Totally and Permanently Disabled and still at work?

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Totally and Permanently Disabled and still at work?

Lisa Norris and Michael Iacuzzi | May 2013 | Insurance & Financial Services

The Court of Appeal has recently delivered a major ruling regarding the interpretation of TPD definitions, including the issues of retraining and whether a claimant can satisfy the definition of TPD if they are working part-time.

This paper will review the Court of Appeal’s decision regarding the interpretation of TPD definitions.

Who does this impact?

Insurers and Superannuation Fund Trustees assessing disability insurance claims.

What action should be taken?

When considering claims based upon the ‘common form’ definition of TPD present in many life insurance policies, regard can be had to work the claimant is ‘reasonably fitted’ to perform by reason of their education, training or experience. Such work may include work the claimant could only perform having undertaken a training course or similar which develops or enables/permits them to utilise aspects of their existing education, training or experience.

Regard can also be had to the fact a claimant is able to perform regular part-time work, even if they were previously working, or able to work, full-time.

Background

On 5 July 2007 Mr Dargan injured his lower back while working as a removalist/truck driver for U Help Removals (U Help). At the time of suffering the injury, Mr Dargan was working 40 hours per week. Mr Dargan did not return to work with U Help after suffering the back injury.

Prior to working for U Help, Mr Dargan also worked as a truck driver, rigger, unskilled labourer and had managed a family-run motel consisting of 30 rooms (providing room service) along with a restaurant. Mr Dargan held a heavy vehicle drivers licence and a riggers ticket. Mr Dargan attended high school and completed year 11 but did not hold any trade qualifications.

In June 2008 Mr Dargan undertook a Road Transport Training Course to obtain a taxi licence (known as an ancillary certificate in Tasmania). The relevant legislation allowed a person to work as a taxi driver prior to obtaining an ancillary certificate, provided they successfully completed a Road Transport Training Course within a reasonable time.

Hannover Life Re of Australasia Ltd v Dargan [2013] NSWCA 57

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Totally and Permanently Disabled and Still at Work? Lisa Norris and Michael Iacuzzi | May 2013

The Road Transport Training Course was conducted over four days and included the following:

Days 1 and 2: Classroom attendance comprising of a general road law assessment of 25 multiple choice answers, a diagrammatic road rule test of 12 scenarios, taxi rules and regulations (27 questions), financial transactions test (16 questions) and a written examination interpreting road maps and navigating (30 minute test).

Day 3: Two questionnaires relating to transporting passengers with disabilities.

Day 4: An on-road practical assessment. This was to demonstrate the applicant’s ability to drive in and around Hobart in a taxi and use a map atlas to drive the shortest distance to a location.

Mr Dargan completed the course requirements and was provided with a certificate of competence for the theoretical part of the course at the conclusion of Day 3.

Shortly after completing the Road Transport Training Course and obtaining his ancillary certificate, Mr Dargan obtained work as a self-employed taxi driver in Tasmania working between 15-20 hours per week. There was evidence that Mr Dargan experienced pain and discomfort while working as a taxi driver.

In 2009, Mr Dargan lodged a claim for a Total and Permanent Disablement (TPD) Benefit with United Super Pty Ltd (the Trustee). The Trustee’s group life insurer was Hannover Life Re of Australasia Ltd (Hannover).

The Trustee and Hannover declined Mr Dargan’s claim for the TPD benefit on the basis that the:

“.. evidence submitted does not support Mr Dargan‘s claim for [TPD], which is evidenced by the member demonstrating the ability to perform regular remunerative work as a Taxi Driver for which he was reasonably fitted according to his previous work experience as a Truck Driver.”

Following a request for reconsideration, the Trustee and Hannover reached a decision that:

“Mr Dargan has demonstrated a capacity to perform Taxi Driving and we therefore consider he could also perform other driving occupations that don’t require the completion of a one week course i.e courier, delivery driver etc.”

Proceedings

Mr Dargan commenced proceedings against the Trustee and Hannover in the Supreme Court of New South Wales.

The matter was heard by Justice Gzell. His Honour noted that the relevant Group Life Policy (the Policy) contained the following definition of TPD:

“Total and Permanent Disablement in respect of an Insured Person who was gainfully employed within the six months prior to the Date of Disablement is where:

the Insured Person is unable to follow their usual occupation by reason of accident or illness for six consecutive months and in our opinion, after consideration of medical evidence satisfactory to us, is unlikely ever to be able to engage in any Regular Remuneration Work for which the Insured Person is reasonably fitted by education, training or experience.”

The words “Regular Remuneration Work” were defined in the Policy to mean:

“an Insured Person is engaged in regular remunerative work if they are doing work in any employment, business, or occupation. They must be doing it for reward - or the hope of reward - of any type”.

Mr Dargan argued that the interpretation of the words ‘reasonably fitted’ meant having prior employment or experience that allowed a person to perform the employment where no further qualifications or training was needed.

In response, TurksLegal on behalf of the Trustee and Hannover argued that the Road Transport Training Course was akin to induction into a new job and Mr Dargan’s experience as a truck driver meant that he was ‘reasonably fitted’ to work as a taxi driver.

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Mr Dargan did not allege that he satisfied the definition of TPD as he was only able to work as a taxi driver on a part-time basis, in circumstances where he had worked for U Help on a full time basis. This argument was raised but abandoned before Gzell J as the Court of Appeal had previously dealt with the issue of part-time work and TPD claims in Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2011] NSWCA 204. Click here to view our Client Update on this case.

It was found by Gzell J that Mr Dargan satisfied the definition of TPD in the Policy and ordered Hannover and the Trustee to pay the TPD benefit, interest and costs. In delivering his reasons, Gzell J found that:

“The words describe a capacity to undertake a new job based on education, training or experience. They constitute a link between the job and past education, training or experience. [para 44]

The only way in which [Mr Dargan] could take work as a self-employed taxi driver was to obtain an ancillary certificate and he could not hold an ancillary certificate unless he successfully completed the Road Transport Training Course. Until he did that he was not reasonably fitted for the work. He did not have education, training or experience that fitted him to be a taxi driver [para 47]

Mr Dargan could only become a part-time taxi driver by completing further education or training. His experience as a truck driver was not sufficient to enable him to take up that work.” [para 48].

In granting leave to appeal from Gzell J’s decision, the Court of Appeal imposed a condition that Hannover and the Trustee would not disturb the costs order before Gzell J and would pay Mr Dargan’s costs of the appeal regardless of the outcome.

The Court of Appeal

Prior to the Court of Appeal hearing, Mr Dargan filed a Notice of Contention seeking to overturn the principles in Manglicmot and sought to argue that he satisfied the definition of TPD as he was only able to work part-time as a taxi driver. Mr

Dargan requested a bench of five judges be constituted to hear the appeal.

Reasonable retaining The Court of Appeal observed that ‘the date the question of a claimant’s Total and Permanent Disablement is to be assessed was a date six months after the incident giving rise to the claim’ (as opposed to, say, the date of the insurer’s decision: contrast Auspine Staff Superannuation Pty Ltd v Henderson [2006] FCA 1281).

Whether Mr Dargan was TPD because he had required further training to continue to work as taxi driver depended on the construction of the phrase ‘reasonably fitted by education, training or experience’. The Court emphasised that:

1. some context needs to be given to the word ‘reasonably’ in the phrase; and

2. the words ‘education, training or experience’ are used both disjunctively and conjunctively. A person can be reasonably fitted for Regular Remuneration Work by reason of education, or training, or experience, or a combination of those factors.

Whether a person is reasonably fitted for a particular type of work would always depend on the facts of the particular case. However, the Court did not consider ‘that the need to obtain a licence and as a condition of maintaining it undertake a limited qualifying course would preclude a person from being reasonably fitted for a particular occupation’.

Mr Dargan was an experienced truck driver who, the Court inferred, was already familiar with the road rules and the demands involved in driving commercial vehicles. He was able to obtain an ancillary certificate to drive a taxi without undertaking any test, and was able to comfortably pass the course which was a condition of retaining the certificate.

There was no evidence that Mr Dargan’s experience as a truck driver was insufficient to enable him to complete the course. Even if he had to refresh his knowledge of the road rules and acquaint himself with the major roads around

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Hobart to complete the course, ‘that would not in my opinion mean that he was not reasonably fit to drive a taxi by virtue of his education, training or experience’.

The Court distinguished Halloran v Harwood Nominees Pty Ltd [2007] NSWSC 913, where the plaintiff had been a greaser in a factory who, having injured his back, undertook a two year TAFE course to qualify for work in alternative employment as a contract officer with the Aboriginal Land Council. The Court contrasted the present case, involving only a four day course to enable Mr Dargan to retain his ancillary certificate.

It was held that, at the relevant date, Mr Dargan was reasonably fitted to carry out the occupation of a taxi driver, at least on a part-time basis. The Court of Appeal found that Gzell J had ‘failed to take into account the word “reasonably” in his construction of the provision and in its application to Mr Dargan’.

Part-time Work

Whether Mr Dargan was TPD despite his ability to undertake part-time work depended on whether such work was Regular Remuneration Work as defined in the Policy. There was no requirement in that definition that the work be full-time; the requirements were that the work be remunerative, be done for reward or hope of reward, and be regular.

The word ‘regular’ meant something occurring at fixed times or uniform intervals. Thus, while it may not include casual or other intermittent work, it would not on a literal construction exclude part-time work.

Mr Dargan was able to work regularly, albeit on a part-time basis, from June 2008. It followed that Mr Dargan was capable of doing Regular Remuneration Work.

The Court observed that ‘the purpose of the policy…. is to provide benefits for Total and Permanent Disablement, not partial disablement.’. It was not considered unreasonable to construe the contract as providing that a person capable of undertaking regular part-time work was not TPD.

Outcome

The Court of Appeal unanimously allowed the appeal.

Implications

This is the first appellate-level decision to provide guidance as to the extent or type of ‘retraining’ that may be taken into account in deciding whether a claimant is TPD (subject always of course, to the words in the applicable TPD definition).

Had the original decision been upheld, even the most elementary induction requirement to restart work would mean that people who were able to work could claim benefits intended for people who were never able to return to work in any role reasonably within their education, training and experience. Assessors must still exercise caution to ensure that any retraining a claimant undertakes develops ‘core skills’ which the claimant has already attained through education or training or experience.

It is important to note that Hannover and the Trustee did not argue, nor did the Court of Appeal find, that anyone with a drivers licence could work as a taxi driver, and therefore anyone with a drivers licence can never be TPD. Mr Dargan was qualified to work as a professional driver before he was injured, and remained able to work as a professional driver after the injury. The brief ancillary certificate course, which was a prerequisite to using his transferable skills, did not place this work outside the scope of work he was already reasonably fitted for by his existing education, or training, or experience.

Of course, in every case the outcome will turn on the TPD definition in issue, the claimant’s pre-disability education, training and experience, and the scope of the ‘retraining’ involved.

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www.turkslegal.com.auSyd | Lvl 44, 2 Park St, NSW 2000 T: 02 8257 5700 | F: 02 9264 5600

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For more information, please contact:

Lisa NorrisPartnerT: 02 8257 5764M: 0410 582 [email protected]

Michael IacuzziSenior AssociateT: 02 8257 5769M: 0412 415 [email protected]

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Totally and Permanently Disabled and still at work?