The NSW Court of Appeal has dismissed MetLife’s appeal against a decision that it had breached its duty (in various respects) in declining a claim for total and permanent disablement (TPD) benefits on two occasions.
MX is a pseudonym and non-publication orders were made by the courts, as the gentlemen claiming the benefit was an undercover police officer who had been exposed to organised crime. He was medically discharged aged 41 from the police force on account of PTSD from service.
MX had not worked since August 2010. All doctors agreed he suffered from PTSD and could not do police work again, but there were differing opinions about his capacity to ever again perform other work.
The TPD provision in the insurance policy contained an orthodox qualifying period (no dispute arose about this) and an ETE (education, training or experience) clause. The benefit sum was $634,371.
MetLife’s First Decision
The insurer reached its first decision in December 2014, declining the claim with written reasons, concluding it was not satisfied MX was incapacitated to a degree that he was unlikely ever to be able to work within his ETEs again. In doing so it essentially relied on:
- a vocational assessment report, which identified three clerical type occupations, but did not address MX’s psychological capacity;
- surveillance showing MX participating in a community club;
- the report of psychiatrist Dr Kaplan, who viewed the surveillance footage and said MX could do work other than police work (but qualified that he would like to know the treating psychiatrist’s views).
The treating psychiatrist Dr Wilkins, said MX is a volunteer at the club, pursuant to his advice as a form of therapy, and the surveillance evidence is consistent with MX’s psychological restrictions in that it shows very little activity on few occasions (one occasion of helping behind the bar for less than 40 minutes, with no socialising). He concluded that MX was psychologically unfit for the alternate jobs identified by the insurer. Another psychiatrist, Dr Adams, gave similar views. MetLife did not accept this evidence.
The Court of Appeal upheld the finding that MetLife’s reasons did not reveal its “path of reasoning” (citing Newling v MetLife), in that it did not explain why it preferred the view of its doctor to that of the other two.
The insurer said its reasons demonstrated it relied on video surveillance to reject Dr Wilkin’s evidence regarding work capacity. However the Court further upheld:
- that the insurer gave no thought or comment to Dr Wilkin’s opinion that the surveillance evidence was not inconsistent with his view.
- that the insurer failed to “come to grips” with the true nature and extent of MX’s activities at the club and did not explain how such limited voluntary activities bore any relationship to the requirements of paid work.
- that it was unreasonable to rely on Dr Kaplan’s report when it was qualified and the insurer did not provide him with Dr Wilkin’s views as he suggested.
- reliance on a vocational assessment which did not account for MX’s psychological capacity was unreasonable.
MX submitted further evidence and requested MetLife afford a reconsideration. MetLife also obtained further evidence. In June 2017 MetLife again determined not to accept the claim, again on the ETE clause.
There was for instance an affidavit of MX explaining his involvement at the club in detail (his “safe haven” as he did not feel safe at many places), and a corroborating affidavit of another club member.
A psychiatrist, Dr Roldan, performed psychometric tests, did not identify any fabrication or exaggeration, but opined a capacity to work, at least part time, provided it did not call for high levels of public exposure and potential for conflictive interactions. An employability capacity assessment identified six alternate jobs. Another psychiatrist, Dr Kneebone, thought MX had not received optimal treatment and there was a possibility MX was exaggerating.
The treating psychiatrist Dr Wilkins provided a further report and maintained his view, addressing why he thought the other evidence was flawed.
The Court of Appeal referred to its own recent exposition (in Hannover v Jones and in MetLife v Hellessey) of the relevant principles, well trodden since Edwards v Hunter Valley Co-op Dairy Co.
Regarding the challenges on appeal the Court:
- Agreed with the insurer that a reconsideration does not mandate ignorance of its earlier decision, but regard to it as one of the relevant considerations.
- Agreed with the insurer that if the first decision is vitiated by error, it does not necessarily follow that a second decision/reconsideration is similarly infected.
- Upheld that the insurer unreasonably:
- continued to rely on the surveillance evidence (as casting doubt on MX’s capacity to work), but failed to address the further affidavit evidence of MX and the other witness (i.e. he was a volunteer with limited activity).
- failed to address whether the further affidavit evidence undermined the views reached by Drs Kaplan, Roldan, Kneebone etc.
- failed to address the significance of distinction between undertaking paid employment, with the nature and extent of voluntary activities at the club.
- Upheld that the insurer’s reasons for rejecting Dr Wilkin’s views were inadequate and unreasonable, in that:
- it was unreasonable to prefer Dr Roldan whose opinion was expressed in generalities (there might be “other roles” which did not require “high levels of public exposure and potential for conflictive interactions”).
- the employability capacity assessment failed to afford any explanation of how the jobs did not call for high levels of public exposure and potential for conflictive interactions, with the Court commenting “the idea that the respondent could do these jobs without being generally in contact with the public or exposed to conflictive situations seem highly artificial”.
- the insurer’s evidence of employment capacity focussed more on theory at the expense of reality. It said the insurer “put aside without comment” Dr Wilkins’ response to the further evidence. For instance Dr Wilkins explained that Dr Roldan’s testing was conducted “in isolation”, examines only “single traits and individual cognitive skills as demonstrated in isolation – controlled testing conditions”, and “fails to take into account the impact of the real world on the respondent’s capacity to function in the real world”. Dr Wilkins also explained why the further treatment postulated by Dr Kneebone was contraindicated.
The appeal was dismissed with costs against MetLife.
An insurer is under an obligation to afford a reasonable and fair process of consideration and outcome, and that “reasonable persons may reasonably take different views” (Edwards).
The Court did not decide whether an insurer’s duty extends to affording reasons for its decision, however without reasons a court will more readily infer a breach of obligation.
A judicial standard of reasoning is not required by insurers, but they must expose the “path of reasoning” to demonstrate the obligation was met. That means objectively and fairly weighing all the evidence, both contrary to and supportive of the claim. That evidence must be applied to an objective analysis of the claimant’s residual vocational capacity and their realistic prospects of working consistent with ETEs. If insurers reject supportive evidence in favour of adverse evidence, they must expose sound reasons for doing so or risk having the decision impugned.