2012 Annual Review of Life Insurance Law Fiona Hanlon TurksLegal
Syddall v National Mutual Life Association of Australasia Limited [2011] QSA 389 Background • • •
Applied for cover in 1993 Applied for increase in cover in 1995 Representations vs Reality Year
Occupation
Income 2yr
Medical
1993
Computer programmer
$26,000 $24,000
Cleanskin
1995
Computer 48,000 programmer/ 36,000 ( + insurance $3,000) agent
Cleanskin
Reality
Plumber/unemployed
Hospital Admission
Less than $7,500 pa
Syddall Section 21 Insurance Contracts Act ( 1984) Cth 1. Subject to this act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured being a matter that: (a) The insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or (b) A reasonable person in the circumstances could be expected to know to be a matter so relevant.
Syddall Section 29 Insurance Contracts Act (1984) Cth (1) This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into: (a) failed to comply with the duty of disclosure; or (b) made a misrepresentation to the insurer before the contract was entered into; but does not apply where: (c) the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or (d) the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds.
Syddall Section 29 Insurance Contracts Act (1984) Cth (2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract. (3) If the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made, the insurer may, within 3 years after the contract was entered into, avoid the contract. (4) If the insurer has not avoided the contract, whether under subsection (2) or (3) or otherwise, the insurer may, by notice in writing given to the insured before the expiration of 3 years after the contract was entered into, vary the contract by substituting for the sum insured (including any bonuses) a sum that is not less than the sum ascertained in accordance with the formula.
Syddall Findings •
Fraudulent non disclosure
•
S 31 should not be applied
•
Not TD
•
Fraudulent claim under s 56
•
No repudiation of the contract
Syddall
TIPS
•
Surveillance is still useful, be innovative in the surveillance sought
•
Ask for the letter of instructions for medical reports received and test the assumptions made .
•
S 21 and 36 Insurance Contracts Act should be considered
•
Ensure that you do not act contrary to the position taken on the continuation of the policy. Don’t inadvertently repudiate the policy.
Summers v National Mutual Life Association of Australasia Limited [2011] TASSC 69 Background •
Interim Cover was incepted - November 1993
•
6 days later Mr Summers injured his shoulder
•
IP Cover incepted - March 1994
•
The tavern in which Mr Summers worked burned down – January 1995
•
Mr Summers has shoulder surgery - June 1995
Summers v National Mutual Life Association of Australasia Limited [2011] TASSC 69 Background •
Benefits paid June 1995 - June 1997
•
Mr Summers injures both knees – January 1997
•
Benefits paid January 1998 - 20 January 2000
•
Mr Summers injured his back- September 2002
•
Cover cancelled April 2003
Summers Termination clause: a) This Policy will terminate on the earlier of : i. …… ii.
When you die, retire or cease to be engaged in any gainful employment otherwise than while in receipt of a benefit under this Policy…..
.
Summers Total Disability Definition •
First 2 years: “own occupation”
•
Thereafter: •
Any “gainful” occupation
•
Under the regular care of a medical practitioner
•
Not engaged in any occupation
Summers Findings •
The policy was repudiated by the insurer in cancelling the policy and the repudiation accepted by Mr Summers.
•
Damages were limited as Mr Summers was found to have returned to a gainful occupation.
•
Interest under s 57(2) of the Insurance Contracts Act payable 3 months after Mr Summers lodged a progress claim form following the FICS decision.
Summers
TIPS
•
Consider potential damages claims when cancelling or avoiding policies of insurance.
•
When seeking damages it is for the party claiming damages to prove the loss
•
Three months to assess a claim is increasingly the court standard when awarding interest.
Galaxy Homes Pty Ltd v National Mutual Life Association of Australasia Limited [2012] SASC 141 Background • February 2011:
Galaxy Homes entered policy with NMLA including terminal illness cover for Mr Eden.
• November 2011: Galaxy cancelled policy pursuant to a contractual right to “end the plan”. • December 2011
Dr Walsh (surgeon) discovered tumours in Mr Eden.
• January 2012:
Dr Walsh diagnosed Mr Eden with Stage IV metastatic melanoma.
Galaxy Homes Pty Ltd v National Mutual Life Association of Australasia Limited [2012] SASC 141 Background • April 2012: Dr Walsh provided certification that Mr Eden would die in 6 months, and that the tumours discovered in December 2011 would have been present for at least 6 months. • April 2012: Galaxy made a claim for a Terminal Illness Benefit attaching the above medical report. • May 2012: NMLA declined to consider the claim as Dr Walsh could only certify the disease as terminal after making the diagnosis of stage IV Melanoma, both of which occurred after the policy ended.
Galaxy Homes Pty Ltd Relevant Policy Terms Insuring clause: If the person insured has a terminal illness, you may ask us to pay the life benefit immediately. Terminal illness: any illness which, in our opinion, will result in the death of the person insured within 12 months, regardless of any treatment that might be undertaken.... Heading F: You must notify us that you wish to make a claim as soon as possible after the person suffers, or is diagnosed with, a “claimable event� (which includes a terminal illness)
Galaxy Homes Pty Ltd Relevant Policy Terms (cont.) Clause H.1: When the plan ends, you can no longer make a claim under the plan and we do not have to pay you any benefits Clause H.2: The plan automatically ends as soon as ... the person insured dies (among other alternatives)
Galaxy Homes Pty Ltd Findings •
A reasonable businesslike construction of the policy was preferred.
•
Coverage was not limited to situations in which diagnosis of a terminal illness occurred during the period the policy was on foot.
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The court should determine whether benefits were payable under the Policy notwithstanding that the parties had only referred preliminary questions of construction of the policy.
Galaxy Homes Pty Ltd
TIPS
•
Definitions are crucial, a requirement for diagnosis within the policy term may have given a different result.
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The interpretation of ambiguous clauses should give a reasonable result in the context of the policy as a whole.
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The agreement of the parties to refer limited issues to the court will not prevent the court determining the whole matter.
Goodin v Colonial Mutual Superannuation Pty Ltd [2011] QDC 38 Background •
Mr Goodin was a truck driver.
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May 2004 he suffered an injury to his lower back.
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April 2005 he was dismissed from his employment.
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April 2005 a TPD claim was made under the Deed and Policy.
Goodin v Colonial Mutual Superannuation Pty Ltd [2011] QDC 38 Background •
March 2006 procedural fairness.
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May 2006 claim declined.
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December 2007 request for a review.
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February 2009 claim declined on review.
Goodin Findings • • •
•
Failure to consider whether a security license could be obtained caused the determination on review to miscarry. Once it was determined that the insurer failed to act reasonably the court can substitute its own opinion. In forming its own opinion the court is not limited to the material before the insurer and therefore disregarded almost the entirety of Dr ScottYoung’s evidence due to bias. The decision maker must be satisfied of two things but there is nothing to say that both have to be satisfied at the same time. The assessment does not need to be made six months post cessation of work
Goodin
TIPS
• A doctor’s obvious or expressed bias reduces the weight to be given to his or her report. • Motivation is not a factor to be considered in determining capacity to engage in an occupation. • Deteriorations in the condition post cessation of work may be relevant depending upon the definition.
Highway Hauliers Pty Ltd v Matthew Maxwell [2012] WASC 53 Background • April 2004, the insurers provided a quotation to Highway Hauliers (HH) which referred to a requirement that drivers complied with PAQS testing but did not specify a minimum score. The quotation did refer to another policy which did state a minimum score and was available on the website. • May 2004, the insurers issued a policy which, in substance, insured HH for loss or damage to its vehicles/trailers and third party liability arising out of those vehicles but made no reference to PAQS testing.
Highway Hauliers Pty Ltd v Matthew Maxwell [2012] WASC 53 Background • July 2004, the insurers wrote to HH enclosing an amended schedule which required drivers of particular types of vehicles used for east-west runs to have achieved a minimum PAQS score. The policy also required HH to submit driver declarations and excluded liability for non-declared drivers. • Two vehicles were later damaged. The insurers refused to pay the claims because, at the time of the accidents, the vehicles were operated by drivers who were non-declared and had not obtained the minimum PAQS scores
Highway Hauliers Pty Ltd Wording of the Exclusion. S.3: We will not pay if …. Non-declared drivers If we have not received, and approved in writing, a Driver Declaration for the driver in control of your vehicle at the time of an occurrence. No indemnity is provided under the policy ….. unless the driver: (a) Is at least 28 years of age…. (b) Has a PAQS driver profile score of at least 36….
Highway Hauliers Pty Ltd S 54 Insurance Contracts Act (1984) Cth. (1) Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by r reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act. (2) Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.
Highway Hauliers Pty Ltd S 54 Insurance Contracts Act (1984) Cth. (cont.)
(3) Where the insured proves that no part of the loss that gave rise to the claim was caused by the act, the insurer may not refuse to pay the claim by reason only of the act. (4) Where the insured proves that some part of the loss that gave rise to the claim was not caused by the act, the insurer may not refuse to pay the claim, so far as it concerns that part of the loss, by reason only of the act.
Highway Hauliers Pty Ltd S 54 Insurance Contracts Act (1984) Cth. (cont.) (5) Where: (a) the act was necessary to protect the safety of a person or to preserve property; or (b) it was not reasonably possible for the insured or other person not to do the act; the insurer may not refuse to pay the claim by reason only of the act. (6) A reference in this section to an act includes a reference to: (a) an omission; and (b) an act or omission that has the effect of altering the state or condition of the subject-matter of the contract or of allowing the state or condition of that subject-matter to alter.
Highway Hauliers Pty Ltd Findings •
S.54 does not operate to modify the “scope of cover” but here the drivers were not insured, the vehicles were.
•
If S.54 applies the parties to a contract of insurance will necessarily have different rights and duties from those for which their contract of insurance provided.
Highway Hauliers Pty Ltd
TIPS
•
Damages for breach of the insurers obligation to indemnify were payable and to be assessed according to ordinary contractual principles.
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S.54 has been found to apply to exclusion clauses.
•
Damages can be payable for breach of the obligation to indemnify.
Sharp v Maritime Super Pty Ltd [2012] NSWSC 1350
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