Group life insurance policies which provide cover to insured members for total and permanent disablement (TPD) generally include a provision requiring the insured member to attend a medical examination with a ‘doctor’ or a ‘medically qualified practitioner’ as part of the claim process. Some policies may not include any such provision. It has become common for plaintiff law firms to refuse to allow their clients to attend medical examinations or other assessments unless there is a specific provision in the policy which requires the insured to attend.
It has also become common for proceedings to be commenced prior to an insurer’s assessment of the claim being completed and a decision to accept or decline the claim being made. In such circumstances an allegation of “constructive denial” is made by the insured.
In a recent decision of the Supreme Court of New South Wales, Shuetrim v FSS Trustee Corporation  NSWSC 464, it was held that the obligations of good faith and fair dealing are bilateral and it was reasonable for the insurers to require the insured to attend vocational assessments before continuing with their assessments of his claim. The Court also refused to find that the insurers had “constructively denied” the insured’s claims and provided some useful comment on what this term actually means and the issues that will be taken into consideration when determining the merits of such an allegation.
Briefly, the relevant facts of this case are that the insured, Mr Shuetrim, was a Police Officer who claimed to have suffered from an anxiety condition and lateral epicondylitis of his left elbow [or “tennis elbow”] caused by incidents during the course of his employment. He claimed that the conditions had left him totally and permanently disabled (or TPD). As a NSW Police Officer, Mr Shuetrim became a member of the First State Superannuation Scheme (the Fund). FSS Trustee Corporation (the Trustee) is the trustee of the Fund. The Trustee effected insurance policies with MetLife Insurance Ltd (MetLife) and TAL Life Limited (TAL) for the benefit of its members. Each of the policies provided cover for TPD. Mr Shuetrim commenced proceedings against the Trustee and the two insurers prior to the insurers making decisions in respect to his claim. TAL formally declined Mr Shuetrim’s claim on 17 December 2014 and MetLife formally declined the claim on 23 January 2015. The hearing of the proceedings before Stevenson J commenced on 9 March 2015.
What is “Constructive Denial”?
Mr Shuetrim sought various declarations, including that he was entitled to the TPD benefits and that TAL and MetLife had “constructively denied” his claims by having not made decisions on the claims prior to the commencement of the proceedings and up until the dates of their decisions (mentioned above).
Stevenson J noted that MetLife’s Counsel had described the expression “constructive denial” as a “colloquialism” and had submitted that the correct question was whether, in circumstances where an insurer had not made a decision to accept or deny an insured’s claim, that failure constitutes a breach of the insurer’s duty of good faith and fair dealing. His Honour noted that the plaintiff’s Counsel accepted that proposition, but submitted (inter alia) that “A breach of the insurer’s duties at any time up to the formation of the actual opinion renders the actual opinion void, regardless of whether there has been no breach in relation to the decision itself.”
In order to decide the issue, in Stevenson J’s opinion the first matter for consideration was whether the manner in which TAL and MetLife dealt with Mr Shuetrim’s claim up to the time they made a decision was itself a breach of their duty of good faith and fair dealing. Stevenson J went on to undertake a review of the history of the claims. That review included considering the correspondence between the insurers and Mr Shuetrim’s solicitors relating to their requests for Mr Shuetrim to undergo vocational assessments.
Requirement to attend vocational assessment
Stevenson J noted the attempts by MetLife to arrange a vocational assessment of Mr Shuetrim and was critical of his solicitors’ attempts to thwart such an assessment from occurring. Mr Shuetrim’s solicitors had argued that as the MetLife policy required an insured to submit to a medical examination conducted by a “legally qualified medical practitioner”, he was not required to attend the assessment with a vocational assessor. The reasoning was that a vocational assessor is not a qualified medical practitioner.
MetLife’s solicitors’ response was that a vocational assessment is a “standard part of prudent claims management” and a reasonable requirement in substantiating any claim. They also advised that if Mr Shuetrim failed to attend the appointment this would lead to the assessment of his claim being delayed and eventually closure of his claim.
Mr Shuetrim’s solicitors maintained that MetLife had no right under the policy to require Mr Shuetrim to attend a vocational assessment and that if it followed through with closing the claim proceedings would be commenced “alleging breach of duty to act with good faith and fair dealing and an order for indemnity costs since MetLife has no legal basis for maintaining its position”.
There was further correspondence between MetLife and Mr Shuetrim’s solicitors (which is quoted at length in the judgment) and both parties maintained their respective positions. MetLife advised that it would close the claim file until Mr Shuetrim attended the vocational assessment and Mr Shuetrim commenced proceedings (against MetLife on 25 September 2013 and on 9 December 2013, he joined TAL to the proceedings).
Stevenson J’s findings
In relation to the allegation of “constructive denial”, Stevenson J noted that in view of the conclusions to which he had come it was not necessary for him to decide this issue. However, he noted that during the period 15 February to the end of 2014, Mr Shuetrim’s solicitors were “regularly serving on the insurers (very often repetitively) medical reports and other material” and in those circumstances he was not persuaded that prior to the insurers making their decisions that there was a breach of their respective duties of good faith and fair dealing.
In Stevenson J’s opinion, Mr Shuetrim’s solicitors’ correspondence in response to MetLife’s request for a vocational assessment was “combative”. He noted that the “obligations of good faith and fair dealing are bilateral”. He went on to state:
In my opinion, in the context of a claim by Mr Shuetrim that he was TPD, it was quite reasonable for MetLife to require, as a condition of considering his claim, that he attend a vocational assessment.
More to the point, I do not consider that it was a breach by MetLife of its obligations of good faith and fair dealing to require Mr Shuetrim to submit to such an assessment.
Take away points
Ultimately, MetLife and TAL were not successful and Stevenson J found that Mr Shuetrim was entitled to the TPD benefits under their respective policies. However, the decision should be of interest to insurers as it considers tactics and practices that have become commonly adopted by plaintiff law firms. It also provides the first judicial consideration in respect of an allegation of “constructive denial”.
Although a policy may not specifically state that an insured is required to attend a vocational assessment, or possibly some type of other assessment or examination, if they refuse to attend, Stevenson J’s decision is supportive of the proposition that the insured may be in breach of their obligation of good faith and fair dealing to the insurer if the request is reasonable in order to allow the insurer to complete its assessment of the claim. In circumstances where the insured refuses to attend such an assessment or examination, relying on Stevenson J’s decision, it may be reasonable for the insurer to refuse to consider the claim further until the insured changes their position and agrees to attend such an assessment or examination.
In relation to “constructive denial”, if the insurer can show that there was no unreasonable delay in its assessment of the claim and that any proceedings were essentially commenced prematurely, based on the considered reasoning provided by Stevenson J, an insured is unlikely to succeed on an allegation of “constructive denial”.
Life insurers should therefore continue to refuse to be intimidated by the tactics which Stevenson J described as “combative” and continue to take the steps necessary in order to properly assess claims.
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