Introduction

The NSW Court of Appeal has recently delivered judgment in the Dargan appeal, a decision eagerly awaited by Australian group life insurers. This Court allowed the insurer’s appeal, ruling that Mr Dargan, a truck driver, was not TPD because he was reasonably suited to employment as a part-time taxi driver after completing a four-day training course.

Facts

Mr Dargan injured his lower back on 5 July 2007 in the course of full-time employment as a truck driver for U Help Removals. He claimed a Total and Permanent Disablement benefit under the terms of a Group Life Policy of which the first appellant, United Super, was the trustee and the second appellant, Hannover Life, was the insurer. His claim was rejected and he brought proceedings seeking orders for payment of the benefit.

The insurance policy contained the following definition of TPD which is commonly found in group life policies:

Total and Permanent Disablement in respect of an Insured Person who was gainfully employed within the six months prior to the Date of Disablement is where…the Insured Person is unable to follow their usual occupation by reason of an accident or illness for six consecutive months and in our opinion, after consideration of medical evidence satisfactory to us, is unlikely ever to be able to engage in any Regular Remuneration Work for which the Insured Person is reasonably fitted by education, training or experience."

The insurance policy contained the following definition of Regular Remuneration Work, which is also common in the industry:

"An Insured Person is engaged in regular remunerative work if they are doing work in any employment, business, or occupation. They must be doing it for reward - or the hope of reward - of any type."

Mr Dargan had completed year 11 and had obtained a Heavy Vehicles Licence and a Rigger’s Ticket. Prior to sustaining his back injury, he had approximately 16 years employment experience as a labourer, truck driver and the manager of his parents’ motel.

In around June 2008 Mr Dargan obtained a certificate enabling him to drive a taxi. To obtain the certificate Mr Dargan was required to complete a four-day road transport training course, which consisted of three full days of training in the classroom, various written tests and examinations, and a one-day driving test. Mr Dargan completed the course and thereafter worked as a taxi driver, but his back injury restricted him to working 20 hours a week.

Mr Dargan lodged his TPD claim in 2009. In accordance with the principles enunciated in Halloran v Harwood Nominees Pty Ltd [2007] NSWSC 913, the insurer decided to retrospectively assess Mr Dargan’s work capacity on the date occurring six months after Mr Dargan’s workplace injury. On the chosen assessment date, Mr Dargan had not yet decided to obtain his taxi driver’s certificate.

The insurer decided Mr Dargan did not meet the policy definition of TPD on the relevant date because he had “the ability to perform regular remunerative work as a Taxi Driver for which he was reasonably fitted according to his previous work experience as a Truck Driver". The insurer upheld its decision upon an internal review, stating "Mr Dargan has demonstrated a capacity to perform Taxi Driving and we therefore consider he could also perform other driving occupations that don't require the completion of a one week course i.e courier, delivery driver etc."

At first instance

The trial judge ruled in Mr Dargan’s favour, deciding that Mr Dargan’s previous employment as a truck driver did not make him reasonably fitted by education, training or experience for alternative employment as a taxi driver.

On appeal

On appeal, Hannover Life argued that Mr Dargan was, on the assessment date, “reasonably fitted by education, training or experience” for employment as a part-time taxi driver even though he had to undertake further training to obtain that role. Mr Dargan filed a notice of contention arguing that he satisfied the definition of TPD as he was only able to work part-time as a taxi driver whereas he was previously fit for full-time work.

The appeal court made two significant rulings concerning the construction of the phrase “reasonably fitted by education, training or experience”.

Firstly, the court noted that the words “education, training or experience” were used both disjunctively and conjunctively in the policy, meaning Mr Dargan could be reasonably fitted for regular remuneration work by reason of education or training or experience or a combination of those factors.

Secondly, providing some context to the word “reasonably”, the Court of Appeal endorsed Hodgson J’s reasoning in Chammas v Harwood Nominees Pty Ltd (No 1) (1993) 7 ANZ Ins Cas 61-175, which was to the effect that, subject to the terms of the policy, TPD definitions should be interpreted so that a claimant should not generally be considered TPD where alternate employment is reasonably open to them and in line with their education training and experience.

The Court of Appeal concluded that the question of whether a person is reasonably fitted for a particular type of work will always depend on the facts of the particular case. The need to obtain a licence, and as a condition of maintaining the licence to undertake a limited qualifying course, does not preclude a person from being reasonably fitted for a particular occupation. Regarding Mr Dargan’s circumstances, the court stated:

Mr Dargan was an experienced truck driver who it can be inferred, was familiar with the rules of the road and the demands involved in driving commercial vehicles. He was able to obtain an ancilliary certificate to drive a taxi without undertaking any test and was able to comfortably pass the test required as a condition of maintaining the certificate. The evidence does not suggest that Mr Dargan’s training and experience as a truck driver was insufficient to enable him to complete the course. Even assuming that he had to refresh his knowledge of the rules of the road and acquaint himself with the major roads around Hobart to complete the course, that would not in my opinion mean that he was not reasonably fit to drive a taxi by virtue of his education, training or experience”.

On the issue of whether a former full-time worker can ever be reasonably suited to alternative part-time work, the policy provided that a claimant was TPD where they were disabled from “regular” alternative work. The appeal court ruled that part-time work of 20 hours per week was “regular”, thus Mr Dargan was not disabled from regular work and therefore not TPD. The court stated:

The definition provides that a person is engaged in regular remunerative work if they are doing work in any employment, business or occupation. There is no limitation on the work being full-time or part-time. The limitations are that the work must be remunerative…and must be regular. The word regular means something occurring at fixed times or in uniform intervals…Thus, it would not in the present context include casual work or other work of an intermittent nature. However, the word regular would not on a literal construction exclude part-time work. In the present case Mr Dargan was able to work regularly…The construction, in my opinion, is consistent with the purpose of the policy. It is to provide benefits for Total and Permanent Disablement, not partial disablement.

The Court of Appeal court approved of its earlier decision in Manglicmot v Commonwealth Bank Officers Superannuation Corp Pty Ltd [2011] NSWCA 204, which ruled in substantially the same terms as Dargan.

The appeal was allowed and the order requiring the insurer to pay the benefit was set aside.

Implications

Subject to the applicable TPD definition contained in the Policy, this decision provides guidance about the type of ‘retraining’ that may be taken into account in deciding whether a claimant is TPD. Reasonable retraining, such as an intensive induction program or short course, which enhances a claimant’s pre-existing skills are no inconsistent with the proportion that the claimant is ‘reasonably fitted by education, training or experience’.