TPD – NSW Court of Appeal grapples with The Insured’s Onus of Proof v The Insurer’s Duty of Fairness; MetLife Insurance Limited v Sandstrom (2021) NSWCA123

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By David Slatyer, Partner and Megan Venus, Senior Associate

Illustrating the complexity of the task, the New South Wales Court of Appeal was split 2-1 on the question of MetLife’s assessment and decision as to whether the insured Ms Sandstrom had proven to MetLife’s satisfaction that she came within the definition of total and permanent disablement (TPD).

Basten JA and Meagher JA dismissed MetLife’s appeal from the trial judge’s decision that MetLife had acted unfairly when deciding it was not satisfied that Ms Sandstrom was unlikely ever to engage in any relevant gainful work over a possible 37 future years.

The dissenting judge, Macfarlan JA, thought that, read as a whole, the insurer’s reasons showed that it did engage with the evidence reasonably and fairly and it was open on the body of evidence for MetLife to not be satisfied that Ms Sandstrom met the definition of TPD.

Of interest, in the leading judgment of the majority, Basten JA specifically drew attention to Commissioner Hayne’s report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, that the operation of such policies had  broad social implications, before proceeding with their reasons for judgment.


Ms Sandstrom was medically discharged from the New South Wales Police Force due to psychological symptoms (PTSD, depression and anxiety) suffered as a result of traumatic experiences during her service, on 7 July 2011 at the age of 28.  She had previously partially completed a Bachelor of Arts degree before training to become a police officer and had no other relevant training or work experience.  One month later she made a claim for TPD benefits from her superannuation fund, which benefits were insured under two policies by MetLife.  It was not until some four years later that the insurer reached a decision to decline the claim in July 2015.  Thereafter, Miss Sandstrom issued proceedings in the Supreme Court of New South Wales, alleging nine grounds on which the insurer breached its duty to act fairly and objectively when determining her claim.  In 2020, the trial judge found for Ms Sandstrom on three of the nine grounds.  Subsequently, MetLife appealed and on 9 June 2021 the New South Wales Court of Appeal dismissed the insurer’s contentions by a narrow majority of 2-1.

The relevant definition of TPD in the policies was fairly orthodox in that it required a six month absence from work due to injury or illness, and the insured providing proof to MetLife’s satisfaction that they had become incapacitated to such an extent as to render them unlikely ever to be engaged in any gainful work for which they were reasonably qualified by reason of education, training or experience (ETE). There was no dispute that the insured would be unable to ever return to policing work or any work within the police environment.

The Three Grounds

Ground 1

The first ground was whether the insurer unfairly relied on the report of psychiatrist, Dr George, who was engaged by the police force to provide an assessment. Dr George said “I believe that, at some time in the future, she may be able to return to some form of work with a different employer” (my emphasis).

MetLife then asked Dr Grace (psychiatrist) and Dr Wong (treating GP) whether they agreed with Dr George’s opinion noted above, by way of a questionnaire seeking yes or no responses. They both agreed with Dr George’s opinion and went on to provide further responses.

MetLife relied on Dr George’s opinion, including the quote above, as supporting its non-satisfaction that the insured met the definition.

The trial judge found the use of the word “may” was equivocal – it could be consistent with only a remote and speculative possibility of returning to work (i.e. supportive of TPD), with the real chance of such employment (i.e. not TPD), or with an unwillingness on the doctor to express any position on that question.  Hence, it was unfair for MetLife to rely on the answer as adverse to Ms Sandstrom.

The majority in the Court of Appeal agreed.  They added that the question put to Dr George also omitted any reference to Ms Sandstrom’s ETE as a qualification of the kind of gainful employment which was to be considered, thus suggesting it was unfair for MetLife to rely upon Dr George’s response. In particular, Meagher JA said “in the face of the ambiguities in that statement and the fact that it was not responding to the question which MetLife was required to address, MetLife acted unreasonably in relying on it, in the absence of further inquiry or clarification, as one of the contemporaneous medical opinion”.

However, in this context Macfarlan JA considered MetLife’s reliance on other medical evidence including that of Dr Grace and Dr Wong (they both agreed with the “may” statement of Dr George).  Dr Wong further said “I cannot say she will not be able to return to work in any role in the future” and when provided with two vocational assessments identifying several vocational options as potentially suitable given Ms Sandstrom’s ETE, Dr Wong believed she would be fit to work as a Case Manager (Benevolent Society).  Dr Grace, who was a treating psychiatrist, had stated “I believe that Miss Sandstrom will be able to return to work but not in a job which reminds her of police work” and further said that it was unlikely that she can never be gainfully employed in the capacity for which she is reasonably qualified.  Dr Grace thought that the insured could work with animals such as dogs or in a non-confrontational environment where she receives guidance but is not answerable to others, and that either self-employment or voluntary work with children or elderly people would most likely achieve it.

Macfarlan JA noted that the policy puts  the onus of satisfying the insurer on the insured.  He set out some trite principles; the test to be applied is whether the opinion formed by the insurer was open to an insurer acting reasonably and fairly; that MetLife’s process and its decision were to be undertaken fairly and reasonably; and that another expert opinion expressed subsequent to the date on which the insurer was required to assess the claim may be taken into account provided they are pertinent to the claimant’s condition as at the relevant assessment date.

Macfarlan JA stated in defence of the insurer’s position that “none of the opinions referred to needed on its own to establish the basis for the (insurer’s) non formation of that opinion.  Rather, reading the letter logically and reasonably, the descriptions of the opinions were given to provide some, but not necessarily conclusive, support for the conclusion.”  He said that Dr George’s “may” statement with respect to returning to work with a different employer, “was supportive of the insurer’s non-satisfaction”, “particularly so when Dr George expressed his opinion in response to a question that specifically asked him about the policy issue of permanent incapacity” and “because Dr George was apparently not satisfied of the relevant matter, the insurer, if attention is at this stage confined only to Dr George’s opinion, was similarly entitled not to be so satisfied”.

Macfarlan JA stated that “Dr George’s opinion was relevant to the question that the insurer was considering” and he believed that upon consideration of all of the insurer’s reasons including all of the other evidence it referred to and relied on, the insurer fairly and reasonably addressed the criteria in the definition of TPD.  He thus didn’t think the insurer in all circumstances had to ask the precise question(s) in the policy of the doctor but could use the doctor’s opinion to direct its mind to the correct question(s).

Ground 2

Ground 2 was that MetLife unfairly relied on the evidence of Dr Wong (GP) as being inconsistent with the “unlikely ever” component of the TPD definition.  This is essentially the same as Ground 1, but in respect of Dr Wong’s evidence.  This ground in fact related to questionnaires answered by Dr Wong and Dr Grace at the request of MetLife.

The majority, because they believed that it was unfair on MetLife to rely on the “may” statement by Dr George, found that it was also unfair to rely on the evidence of Dr Grace and Dr Wong, who were asked whether they agreed with Dr George’s opinion (and both said yes).

The majority criticised MetLife for asking a question about alternate work qualified by the “foreseeable future” rather than the correct question of “unlikely ever”, and for relying on Dr Wong’s and Dr Grace’s evidence when they conflicted in some respects on the question of future work capacity. The trial judge had said that further when Dr Grace was asked to provide an opinion in terms of the policy he stated “because of Rebecca Sandstrom’s PTSD it is unlikely that Rebecca can ever be gainfully employed in the capacity for which she is reasonably qualified because of her education, training or experience”.  Basten JA said that MetLife did not have to accept  this view, but it was unfair to not refer to it when referring to Dr Grace’s other responses to the questionnaire which MetLife relied on.  Meagher JA said “its doing so without addressing or mentioning his contrary opinion …, which was directed to the question which MetLife was required to consider, did not have due regard to the interests of the insured and her contractual right to have that question considered fairly and reasonably”.

Macfarlan JA in the minority, however, thought that Dr Wong’s acceptance of the “may” statement (about future work capacity) by Dr George, provided some support for the insurer’s lack of satisfaction that the insured was unlikely ever to be able to perform relevant work again, and it was therefore not inappropriate to refer to it in its decision letter.  He also said Dr Wong’s statement that “I cannot say she will not be able to return to work in any role in the future” was also supportive of the insurer’s non-satisfaction of the “unlikely ever” test and that “in circumstances where the insurer had to decide whether it was positively satisfied of the relevant disability it provided some clear guidance”.  He said that “read as a whole those further opinions confirm that Dr Wong, was throughout, of the view that the insured would not be able to return to any police or similar type of employment but was unable to say that she would not be able to take up some other kind of employment in the future”.  On that basis, Macfarlan JA thought that it was open to the insurer not to be positively satisfied that the insured was TPD.

Ground 3

The third ground was that MetLife failed to properly engage and adequately reason with written submissions made by the plaintiff’s solicitors before it declined the claim.  Those submissions were in response MetLife’s first procedural fairness letter.  The insured and her solicitors did not respond to MetLife’s subsequent procedural fairness letter, before it made its decision.

One of the submissions was that it was almost five years since the incident and Ms Sandstrom’s condition had failed to improve or respond to treatment in any meaningful way and that her condition remained largely as it was immediately after the incident of September 2010.

The submissions also relied on two reports by Dr Smith who believed that the insured was unable to engage in alternative work in future.  MetLife responded that the main purpose of Dr Smith’s reports was to support a claim for workers’ compensation, that Dr Smith first examined Ms Sandstrom two years after the date for MetLife’s assessment, and lastly Dr Smith was not provided with the two vocational assessment reports.

Basten JA thought that the vocational assessment reports were “of such a general nature in their suggestions that MetLife could not fairly discount Dr Smith’s opinions to any material extent based on that omission”.  Dr Smith provided a supplementary report which stated his opinion that Ms Sandstrom “satisfies the formal definition of total and permanent disability” in the policy.  Basten JA says that “MetLife took note of the existence of the report, it apparently gave the report no weight, but for reasons which did not engage with the substance of the report”.

Another complaint about MetLife’s treatment of Ms Sandstrom’s submissions related to two reports of Dr Wilkins, who said “it is highly probable that she will not return to any form of paid employment in the foreseeable future” and “at this time it is not possible to say if the member will be capable and fit to work in any capacity in the future… prognosis remains guarded”.  MetLife reasoned that Dr Wilkins’ views were “somewhat ambiguous”.  Basten JA thought that MetLife’s treatment was “quite unfair or demonstrated a failure to read the whole report”.

However, Macfarlan JA thought, in respect of Dr Wilkins, that if anything it was again supportive of the insurer’s lack of satisfaction as to TPD as it was confined to the present and foreseeable future only. He also did not agree that MetLife erred in its treatment of the opinions of Dr Smith, stating that the vocational assessments would be somewhat relevant to Dr Smith and that MetLife was entitled to note the same, and it was wrong to say MetLife dismissed Dr Smith’s report because they in fact considered it and expressed some not irrational views in their second procedural fairness letter.  Macfarlan JA thought that Dr Smith’s views were in any event far from decisive on the policy issue and the highest they rose was that the insured would have very limited capacity to obtain work in the open labour market.

Macfarlan JA thought that the MetLife’s approach was not irrational or unreasonable and he was of the view that MetLife had made out each of its three grounds of appeal.


The differing views of the Judges as to the effect of the insured’s onus of proof to satisfy an insurer of the policy criteria, and the insurer’s duty to act fairly and reasonably in the process of assessing the claim and in reaching a decision, are difficult to reconcile and show that in a given case there will be differences of opinion even at the highest judicial level.

The majority thought the evidence was equivocal, that the insurer had not asked the correct question or questions of the doctors and that in those circumstances the insurer ought to have made further inquiries (arguably an obligation reserved for the trustee who is in a fiduciary relationship with the insured). Whereas the minority thought the insurer was entitled by contract to require the insured to provide satisfactory proof and it had assessed mixed evidence in a not irrational or unfair way overall.

Of course there is always comfort in the notion that each case turns on its own facts, but with such exacting standards required by the majority and the difference of opinion expressed in the court, those both bringing and assessing these claims are entitled to be somewhat unclear on the obligations and standards required.

It is also hard to ignore the possibility that outcomes of the Royal Commission may influence thinking in some parts the judiciary in the foreseeable future.

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

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