By Nica Manosca, Associate and Megan Venus, Special Counsel

This is an appeal against orders made by the primary judge, Kunc J, on 25 September 2024 dismissing a claim by the appellant, Murphy, McCarthy & Associates Pty Ltd t/as MMA Civil Contractors (Subject to Deed of Company Arrangement) (MMA), under an insurance policy issued to MMA by OnePath Life Ltd on 16 July 2013 and renewed annually by MMA. Among other things, the policy provided life and total and permanent disability (TPD) cover. The life insured under the policy was Mr Francis Heron, who through a company he incorporated, FREMS Contractors Pty Limited, provided his services to MMA as a construction manager and project supervisor on an exclusive basis from about 2002 to November 2021. MMA claimed that Mr Heron suffered a “total and permanent disability” within the meaning of the policy following a left hip replacement he had on 19 November 2021. On 1 August 2022, the life policy was novated to the respondent, Zurich Australia Limited, following its acquisition of the insurance business carried on by OnePath.

Clause 3.2.1 of the policy relevantly provided that “If the life insured suffers total and permanent disability while their TPD Cover is in force and satisfies the conditions of the TPD definition which applies (as shown on the Policy Schedule and defined in section 3.2.1.2), we will pay the full TPD Cover amount insured by the benefit payment type which applies.” At the time MMA made its claim, the “TPD Cover amount” was $2,954,908. The TPD definition selected in the Schedule was “Own Occupation”. “Own Occupation TPD” was defined in clause 3.2.1.2 as:

‘Own Occupation’ relates to the most recent occupation in which the life insured was engaged prior to the date of disability.

Own Occupation TPD means that, as a result of illness or injury, the life insured: (1) a) has been absent from and unable to engage in their ‘Own Occupation’ for three consecutive months; and b) is disabled at the end of the period of three consecutive months to such an extent that they are unlikely ever again to be able to engage in their ‘Own Occupation’;

In mid-2021, Mr Heron, who was then aged 64, saw his general practitioner, Dr Peter Hay, complaining of hip pain. He was referred to Dr Michael O’Sullivan, an orthopaedic surgeon, who diagnosed Mr Heron as suffering from “arthritic change affecting the left hip”. Mr Heron ceased work on or about 12 November 2021. He underwent a total left hip replacement on 19 November 2021. The primary judge found that “the surgery was very successful”, that Mr Heron “has made an excellent recovery” and that he “cuts a vigorous figure as he moves about [his current work site] performing his duties” (a conclusion the primary judge was able to draw from several videos shown to him). Mr Heron subsequently returned to work, but not for MMA. Mr Heron worked as a project supervisor at Jonishan Pty Ltd. Zurich obtained video footage demonstrating that Mr Heron was still able to undertake many of the activities that he undertook while working for MMA.

On 26 May 2022, MMA’s solicitors lodged on behalf of MMA an Initial Claim Form for a TPD claim in respect of Mr Heron together with supporting documents, including a “position description” which purported to set out Mr Heron’s principal activities while working for MMA.

The critical question before the primary judge was whether Mr Heron was, as a consequence of his hip replacement, unlikely ever again to be able to engage in the occupation in which he was engaged immediately before his operation. His Honour concluded that Mr Heron’s own occupation was “Construction Manager/Project Supervisor” and that he was not disabled to such an extent that he was unlikely ever again to be able to engage in the activities performed as part of that occupation.

On appeal, MMA contended that the primary judge erred in the following respects:

• By taking the wrong approach to the definition of the word “occupation” as used in the policy and in doing so placing too much emphasis on Mr Heron’s resume and inadequate weight on evidence of what Mr Heron did for MMA.

As to this issue, the Court held that the word “occupation” as used in the definition of “own occupation” should be interpreted consistently with the purpose of providing protection to MMA if Mr Heron’s services were, because of an injury, no longer available to it. In that context, the word “occupation” requires consideration of the actual activities carried out by the life insured in his or her most recent job, not whether he or she could carry out the same occupation according to some abstract taxonomy for the classification of different types of occupation: [29]-[30].

Although the primary judge adopted a taxonomic approach to the identification of Mr Heron’s occupation by drawing a distinction between his “own occupation” and “job”, it is apparent that when addressing the critical question whether Mr Heron was unlikely ever again to be able to engage in his own occupation, his Honour did focus on the activities Mr Heron could do following his hip replacement and compared that to what Mr Heron did when he worked for MMA. Consequently, although the approach taken by the primary judge to the definition of “own occupation” may have been erroneous, his Honour made no error in applying the definition to the facts of this case: [32]-[38].

• By giving inadequate weight to the “position description” document and to the description of Mr Heron’s duties contained in the application form for the insurance.

As to this issue, the Court held that the primary judge was correct to point out that the position description was not Mr Heron’s document, that Mr Heron appeared to have no idea about the document when he was cross-examined about it, that it was obviously incomplete and that it was difficult to reconcile with other evidence concerning Mr Heron’s role at MMA, which was primarily a supervisory one. His Honour was entitled in those circumstances to conclude that little weight could be given to the document in determining what Mr Heron’s role at MMA was: [41].

The primary judge considered the application form and correctly thought that the evidence supported the conclusion that Mr Heron’s responsibilities while working for MMA involved a minimal amount of manual labour: [44].

• By wrongly concluding that Mr Heron’s evidence of the nature and extent of the physical work he did for MMA was exaggerated.

As to this issue, the Court held that the primary judge had the advantage of seeing Mr Heron in the witness box and considering all the material. It was on that basis that he formed the opinion he did concerning Mr Heron’s credibility. There was ample evidence to justify that finding. The primary judge was entitled to find that Mr Heron’s evidence on the degree to which he engaged in physical activities while working for MMA was “exaggerated” even though that suggestion was not put directly to Mr Heron in cross-examination: [55], [57]-[61].

• By giving inadequate weight to the evidence from the medical experts.

As to this issue, the Court held that the primary judge was conscious of the medical evidence and accepted it when he described the things that Mr Heron could not do. However, on the findings of the primary judge those activities were not an essential part of the work Mr Heron did for MMA. Accordingly, no error has been made out: [64].

The appeal was therefore dismissed with costs, and MMA’s claim for TPD was not upheld.