March 7, 2019

Life Insurance

A recent decision by Hallen J in Folmer v VicSuper Pty Ltd & Anor [2018] NSWSC 1503 highlights the importance of giving real consideration to any psychological medications, and the full-time/part-time nature of work specified in the policy definition, in the assessment of Total and Permanent Disability (TPD) claims.

PLAINTIFF’S BACKGROUND:

The plaintiff, Ms Folmer, was a 37-year-old community development officer and counsellor at the time she ceased work in January 2008 due to conditions including psychological injury or illness comprising PTSD, anxiety, depression and agoraphobia. 

Folmer had an extensive educational and vocational history. She had numerous tertiary qualifications and had held roles as a ‘counsellor, youth support worker, disability support worker, case worker, social worker, and a researcher’.

Various events that occurred prior to, and after, Folmer ceased work were relevant in the case.

  • March 2006: Folmer was arrested after being involved in a motor accident while allegedly affected by alcohol. Folmer claimed she suffered PTSD from a police incident associated with the crash. She had also experienced depression and anxiety before the incident.
     
  • May 2006: Folmer opened a private counselling and consultancy practice. 
     
  • Late 2007: Folmer commenced her final employment role, which involved providing counselling services. She also became aware that her mother was suffering from serious health issues. 
     
  • January 2008: Folmer ceased work and commenced full-time studies to gain a PhD in Modern Social Work.
     
  • September 2009: Folmer was assaulted by an ex-boyfriend. She suffered physical injuries (including rib fractures, breathing difficulties, and ongoing back pain), aggravated her existing anxiety and/or depression and exacerbated her agoraphobia. 
     
  • April 2011: Folmer withdrew from her PhD studies due to the consequences of the 2009 assault.
     
  • February–July 2012: Folmer attempted studying a Post Graduate Criminology Degree.
     

At trial, Folmer alleged that her TPD claim, lodged in 2014, was based upon the consequences of both the March 2006 police incident and the September 2009 assault.

THE POLICY, CLAIM AND PROCEEDINGS:

Under the terms of the relevant TPD policy, Folmer was entitled to a $90,000 benefit if:

(a)    she had been continuously unable to work because of injury or illness for the TPD waiting period (6 months); and

(b)    the Insurer considered that she was ‘unable ever again to work for reward in any business, occupation or regular duties’ for which she was ‘reasonably qualified by education, training or experience’.    

Essential qualifications to the TPD definition included that:

  • the Date of Disablement was ‘the date on which she commenced the most recent period of absence from employment through injury or illness’.
     
  • the definition of ‘business, occupation or regular duties’, referred to full-time work where Folmer ‘was working at least 15 hours per week at the Date of Disablement’.
     

Folmer’s claim was declined once by VicSuper Pty Ltd (the Trustee) and at least twice by AMP Life Limited (the Insurer). The Insurer’s declines were in November 2016 and February 2018. A contentious point was whether a letter, sent to the plaintiff’s solicitors in September 2017, were reasons for the first decision or a decision in itself. Proceedings against the Trustee and Insurer were commenced following the Insurer’s second decision. 

REASONS:

Hallen J held that the relevant Date of Disablement was 25 (or 28) January 2008. Therefore, Folmer’s TPD status was to be assessed as at 25 (or 28) July 2008, i.e., at the end of the six month waiting period. 

Did the Insurer breach its duties and obligations to Folmer in declining her claim?

His Honour noted that it was necessary to determine:

whether the views expressed by the Insurer can be shown to have been unreasonable on the material then before it, or whether it had not considered the correct question and that, in considering that question, and informing itself as to matters material to its determination, the Insurer had not acted fairly and reasonably. The latter ground would include taking, or failing to take, particular matters into account if doing so, or omitting to do so, would constitute not acting fairly and reasonably having due regard for the interests of the Plaintiff.

First Decision:

Hallen J rejected the Insurer’s contentions that Folmer failed both limbs of the TPD definition. His Honour vitiated the first decision on the basis that it ‘was not open to it acting reasonably and fairly in the consideration of the claim’.  

Issues with the first decision included that:

  • medical evidence demonstrated that Folmer was, in fact, suffering from psychological and physical disabilities at the Date of Disablement which, on balance, likely contributed to her ceasing employment;
     
  • the Insurer had limited itself to whether Folmer was attending medical treatment, and had not ‘given real consideration to the ongoing consequences of the Plaintiff’s medication’; and
     
  • the Insurer had not given detailed consideration to the qualification that Folmer was unable ever to undertake full-time work. Additionally, the fact Folmer maintained her studies after the Date of Disablement did not go to whether she satisfied either limb of the TPD definition.

Hallen J held that the Insurer’s letter of September 2017, to the extent it formed part of the decision, was erroneous for similar reasons. In particular, the Insurer did not identify how the requirement to take psychological medication would impact Folmer’s ability to work full-time. 

Second Decision:

The second decision was vitiated for reasons similar to the first. Again, the Insurer did not have proper regard to the available information, nor ‘form an opinion that was reasonably open to it’. Issues with the second decision included that the Insurer:

  • did not refer to the “full-time” qualification in the TPD definition, nor Folmer’s prescribed medications and their impact on her capacity to undertake such work; and
     
  • had made a statement indicating that it had in fact accepted that Folmer’s psychological condition and symptoms existed at, and following, the Date of Disablement.

Was Folmer TPD under the policy?

Hallen J concluded that Folmer was TPD within the meaning of the policy and therefore was entitled to the benefit.


LESSONS:

The decision highlights the importance of considering psychological medications, and their effects on an insured’s capacity to undertake work in determining whether an insured satisfies the TPD definition. The decision also reminds insurers to ensure their decisions give real consideration to any qualifications to the TPD definition. Policies may explicitly refer to the insured being capable of resuming work on a full-time or part-time basis. Other policies may be silent as to this issue, such as in Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2011] NSWCA 204.

For further information, please contact a member of the Life Insurance Team. The author wishes to acknowledge Ashley Dunn, Law Clerk for his contribution to this article.