Appeal dismissed in fund member's favour

The NSW Appeal Court has dismissed an insurer's appeal against a judgement in a superannuation fund member's favour claiming a total and permanent disablement (TPD) benefit under two group life policies.

In MetLife Insurance Ltd v Hellessey, the Appeal Court said an insurer's decision may be set aside if it is shown to be unreasonable on material before it. An insurer's decision may also be set aside if the process of consideration underlying the decision was not conducted reasonably and fairly, even if the outcome itself was not also shown to have been unreasonable on the material before the insurer.

Background

The super scheme's trustee took out two group life policies with MetLife.

Super fund member and former police officer Bernadette Hellessey claimed a TPD benefit under each policy. According to her treating psychiatrist, Dr Durrell, she was suffering from post-traumatic stress disorder and major depressive disorder.

MetLife rejected the claim three times. Between the first and second rejections, Ms Hellessey started proceedings against the trustee and MetLife in the NSW Supreme Court. The third rejection letter was dated 30 November 2016, just before the trial started on 5 December 2016. The parties agreed the only operative question was whether the third rejection was valid.

The primary judge's decision

Justice Robb found the insurer's third rejection of the claim was invalid and Ms Hellessey satisfied the policies' TPD definition.

In support of her claim, Ms Hellessey had insisted MetLife consider the contents of six lay witness affidavits filed for her in the proceedings. They were from Ms Hellessey; her husband; her mother; a neighbour; a friend who, like Ms Hellessey, was involved with horses; and a person from whom Ms Hellessey had bought horses.

In its third rejection letter, MetLife had said it: "… has carefully considered the affidavits and makes the following comments. While we do not intend providing an exhaustive analysis of every affidavit, we note the member's affidavit falls short of adequately addressing or does not address at all, issues raised in [the insurer's] letters of 11 May 2016 and 31 October 2016. For example the member has not addressed in any way her involvement with ‘Fairymead'."

Ms Hellessey said Fairymead was a prefix to register horses and a horse show team name; she denied it was a business.

Justice Robb said: "While it is true [the witnesses' affidavits] did not deal chapter and verse with every single item of evidence referred to in [the insurer's] four procedural fairness letters, they did clearly present a comprehensive case and a reasonable explanation in support of [the member's] claim.

"If the evidence of the [member's witnesses] is accepted in substance, that would be a basis for concluding she was TPD at the date for assessment, when read with the expert medical evidence in her case. There could be no basis at all for [the insurer] to summarily reject entirely the evidence in the member's witnesses' affidavits without any response or explanation. It is true [the member] did not deal in her affidavit with her involvement with Fairymead."

Witness Lorraine Cleary said: "In January 2012, we had a foal born who we jointly owned and called Fairymead Princess Mary. I had it registered with the Australian Pony Stud Book in joint names. We used my Australian pony stallion (Cranellie Da Vinci) and my Australian pony mare at the time (Vichand Chantilly Lady) to breed the horse.

"We had decided to call our stud prefix Fairymead, because my husband, Keith, is from Fairymead in Queensland. Fairymead is and never was a business venture of any sort, it was merely a stud name we could use to register any foals we had. If we went to shows or sponsored classes at shows, we would often put it under the name Fairymead Show Team."

Justice Robb said: "Ms Cleary was an older lady who was a long-time friend of [the member], and somewhat of a mother figure to her, and who had engaged in horse-related activities with [the member], and provided her with considerable assistance and protection, particularly [about the member's] attendance at various shows and horse-related activities while she was suffering from her psychological injuries.

"[The insurer] seems to have been proceeding on the basis [the member] was engaged with Ms Cleary in a substantial horse-related business that traded under the name Fairymead, so when it did not receive a comprehensive explanation as to why that was not so, it thought it reasonable to disregard all other evidence served to support [the member's] claim."

In support of her claim, Ms Hellessey had also provided reports by her treating psychiatrist Dr Durrell, consultant psychiatrist Dr Westmore and consultant neuropsychologist Dr Rawling. In its third rejection letter, the insurer said it acknowledged the doctors had reached a different view and had not disregarded their opinions.

But MetLife said it had "identified its concerns about the weight to be given to those opinions. This is because [the insurer] considers the practitioners have not been provided with full or accurate accounts of the extent of the member's activities".

The Appeal Court said the reference to "the extent of the member's activities" was to matters dealt with by Justice Robb under the headings:

• Horse-related shows and events
• Facebook posts
• Fairymead
• Palomino Association and the Goulburn Pony Club
• Shopping activities.

The insurer rejected or gave little weight to the medical opinions of Dr Durrell, Dr Westmore and Dr Rawling because they had "not been provided with full or accurate accounts of the extent of [these] activities".

Justice Robb said: "This conclusion underscores the significance of [the insurer] having dismissed the evidence of [the member's] lay witnesses. Not only did that dismissal colour [the insurer's] judgement in relation to the facts concerning [the member's] psychological injury and its symptoms, but it was also a major factor in the reasons given by [the insurer] for discounting the evidence of medical experts who supported [the member's] claim."

The NSW Appeal Court decision

The NSW Appeal Court dismissed MetLife's appeal.

The insurer's main ground of appeal was that Justice Robb had applied an "incorrect legal test" to determine whether the insurer's third decision was valid.

In Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233, Justice Gleeson said "The task for the court is not to assess what it thinks is reasonable and thereby conclude that any other view displays error. It may also be accepted there can be a range of opinions available to an insurer acting reasonably and fairly on the material before it. …

"[T]he criterion of reasonableness of an insurer's decision is whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim."

In Hellessey, the insurer submitted Justice Robb had formulated and applied two tests, each of which departed from that passage in Jones.

The Appeal Court rejected that submission. Justice Meagher, with whom Justice McColl agreed, said: ".. the obligation to act reasonably and fairly applies to the process of consideration …, as well as the decision" and the insurer "takes issue with the implicit requirement a determination be ‘sufficiently reasonable in relation to the logic and judgments applied to the consideration'. [S]uch a requirement is not erroneous in substance."

Justice Meagher said an insurer's decision may be set aside either if the decision was shown to be unreasonable on the material before the insurer, or if the process of consideration underlying the decision was not conducted reasonably and fairly.

Justice White said: "An opinion that would not be open to an insurer acting reasonably and fairly will not be binding on the claimant. It is not a corollary of that principle that the insurer's opinion will be binding on the claimant if it is one that would be open to an insurer acting reasonably and fairly, if the insurer in question did not act reasonably and fairly in reaching its opinion. It is only if the insurer has acted fairly and reasonably in assessing and determining the claim that the insurer's decision that it is not satisfied the claimant has met the requirements of the TPD definition may be determinative.

"It would be to distort the contractual language (‘to our satisfaction') to postulate the satisfaction of a hypothetical reasonable insurer faced with the same materials which the actual insurer had. There is a distinction between the formation of a reasonable opinion and acting reasonably in the formation of an opinion."

In other words, it is not enough for an insurer's decision to be one open to an insurer acting reasonably and fairly. The decision can still be set aside if it is shown the particular insurer did not act reasonably and fairly in reaching the decision.

Ms Hellessey's claim for a TPD benefit under each policy was allowed with interest and costs.

(MetLife Insurance Ltd v Hellessey, [2018] NSWCA 307)