Ivan Mabbett v Watson Wyatt Superannuation & Anor  NSWSC 365
The NSW Supreme Court upheld an insurer's finding that a member of a superannuation fund did not satisfy a Total and Permanent Disablement ("TPD") definition. Insurers will welcome a number of the court's findings, including that the member owed the insurer a duty of utmost good faith, even though the member was not a party to the group policy.
In July 2001, the member resigned from P&O Cold Logistics ('P&O'). He intended to commence work the next day with Associate Building & Construction ('ABC'). P&O accepted the resignation, but asked the member to complete his shift.
Between the time he resigned and the end of his shift, the member injured his back. He alleged that, due to this injury, he could not start work with ABC the next day.
The member began working for ABC in November 2001, but ceased in May 2002.
In July 2003, the member obtained work as a bus driver, but resigned when asked to work longer hours and obtain a commercial licence.
Subsequently, the member engaged in political activities but did not receive remuneration.
The member submitted a claim for a TPD benefit. To satisfy the definition of TPD, the member had to establish that:
- The injury caused the member to be absent from employment with 'the Employer' (defined as P&O) for at least 6 months in a row ('the first limb')
- In the insurer's opinion, the injury meant that the member was unlikely ever to work in any regular remunerative work for which he was reasonably fitted by education, training or experience ('the second limb').
The insurer declined the claim on the basis that the member was not absent from employment with 'the Employer' for 6 months in a row due to the alleged injury, as he began work for ABC 4 months after he ceased work with P&O.
First Limb of Total and Permanent Disablement Definition
The issues for determination were:
- Was the member absent from employment with 'the Employer' for at least 6 months in a row ?
- If yes, was that absence from employment caused by the member's injury ?
Was the member absent from employment with 'the Employer' for 6 months ?
The policy defined 'the Employer' as P&O. The member contended that he was merely required to establish that he was absent from employment with P&O for 6 months in a row. The fact he worked for ABC during that 6 month period was irrelevant.
The insurer argued that the first limb could only be satisfied if the member was absent from employment altogether for 6 months in a row. It asserted that it would be 'bizarre' if a member could qualify for the TPD benefit while working for another employer.
The court rejected the insurer's contention:
- The language of the policy only required the member to be absent from employment with P&O
- The 'bizarre result' suggested by the insurer was tempered by the fact that the member was still required to satisfy the second limb; i.e. satisfy the insurer that future employment was unlikely.
Was the absence from employment caused by the member's injury?
The insurer argued that, even if the member was absent from employment with 'the Employer', the absence was not caused by injury. The insurer contended it was the member's resignation, and not the injury, which caused the absence from employment.
The court found that the member's resignation did not necessarily preclude him from sustaining an injury which was a 'real and effective' cause of his absence from employment with P&O.
However, the onus was still on the member to establish that his injury was, as a matter of fact, a real and effective cause of his absence from employment. In a decision that turned on the medical evidence, the court found that the member failed to discharge that onus.
Second Limb of Total and Permanent Disability Definition
The court stated that the second limb required the insurer to form an opinion on whether future employment was unlikely, as at January 2002 (being the expiry of the waiting period).
The court was mindful not to disturb 'the contractual mechanism for fact-finding and decision-making' which allocated a discretion to the insurer, unless there was a vitiating error in the insurer's decision. It was insufficient for the member to show there was an alternative view on the materials.
The court found that the insurer was justified in forming its opinion that the member had not established that future employment was unlikely, as at January 2002.
The court took into account that the member had worked subsequent to January 2002, and had been receiving workers' compensation which enabled him to pursue political activities.
The court found that the member owed the insurer a duty of utmost good faith, even though the member was not a party to the group insurance policy. With this in mind, the court found that it was entitled to assume that the member was 'highly motivated to obtain suitable paying work'.
The court stated that the member was not permitted to bring about the 'unlikelihood' of returning to work by his own 'wrong'; eg by failing to make a genuine effort to return to work. Such unpermitted conduct included remaining on workers' compensation to pursue political activities.
Case Clarifies the Total and Permanent Disability Test
TPD case law is made up of a mish-mash of conflicting decisions across various jurisdictions. This decision adds some welcome clarity to the area:
- It is consistent with the line of authority (including Tonkin v Western Mining and Maciejewski v Telstra) which suggests that the date of assessment of TPD is 6 months after ceasing work
- The court relied on the NSW Court of Appeal's decision in Hannover v Sayseng in finding that a member owes the group insurer a duty of utmost good faith, even though the member is not a party to the group policy
- The decision confirms that the court's first task is to find whether the insurer's decision miscarried in some way. If, and only if, the court makes such a finding, it is then empowered to make its own determination on whether the member is TPD.
Finally, the decision is a reminder that the first limb of a standard TPD definition requires a member to establish a causal link between the absence from employment and the injury. This requirement should be scrutinised when there has been a resignation or redundancy.
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.