March 14, 2019

Life insurance

A recent decision by Parker J in Sargeant v FSS Trustee Corporation [2018] NSWSC 1997 demonstrates circumstances in which delay will not constitute a breach of a Total and Permanent Disability (TPD) insurer’s obligations. The decision also addresses whether the second stage can be decided “on the papers”.

the Plaintiff

The plaintiff, Ms Sargeant, was a former police officer who sustained a lower back injury while attending an incident in November 2009. She ceased work on 19 February 2010 and was medically discharged from the force in April 2011.

Medical evidence indicated that Ms Sargeant was suffering from piriformis syndrome, depression and post-traumatic stress disorder (PTSD).

the policies, claims and proceedings

Ms Sargeant made TPD claims under two, near-identical, group life insurance policies that were issued by MetLife Insurance Limited (MetLife) (second defendant) in June 2011. This insurance cover had been obtained by FSS Trustee Corporation (FSS) (first defendant) as trustee for the First State Superannuation Scheme.

MetLife had not yet made a decision on Ms Sargeant’s claims when the relevant court proceedings were commenced on 2 September 2015.

was metlife’s delay a breach of its obligations?

The relevant question was ‘whether MetLife’s failure to make a decision on Ms Sargeant’s claims by 3 September 2015 or, alternatively, by 3 September 2016, was a breach of MetLife’s obligations to act reasonably and fairly in dealing with the claim’. Parker J answered this question “no” and dismissed the proceedings.

Several factors led to the conclusion that the delay did not cause MetLife to breach its obligations. These included:

  • that Ms Sargeant’s claims were dependent on self-reporting. There was suggestion that Ms Sargeant had exaggerated her injuries to some extent;
  • the timing of the PTSD claim in relation to both Ms Sargeant’s response to procedural fairness and the date the condition was medically diagnosed;
  • that the position was not so clear as to preclude further investigation and consideration of the claim;
  • that there had been periods where MetLife was waiting for Ms Sargeant;
  • that FSS and Ms Sargeant did not pursue opportunities to refer her claims to the Claims Review Committee or complain to the Financial Ombudsman Service;
  • the awkward position MetLife was placed in by Ms Sargeant’s solicitor serving further medical reports after proceedings had commenced. Parker J also noted that Ms Sargeant’s solicitor did not advance an argument that the first stage analysis had already been satisfied by 2015 and that any supplementary material was applicable only to the second stage analysis; and
  • that Ms Sargeant’s solicitor did not attempt to make “time of the essence” at any point before 3 September 2016.

Parker J also held that it was not unreasonable for MetLife to seek its own independent evidence, rather than accepting the evidence provided to it by Ms Sargeant at face value.

Could the second stage hearing be decided “on the papers”?

Although a second stage hearing was no longer necessary, Parker J ‘would not have considered it possible to have decided the claim “on the papers”’. His Honour noted the difficulties in ruling on the parties’ objections to expert evidence when ‘the claims process is not one which is governed by the rules of evidence’. His Honour held that the Court must follow its own rules, including the rules of evidence, when deciding factual questions.

lessons

Parker J’s concise decision demonstrates to insurers the practical factors the Court may take into account when deciding whether a delay in deciding an insured’s claim is enough to breach the insurer’s obligations.

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.