintiff ’s solicitor), Hammonds, Solicitors, Dargaville
Mr D McLellan QC, Barrister, Auckland
Mr D A Campbell and Ms D I Durovich (defendants’ solicitors), Kensington Swan, Solicitors,
Auckland

BANICEVICH v AMP SERVICES (NZ) LIMITED [2015] NZHC 2273 [21 September 2015]

[1] Mr Banicevich has brought claims under or arising out of an insurance policy written by the second defendant, National Mutual. The first defendant, AMP, has administrative responsibilities. The defendants can be referred to collectively as AMP.

[2] The cover in issue is $2 million for specified major health “traumas”. Mr Banicevich claimed that he had had a “pancreatic neuroendocrine tumour and cancer” and that this entitled him to a payment because it was “cancer” as defined in the policy. Surgery to remove the tumour took place on 22 November 2012. Notice of intention to make the claim was not made until 14 August 2013. AMP declined the claim on the grounds that the policy had been cancelled on 18 November 2011.

[3] Mr Banicevich’s primary claim is that he is entitled to payment under the policy because the contract was not validly cancelled, or it was reinstated. There are three further and alternative causes of action, but the substance of these is that the policy remained in force, or should be treated as if it had remained in force. The focus of much of the evidence was on events leading up to and immediately following a notice of intention to cancel the policy dated 5 November 2011.

[4] AMP defended the claim on a number of grounds, but two only need to be outlined at this point. They are summarised below. AMP also advanced six affirmative defences. Only one of those needs to be noted at this point, and is also summarised below.

[5] National Mutual traded as AXA from 1999 until it merged with AMP in 2012. Almost all of the events requiring consideration occurred before the merger and I will refer to acts of the insurer as being those of AXA.

[6] The outlines of AMP’s defences, and the affirmative defence, are as follows:

(a) AMP says the policy was cancelled on 18 November 2011 as a consequence of persistent failure by Mr Banicevich to pay the premium on the due date, and continued failure to pay within a further grace period allowed by AXA. Mr Banicevich says that, although

AXA may…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NZHC 2273
Decision Date: 21 September 2015

CaseChat Overview and Summary

The plaintiff, Mr Banicevich, brought a claim under a trauma insurance policy written by the second defendant, National Mutual. The first defendant, AMP, has administrative responsibilities. The defendants can be referred to collectively as AMP. The cover in issue is $2 million for specified major health “traumas”. Mr Banicevich claimed that he had had a “pancreatic neuroendocrine tumour and cancer” and that this entitled him to a payment because it was “cancer” as defined in the policy. Surgery to remove the tumour took place on 22 November 2012. Notice of intention to make the claim was not made until 14 August 2013. AMP declined the claim on the grounds that the policy had been cancelled on 18 November 2011. Mr Banicevich’s primary claim is that he is entitled to payment under the policy because the contract was not validly cancelled, or it was reinstated. There are three further and alternative causes of action, but the substance of these is that the policy remained in force, or should be treated as if it had remained in force. The focus of much of the evidence was on events leading up to and immediately following a notice of intention to cancel the policy dated 5 November 2011. AMP defended the claim on a number of grounds, but two only need to be outlined at this point. AMP says the policy was cancelled on 18 November 2011 as a consequence of persistent failure by Mr Banicevich to pay the premium on the due date, and continued failure to pay within a further grace period allowed by AXA. Mr Banicevich says that, although AXA may have given notice of cancellation, cover was reinstated on its original terms following payment by him of an overdue premium. I am satisfied that AXA did validly and effectively cancel the policy. Cover came to an end on 18 November 2011. Mr Banicevich therefore had no cover when he made the claim almost two years later. AMP contends in the alternative that, if the policy was still in force when Mr Banicevich made his claim, the medical condition in respect of which he made the claim did not qualify as “cancer” as defined in the policy. I am satisfied that Mr Banicevich’s condition does not come within the terms of the policy for a number of reasons. The evidence establishing this includes evidence from experts called for Mr Banicevich. AMP’s affirmative defence is that it had validly avoided the trauma component of the policy, with avoidance effective from its inception in November 2010, on the grounds of breach by Mr Banicevich of his duties of upmost good faith, disclosure and fair dealing. I am satisfied that this defence is made out. The facts established that, at the time of applying for the additional trauma cover, Mr Banicevich was in a precarious financial position. He was in severe financial distress and was insolvent during 2010 and 2011. He did not have sufficient cash flow to meet the monthly premiums on a sustainable basis when he took out the trauma cover in November/December 2010, or when his condition was diagnosed in February 2012, or at the date of the claim in August 2013. Mr Banicevich had little in the way of surplus cash and some of his payments were being reversed during the relevant period. There was no evidence from or for Mr Banicevich which questioned the conclusions of AMP’s expert witness. I am satisfied that the expert witness’s methodology was appropriate and I accept the conclusions. The principles applying to the duty of disclosure and the insurer’s entitlement to avoid a policy are that contracts of insurance are contracts of the utmost good faith on both sides. Pursuant to that principle, the insured was bound, quite apart from any terms or conditions in the insurance policy, to make full disclosure of all material facts. This duty of disclosure was not however absolute and the insurer could expect disclosure only of facts within the actual or presumed knowledge of the insured. The test in New Zealand of materiality in relation to facts that should be disclosed by insureds is whether the mind of the prudent insurer would be affected by knowledge of a particular fact, either in deciding whether to take the risk at all or in fixing the premium. I am satisfied that Mr Banicevich did intend to take out the policy for the ulterior and bad faith purpose stated in AMP’s pleading. I am further satisfied that when he did so he knew that he would not be able to meet the premiums as they fell due and that that state of affairs continued through to cancellation in November 2011. The remaining question is whether the true facts, if disclosed, would have been material to AXA’s decision whether or not to grant the additional cover, or to allow it to continue. I am in no doubt that these matters were material. They should have been disclosed. The plaintiff’s claims are dismissed. There is judgment for the second defendant in a sum of $69,491.26 with interest to be calculated in accordance with clause 11.7 of the distributor agreement from due date down to the date of judgment. The defendants are entitled to costs.

Orders