In a claim for total and permanent disability (TPD), insurers often grapple with the distinction between what is real and what is theoretical when determining whether someone is capable of performing work by reason of education, training and experience. In the recent case Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Limited, Justice Hallen gives life insurers some guidance in making this determination.
In this matter, Mr Birdsall (the plaintiff) suffered an injury to his right wrist when he was lifting a heavy gearbox in the course of his employment in February 2009. The plaintiff was paid workers' compensation benefits. The plaintiff attempted to undertake various periods of restricted duties and ultimately ceased work with the employer on 4 October 2010. The plaintiff was a member of the MTAA Super Fund. The trustee (the first defendant) took out a policy with the insurer who was the second defendant in the proceedings. The plaintiff made a claim for a TPD benefit on 14 April 2011. The claim was rejected by the trustee and the insurer.
The plaintiff sought a declaration that he was totally and permanently disabled. The Court was required to consider the second limb of the TPD definition, which looks at whether the plaintiff was:
"...unlikely ever to engage in or work for reward in any occupation or work which he is reasonably capable of performing by reason of education, training or experience".
All doctors who examined the plaintiff agreed that he was unable to perform his usual occupation, but that he could perform sales or customer service related roles on a full-time basis.
Before making its decision, the insurer obtained a copy of the workers' compensation insurer's file, which contained evidence that the plaintiff had sent off applications for approximately 50 jobs, without success. The file also contained an Employment Capacity Assessment report, prepared jointly by Dr Keller and Ms Lee, the only doctors who were cross-examined in the proceedings. The report detailed the availability of positions in online advertisements for jobs the doctors believed the plaintiff was capable of performing.
There was also a report from APM, which said that based on the review of the labour market in the plaintiff's area, there appeared to be realistic employment opportunities at the plaintiff's skill level.
The Court's decision
In his decision, His Honour set out the "Relevant Legal Principles", which of themselves create a pathway to determining what is real and what is theoretical in TPD cases. He referred to his own judgment in Lazarevic v United Super Pty Limited, where he said:
"The definition relates to disability to obtain future employment. ... The application of the definition is directed to the realities affecting the capacity of the insured under consideration. It is not about theory: ... Similarly, the concept must include that which is reasonably available and in an area in which it could be expected the insured, in the position of the Plaintiff, could reasonably apply."
The Court found the conduct of the insurer and the trustee was unreasonable for failing to consider the fact that the plaintiff had applied for many different positions without success. Merely referring to the workers' compensation insurer's file in the denial letter did not satisfy His Honour that they had properly considered the applications made for employment.
Notwithstanding the finding that the conduct of the insurer and trustee was unreasonable, His Honour said:
"In light of this finding and as agreed by the parties, it is then appropriate for the Court to determine the Plaintiff's claim. ...
That requires the Court to consider not just the theory that a person is physically fit to do the particular work that was regarded as suitable, but also the actual likelihood of him obtaining regular employment for reward other than casual work or work of an intermittent nature.
Inherent is the issue whether the work suggested was work which the Plaintiff was reasonably capable of performing by education, training or experience and whether, in the real world, it was work which, as a matter of likelihood, was available to him."
His Honour referred to the applications that the plaintiff made for work, but said the failure to obtain work that was advertised, when it was not known whether the plaintiff followed up the applications, did not lead to the conclusion that the plaintiff would not "ever" obtain work that he was capable of performing by qualification, education and experience. His Honour concluded there were specific areas of work available that the plaintiff was reasonably capable of performing by reason of education, training and experience.
On that basis his Honour was not satisfied that the plaintiff was within the definition of TPD in the policy and the trust deed.
What does this mean?
Birdsall highlights the rigour and scrutiny the court applies in assessing capacity for work and availability of work, as well as the importance of considering what is real rather than theoretical, to determine whether a person satisfies the definition of TPD.
Insurers and trustees need to apply the same rigour to their decision-making process, as in many cases, where the insurer has failed to resist a TPD claim, it is due to the lack of rigour in the process engaged in to determine a claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.