On 7 April 2016, the New South Wales Court of Appeal handed down its decision inTAL Life Ltd v Shuetrim and Metlife Insurance v Shuetrim [2016] NSWCA 68.  The decision has clarified the meaning of “unlikely” in TPD clauses and in doing so, has raised the bar for an insured member to establish that they are “unlikely” to ever work again in a role within their education, training or experience.

THE PREVIOUS POSITION

The position commonly held for over a decade has been that stated by the New South Wales Supreme Court in Halloran v Harwood Nominees Pty Ltd[1].  There, the Court stated that “unlikely” in a TPD clause meant a “probability of less than 50%”,citing White v Board of Trustees.[2]

SHEUTRIM AT FIRST INSTANCE

At trial, on the basis of Halloran and White, Stevenson J, framed the question for determination as whether “it is probable that Mr Shuetrim would actually obtain work for reward for which he is qualified by education, training or experience?”  In answering that question, Stevenson J held:

“The expression ‘unlikely ever” means that Mr Shuetrim must show that, probably, he would not during the period of 30 years ‘ever’ obtain relevant employment.”

At first instance, Stevenson J found for Mr Shuetrim.

SHUETRIM ON APPEAL

On appeal, TAL submitted that in Halloran (and elsewhere), the principle from Whitehad been misconstrued because of an error in the headnote in the Queensland Reports and because of some inconsistent aspects of White J’s reasons.  TAL referred the Court of Appeal to the decision in Beverley v Tyndall Life Insurance Co Ltd[3]which held that the meaning of unlikely in White was “no real chance or even improbable.”  TAL also referred the Court of Appeal to the decision in Wiley v The Board of Trustees[4] and highlighted that White J said in White that “the ordinary meaning of “unlikely” means no real chance.  Other cases use the test improbable”

Metlife maintained that the term “unlikely to engage in or work for reward” was a composite phrase, the meaning of which could be distorted if the words “unlikely” and “ever” were considered independently.  Mr Sexton QC for Metlife submitted that “unlikely ever” did not reflect “a distinction between 60% and 51%, but a more stringent test overall.”

The Plaintiff submitted that the decision in White was useful and drew a distinction between the mere unlikelihood of an insured member being engaged in employment as opposed, to “more remote” possibilities and argued that members need only satisfy insurers of the former.

In considering the submissions, Leeming JA (with whom Beazley P and Emmett AJA agreed) held that for an insured member to be “unlikely ever” to return to relevant work does not mean merely that it is more probable than not, he/she will not ever return to relevant work  (i.e., “unlikely” does not less than 50%).

LESSONS

The Court of Appeal’s decision in Shuetrim has undoubtedly raised the bar for establishing an insured member is “unlikely” to return to work and the “take-away” points from the decision are as follows:

  • The headnote of White caused subsequent decisions to depart from the position in Beverley.
  • Where there is a chance an insured member may return to relevant work, even though it could not be said that a return to relevant work was more probable than not, the insured member would not be satisfy the definition.
  • Unlikely ever” in this context, is much stronger than less than 50%.
  • If there is merely a remote or speculative possibility that the insured member will at some time in the future return to work, an insurer will not, acting reasonably and in compliance with its duties, be able to be satisfied that the insured member is not TPD.  
  • A real chance an insured member will return to relevant work, even if it is less than 50%, will preclude a insured member meeting the definition of “unlikely” ever to return to work.