Developments in TPD insurance claims 2016
Published 08 Dec 2016
Author: Gerard Malouf
Total and permanent disablement (TPD) policy dispute is a growing area of litigation and there has recently been a large number of decisions in various jurisdictions, including New South Wales, which touched on a wide of variety of issues. 
The significant growth is likely caused by the Superannuation Funds incepting policies of TPD for its members by default, and accordingly this paper will specifically focus on TPD policies as held in superannuation funds.
These decisions has caused a rapid development in the interpretation of these policy, which has wide impact on these claims. In this paper, I will attempt to briefly recount key cases on several issues which I believe would assist a lawyer in practically determining a claim’s viability:
- TPD Definition
- “Any Occupation”
- “At Work”
There is an increasing expectation that firms give advice to persons who may be entitled to claim upon TPD policies of their entitlement, and it thus becomes incumbent upon solicitors to be aware of what may be a claim even when they do not practice these claims.
Total and permanent disablement or totally and permanently disabled (TPD) insurance policies are a type of insurance as defined under s9 of Insurance Contract Act 1984 (C’th). It is accordingly not an area of personal injury but part of commercial litigation – insurance contracts. In essence, this kind of dispute is more similar to insurance contracts relating to buildings or property damage, than to personal injury. When disputing TPD the medical evidence, quite primary in personal injury, is often incidental when compared to legal construction and credit.
A frequent question I receive from personal injury colleagues and clients alike is “whether there is a claim for TPD?” In contrast to injury cases where the facts often are very indicative of viability, in a TPD case viability cannot be immediately determined without knowing the contents of the relevant policy, and insurance policies can be worded in many different ways.
In principle, TPD has zero meaning as it is merely a title, and the contract can be worded however the parties please. A typical “Own Occupation” policy would usually respond should the insured be only unable to return to their “own job” while other TPD policies have extremely harsh definitions which would only respond in the event the insured loses completely two (2) of either limb and/or eye.
But there is a specific kind of policy known as the “Any Occupation” if it is held in a super fund. This is a result of the Sole Purpose test in s62 of the Superannuation Industry (Supervision) Act (SIS) 1993 (C’th) and the conditions of release in Schedule 1 of SIS Regulations 1994.
In short, most TPD policies in Super typical have the “Any Occupation” definition as it has similar to the meaning of “Permanent Incapacity” which is a condition of release. The conflation of the terms required by the Insurance Contract and the Superannuation framework occasionally leads to confusion for both clients and insurers.
“Any Occupation” has many variations but is typically grouped into two set: “unlikely to ever return to work” and “unable to ever return to work.” It was initially the belief that these are essentially the iteration of the same concept and was suggested in the decision of O’Neill J in Colella v Hannover Life Re of Australasia Ltd  VCC 620 at  where His Honour where finding in favour of the Plaintiff in an “unable” policy opined:
As a matter of common sense, it is highly unlikely the plaintiff would have given up employment and a good wage to look after a farm which produced virtually no income (emphasis added)
In the appellate decision, the Court of Appeal unanimously upheld the decision but the leading opinion of Garde AJA opined at  –  suggesting that the words “unable” being more stringent that “unlikely”:
Consistently with authority, the trial judge was right to take into account the claimant’s physical ability, intellectual capacity, education and qualifications in concluding that he was unable to perform any work for six consecutive months as a result of injury. Plainly, a person has no ability to do work for which the person does not have the physical or the intellectual capacity, or is unqualified or unsuited…
To the extent, however, that the trial judge’s construction of the expression ‘unable to work’ is dependent on the existence of work ‘which is reasonably available in the market place and in an area in which it could be expected an insured in the position of the claimant could reasonably apply’, the trial judge went too far.
Insofar as a distinction between “unable” and “unlikely”, the decision of Colella appears to espouse that “unable” in requiring the actual inability to do work is more stringent that the “unlikely” test as characterised by Bereton J in Halloran v Harwood Nominees Pty Ltd  NSWSC 913 at : meaning a probability of less than 50%. This was the test applied by Stevenson J in Shuetrim v FSS Trustee Corporation  NSWSC 464 and His Honour found in favour of the Plaintiff. At appeal the court unanimously overturned that decision and Leeming JA opined in the leading decision at  –  that:
…“Unlikely ever” is, in this context, much stronger than “less than 50%”.
What follows is this. To make an assessment of TPD, it is not sufficient for the insurer to be satisfied that it is more likely than not that the person will never return to relevant work. On the other hand, if there is merely a remote or speculative possibility that the person will at some time in the future return to relevant work, an insurer will not, acting reasonably and in compliance with its duties, be able to be satisfied that the person is not TPD. The critical distinction is between possibilities which are readily contemplatable even though they may not be more probable than not, and possibilities which are remote or speculative. A real chance that a person will return to relevant work, even if it is less than 50%, will preclude an Insured Person being unlikely ever to return to relevant work.
and the Court of Appeal at  determined that:
The question was whether the court was satisfied that there was not a real chance that he would ever return to relevant work
What is clear is that Leeming JA has set a precedent in TPD cases one should not utilise arbitrary calculations of 50% but the more stringent test of “no real chance”. The extent of whether the two Any Occupation definitions are the same is currently unknown and future cases will hopefully clear this up.
While the stringent definition of TPD Any Occupation has now been determined, it is often the case that clients insist they are able to succeed in a claim on the basis the policy refers to only their “education, training and experience” and contends they are unable to do anything for which they were trained or educated and need retraining to work again.
In the decision of Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd  NSWCA 104, the court unanimously upheld the decision of Hallen J at first instance which His Honour determined at  – ,  –  that:
In my view, the words “reasonably capable of performing by reason of education, training or experience” are critical. The work that is referred to is not, necessarily, that in which the Plaintiff was engaged prior to having sustained the injury referred to. It is the work described, being work that the Plaintiff was reasonably capable of performing by reason of education, training or experience. The phrase is a composite phrase placing a limitation on the basis that a person might be reasonably capable of performing alternative work. It does not have to be established that the insured person had actually performed such alternative work prior to his disablement.
Nor does the phrase, in my view, exclude further training reasonable for the insured to undertake. In the present case, there is nothing to suggest that, as at the date the Plaintiff’s disability fell to be assessed, he was not capable of completing any necessary training course likely to be required to enable him to use his transferable skills. Such a training course did not place this work outside the scope of work he was already reasonably fitted for by his existing education, or training, or experience.
It follows that, at the time his capacity for employment came to be assessed, the Plaintiff was reasonably capable, with some retraining if that were necessary (which it may not have been), to carry out the work suggested on a full-time basis.
Alternatively, the evidence suggests that any retraining that would have been required would have been minimal and that he would have had the capacity to undertake it. Furthermore, it would have been further training that would be reasonable for him to undertake in all the circumstances.
In practical terms, the act of proving there would be retraining required is demonstrably difficult as expressed by His Honour Young AJ in Chapman v United Super Pty Ltd  NSWSC 592 at  – :
Dargan makes it clear at  that it is no bar to the finding that work is within the plaintiff’s education, training or experience that a short qualifying course of training or retraining may be required.
The plaintiff says he is not fit even for part-time work. The defendant says that the plaintiff can do part-time work as a spare parts interpreter, a taxi driver, a checkout operator and similar jobs.
I have already considered the position of spare parts interpreter and on the facts I discard that as a realistic possibility.
The plaintiff would need some retraining to be a taxi driver. Although there is no actual evidence on this point, it would seem from general knowledge that the retraining would not be particularly arduous and would come within the principle noted in paragraph 34 above.
The onus is on the plaintiff to show that he is not able to do any part-time work so that any deficiency in proof here would be to his account. He probably could be a checkout operator without retraining. He would have to stand for some time, but again the evidence does not show that he cannot do that.
The ability to retrain per se can be inference of capacity (even if only of part-time capcaity) as was briefly suggested by His Honour Bathurst CJ in the unanimous full bench decision of Hannover Life Re of Australasia Ltd v Dargan  NSWCA 57 at , :
In the present case Mr Dargan was an experienced truck driver who it can be inferred, was familiar with the rules of the road and the demands involved in driving commercial vehicles. He was able to obtain an ancillary certificate to drive a taxi without undertaking any test and was able to comfortably pass the test required as a condition of maintaining the certificate. The evidence does not suggest that Mr Dargan’s training and experience as a truck driver was insufficient to enable him to complete the course. Even assuming that he had to refresh his knowledge of the rules of the road and acquaint himself with the major roads around Hobart to complete the course, that would not in my opinion mean that he was not reasonably fit to drive a taxi by virtue of his education, training or experience.
Although cases dealing with policies that have a different wording must be treated with caution, his Honour’s view as to the meaning of the expression “reasonably qualified” is of some assistance in this case. In the present case there is nothing to suggest that as at the date Mr Dargan’s disability fell to be assessed, he was not capable of obtaining an ancillary certificate and completing the training course which he undertook in 2008. The contrary was not suggested. It follows, in my opinion, that at the time his capacity for employment came to be assessed he was reasonably fitted to carry out the occupation of a taxi driver, at least on a part-time basis.
As these policies are incepted by default (also called Automatic Acceptance), the insurer usually inserts a condition of limited cover for person already unable to work at the inception of the policy. These are typically titled “At Work” or “Active Employment”. There has not been significant clarification of these terms, but what is clear is that insurers have applied these broadly, such as in the Mehmet v IOOF Investment Management Ltd  NSWSC 1914 at  – . An insurer would allege that if it was not immediately apparent that an insured person was unable to work at the time of their injury, he or she would fail to satisfy “At Work” if by the time the disability did become apparent the insured was not working sufficiently as a result of illness. The insurer would accordingly avoid the policy:
TAL submitted that this was so because:
- the Guidance Note provides that:
◾(a) the incoming insurer would provide TPD cover to insured members who were “at work” on the relevant date (agreed to be the business day before Lumley took over cover; 30 June 2003, as Lumley took over cover on 1 July 2003);
◾(b) insured members who were not “at work” on the relevant date due to sickness or injury would only (my word) be provided “new events cover”
◾(c) a member is not “at work” if, relevantly, the member was “entitled to claim…workers’ compensation benefits” on that date; and
◾(d) “new events cover” excludes cover for any medical condition which caused the member to be “not at work” on the relevant date, and thus for the medical condition which gave rise to the entitlement to workers compensation;
(2) on 11 February 2010, the NSW Workers Compensation Commission awarded Mr Mehmet workers’ compensation for the entire period from 8 May 2001 to 9 February 2010;
(3) Mr Mehmet must therefore have been “entitled to” workers compensation benefits on 30 June 2003;
(4) Mr Mehmet was therefore “not at work” for the purposes of the IFSA Guidance Note; and
(5) Mr Mehmet was thus only entitled to “new events cover” and not to cover for the medical condition which caused him to be “not at work”; and therefore not to a TPD benefit arising from his 12 March 2001 injury.
While the insurance in Mehmet was a transfer of a continuing policy, the decision has application to a single insurer policy. This kind of submission by the insurer requires almost a contrivance, and contra proferentem would work against the insurer. As His Honour Stevenson J in ruling against the insurer by pointing out at  – :
The obvious purpose of the provision was to ensure that a Fund member, such as Mr Mehmet , who had TPD cover when he became a member of the Fund, would not lose that cover merely because of a change in the identity of the insurer engaged by the Trustee pursuant to its powers under the Trust Deed.
As I have said, when Mr Mehmet joined the Fund, Hannover was the insurer. Under that policy, Mr Mehmet had TPD cover which was not subject to any “at work” requirements. In my opinion, the effect of cl 3.24 of the TAL Policy is to “ensure” that Mr Mehmet retained that level of cover notwithstanding the fact that Lumley, and then TAL, became the insurer.
If Mr Mehmet ’s cover under the TAL Policy is by reason of the Automatic Acceptance provisions of the policy, this issue does not arise. That is because although such cover is subject to an “at work” qualification (in the TAL Policy itself), the definition of “at work” for that purpose is a person:
“…actively and competently performing all the essential duties of his or her usual occupation without restriction”.
On the relevant dates, Mr Mehmet was “at work” within the meaning of that definition.
Applicable to a single insurer situation is consideration of the intent of the “At Work” qualification. Taking into to account its insertion is to avoid the insurer taking risk of a person who was already unable to perform all duties at inception, the corollary must be that where a person can perform all duties at inception are necessarily “At Work”.
TPD policies have a growing body law which requires practitioners to be kept aware to properly advise clients. While technical arguments regarding supplementary issues such as eligibility and cause of action are broadening in favour of applicants, the court has moved restrictively regarding the test for TPD per se. In the past it has been suggested that a TPD claim may be successfully where the evidence suggests partial work capacity or need of significant retraining, as in decisions of Folan v United Super Pty Ltd  NSWSC 343 by Nicholas AJ and Lazarevic v United Super Pty Ltd  NSWSC 96 by Hallen J where the claim was successful even when there was evidence of very significant residual work capacity. However the recent string of decisions from the appellate courts, namely Shuetrim, have reinforced that the test is effectively “the person has no chance of ever working again”.
 Hannover Life Re of Australasia Ltd v Dargan  NSWCA 57; MetLife Insurance Ltd v FSS Trustee Corporation / FSS Trustee Corporation v Maund  NSWCA 281; Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd  NSWCA 104; TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim  NSWCA 68; Hannover Life Re of Australasia Ltd v Colella  VSCA 205; Chapman v United Super Pty Ltd  NSWSC 592; Erzurumlu v Kellogg Superannuation Pty Limited  NSWSC 1115; Lazarevic v United Super Pty Ltd  NSWSC 96; Folan v United Super Pty Ltd  NSWSC 343; Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd  NSWSC 632; Banovic v United Super Pty Ltd  NSWSC 1470; Panos v FSS Trustee Corporation  NSWSC 1217; Ziogos v FSS Trustee Corporation as Trustee of the First State Superannuation Scheme  NSWSC 1385; Harrison v Retail Employees Superannuation Pty Limited and Anor  NSWSC 1665; Mehmet v IOOF Investment Management Ltd  NSWSC 1914; Wheeler v FSS Trustee Corporation as trustee for the First State Superannuation Scheme  NSWSC 534;
 see Hannover Life Re of Australasia Ltd v Dargan  NSWCA 57 at 
 see Zahr v TAL Life Limited  NSWSC 358 at 
 Superannuation Industry (Supervision) Act (SIS) Regulation 1994 Sch.1 ,103
 Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd  NSWSC 632
 see Dargan at , 
 see Mehmet v IOOF Investment Management Ltd  NSWSC 1914 at 
 Mehmet at 
 i.e. Constructive Rejection; c.f. Wheeler v FSS Trustee Corporation as trustee for the First State Superannuation Scheme  NSWSC 534 at  – ; Panos v FSS Trustee Corporation  NSWSC 1217 at