TPD Insurer – No Duty to Reconsider a Claim Decision

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By David Slatyer, Partner

Justice Black, in the Supreme Court of New South Wales, decided that a TPD insurer does not owe an obligation to reconsider a decided claim.

The case of Hart v MetLife Insurance Limited (2022) NSWSC 1157 was handed down on 31 August 2022.  There was a significant history to the matter, including an earlier determination of the Superannuation Complaints Tribunal (SCT) and an appeal of that determination to the Federal Court, before Derrington J. Further the Court had previously ordered that three questions be answered before all other questions in the proceedings and it is to those questions which Black J decided.

The first question was whether MetLife breached its duties in considering and declining Ms Hart’s TPD claim, in its (only) decision of 9 August 2021.  The answer to that question according to Black J was ‘No’, and we will come back to that in a subsequent update. It is the second question and its answer which we focus on in this update.

The second question was whether MetLife breached any duty or obligation to Ms Hart in failing to reconsider Ms Hart’s claim.

As is not uncommon in these matters, subsequent to MetLife’s decision to decline the claim on 9 August 2021, Ms Hart via her solicitors wrote to MetLife on 15 November 2021 enclosing further evidence and asking MetLife to reconsider her claim.  The further material was new reports of Associate Professor Robertson (Psychiatrist) and Dr Lewington (a Spine and Rehabilitation Physician) as well as a detailed statement of Ms Hart.

Ultimately MetLife did not respond to that request and did not reconsider Ms Hart’s claim. In the proceedings, it was alleged by Ms Hart that this failure was a breach of MetLife’s duty, in particular its duty of utmost good faith.

Black J stated; “I am not persuaded that any duty in respect of reopening, applicable to superannuation trustees, should be extended to insurers generally or TPD insurers specifically”.

Several reasons were afforded, including that there is no express duty within the extensive statutory regime for the regulation of insurers and superannuation trustees and the Court should not introduce one where there is a public benefit in the finality of claims.  Also the recognition of such a duty would have significant implications where it is unbounded by any identified limitation as to the number of times matters should be reconsidered (with the Plaintiff’s Counsel suggesting that should be left to future cases to decide).  It was also noted that the Court could not assess whether the benefit of imposing such a duty outweighs the cost implications.

The Plaintiff’s Counsel had submitted that the insurer’s duty of good faith imposed an obligation on it to reconsider the claim, once it was presented with new evidence pertinent to the question of MetLife’s liability under the policies.  It was submitted that because the insurer requires a claimant to present evidence to substantiate a TPD claim, and where the insurer has the formation of its opinion on that evidence as a condition of its own liability, the duty of good faith hence obliges the insurer to consider new evidence presented to it by the insured.

The Plaintiff’s Counsel, whilst conceding that the question at hand “has not been the subject of extensive judicial consideration”, submitted that such an obligation appears to have been accepted in the cases of Heitman v Guardian Assurance Co Limited (1992) 7 ANZIC 61-107, and Nile v Club Plus Superannuation Pty Ltd (2005) NSWSC 55.

The Plaintiff’s Counsel also submitted that the approach should be the same for an insurer, as it is for a superannuation trustee, namely the duty arises when presented with fresh evidence indicative of a possibility of a different outcome (citing various cases involving the trustee’s duty to reconsider, most recently Board of Trustees v Gomez (2018) QCA 67).

MetLife’s Counsel, however, submitted that the insurance policies at hand did not expressly provide for an obligation to reconsider a decided claim, and highlighted possible difficulties with the suggested duty, for instance would the duty require the insurer to reconsider all claims indefinitely?; what are the limiting factors on a such a duty?; what commercial objective of the parties, intended to be secured by the policies, are served by “opening the floodgates” in this way?

Justice Black was not persuaded that such a duty should be applied to an insurer or at least a TPD insurer, by analogy to the position of a superannuation trustee, because of the differences in their roles, in particular the trustee being a fiduciary of the insured (and the insurer not).

MetLife had argued, in the alternative, that if the duty existed, the further evidence would not pass the threshold test. However, Justice Black was of the view that the further evidence submitted by Ms Hart could not have been dismissed by MetLife without further inquiry and said “I could not conclude that those documents did not meet the threshold set out in these cases for a reopening (that is the cases relating to trustees), by giving rise to a reasonable possibility of a different result, if (contrary to the view that I hold) this approach could or should be extended to an insurer as distinct from a trustee”.  (We know from the cases relating to trustees, that test is a ‘low bar’.)

Justice Black also dismissed the Plaintiff’s submission that such an obligation to reconsider a claim had been imposed on insurers in the Heitman and Nile cases (above).  This was contested by MetLife and Black J stated; “it seems to me that neither Heitman nor Nile provides any reasoned basis for such a duty, or identifies any previous English or Australian authority in respect of insurers that recognised such a duty”.

His Honour concluded “I do not consider that I should now recognise such a duty, as an aspect of the duty of utmost good faith, for the same reasons that I have held above that I should not extend any such duty, applicable to superannuation trustees, to insurers generally or to TPD insurers specifically”.

The third question for Justice Black was what relief if any should be granted, in light of the answers to the first two questions.  The proceedings were, accordingly, dismissed with costs.

We will come back to the first question, namely the validity of the (only) decision to decline the claim, by MetLife, in a subsequent publication.  That question involved a number of contested considerations, in the context of an earlier hearing in the SCT and the Federal Court.  One point of interest raised was a potential difficulty in dealing with coordinate causes of an insured’s TPD under the policy, the trust deed and the IFSA terms, where Blac J. stated; “it does not seem to me that the policy, the deed or the IFSA terms provide any clear solution to that difficulty. However it is not necessary to address it further…” (in this case).

In conclusion, there is judicial authority that, depending on the terms of the particular trust deed, a superannuation trustee may owe a duty to a member of the fund to reopen or reconsider an earlier decision, where it is presented with new material that indicates a “reasonable possibility of a different result” (which is a low threshold).  However such an obligation does not exist on the fund insurer, by virtue of the duty of utmost good faith. The introduction of such a duty, according to Black J., is a matter for the Parliament or the policy wording. It is unlikely that the policy itself would provide for such an obligation and also unlikely that one would be an implied policy term.  (That is so, it seems, despite the existence of new material giving rise to a “reasonable possibility of a different result”.)

Consider the situation where, like in this case, the claimant submits new evidence that meets the threshold test to impose the duty on the trustee, thereby obliging the trustee to reconsider the claim, but not the fund insurer.  Is the trustee obliged to reconsider where in the same circumstances its insurer is not?  If so, could the claimant have a remedy against the trustee, which is prevented or does not exist against the insurer?  If so, how does that promote good public policy in this context?  There are certainly further questions arising, and it remains to be seen whether they will be tested in an appeal of this decision, in subsequent cases, or via Parliament.

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

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