Life Insurance – Income protection: Quach v MLC Limited (No 6) [2021] FCA 271

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By David Slatyer, Partner and Megan Venus, Senior Associate

This is an interesting case about the application of the duty of utmost good faith in the context of a claim by a doctor for income protection benefits, where he did not submit any satisfactory evidence.

Background

The self-represented applicant, Quach, was a doctor (General Practitioner).  He obtained a policy of income protection insurance from MLC.  Under the policy, the loss of income had to be caused by “injury or sickness.” The policy also allowed MLC to seek more information from the applicant to help assess a claim and seek further proof of disability if a claim continued.

On 21 April 2015, the Civil and Administrative Tribunal of New South Wales (NCAT) determined that the applicant’s registration as a general practitioner be cancelled, as a result of his narcissistic personality disorder, and numerous failings in his medical knowledge, diagnosis, treatment and patient inter-relationships.

On 9 October 2015, the applicant lodged a claim with MLC for total disability, relying upon medical evidence before the NCAT hearing which found he a narcissistic personality disorder.  However, he did not provide MLC with any medical reports before NCAT and simply attached a report from his treating psychiatrist, Dr Skinner.

Dr Skinner responded to specific questions in the claim form as follows:  

Are the patient’s current symptoms impacting their ability to perform any of their usual work duties? 

A:       No, in my opinion.

Do you expect the patient to return to work in the future? 

A:         Yes.

Between 2015 to 2019 since lodgement of the claim form to MLC, the applicant maintained that due to the decision of NCAT his claim for total disability should accepted. He refused to provide any supporting medical reports and asserted that MLC was not entitled to access the NCAT documents, claiming MLC was on a ‘fishing expedition’.

On 19 March 2019, he filed an Application and Statement of Claim in which he alleged that pursuant to s13 of the Insurance Contracts Act, MLC breached its duty of utmost good faith to pay his claim under the policy and was interfering with the administration of justice by withholding the financial benefits. The statement of claim outlined that an initial determination of the applicant’s illness was made by the Medical Board in 2008, which limited his ability to work and the illness resulted in his inability to work since 2015.

In an attempt to resolve the matter before the Federal Court hearing, and despite its acknowledgment of the lack of evidence to establish the claim, MLC agreed to waive its requirements and accepted the applicant’s claim for total disability from cessation of work in 2014 to 28 February 2021 and agreed to pay his costs.

Unfortunately for the applicant, he pursued the matter. Rares J specifically noted that the applicant had an unfortunate, self-defeating behaviour and was not a man to come to any sensible agreement.

The Decision

At the time of the hearing, the applicant had failed to provide MLC or the court with medical evidence that a narcissistic personality disorder was capable of being an “illness” in terms of the policy, and the court was obliged to respond to the applicant’s allegations.

Application of the Evidence Act

The applicant had asserted that MLC was bound to accept NCAT’s finding that he suffered from a narcissistic personality disorder as conclusive of his entitlement to indemnity under the policy.

The court held that any findings by NCAT in its reasons cannot be evidence in the Federal Court proceeding, of the existence of a fact in issue before it, and relied upon s91 of the Evidence Act.

91       Exclusion of evidence of judgments and convictions

(1)  Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.

Breach of the Duty of Utmost Good Faith

The applicant alleged MLC breached its duty of utmost good faith, however, the court was not satisfied that MLC had done anything contrary to its obligations under s13 of the Insurance Contracts Act.

Rares J suggested that the applicant’s behaviour towards MLC was the antithesis of his own obligation under s13 to act in the utmost good faith, by failing to provide information to MLC at any relevant time or to comply with orders of the Court relating to the provision of discovery.

The court was scathing of the applicant’s behaviour noting he had made a deliberate, not accidental, decision not to lead any medical evidence.

Rares J said: Throughout the proceeding, (the applicant) has refused to lead any such evidence… He has denied that he has any medical condition.  Rather, he makes the assertion that NCAT found that he had one, based on its findings about (the medical) evidence…His own treating doctor denied that he had a condition that enlivened MLC’s liability to pay under the policy.

The court was not satisfied that MLC was in breach of its obligations under the policy to pay the applicant’s claim. Nonetheless, Rares J suggested the applicant’s behaviour in the course of the proceedings would suggest he may have some form of illness that affected his ability to practice medicine, which could explain MLC’s humane decision to pay the claim even though the applicant had refused to comply with the policy conditions.

The court dismissed the application as MLC was not in breach of the policy and awarded costs against the applicant.

Implications

This claim presents its own unique set of facts, and we assume very few customers would take the approach of Mr Quach in response to a request to produce medical evidence.

However, it is a reminder of the duty of utmost good faith and that it works both ways. Insurers are reminded when seeking information to assess a claim to ensure that it is relevant and necessary, and to clearly describe the medical evidence required to assess the claim and why, particularly dealing with a self-represented customer, which MLC did here.

For further information, please do not hesitate to contact us.

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