NSURANCE – disability policy – totally and permanently disabled – insurer’s opinion – not unreasonable
INSURANCE – disability policy – insurer not an employment agency – no obligation to obtain labour market analysis

Dotlic v Hannover Life Re of Australasia Limited [2017] NSWSC 986

  1. There was no dispute as to the applicable legal principle. It was best articulated by McLelland J in Edwards v The Hunter Valley Co-Op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 at 77,536 and has been approved many times since, including at great length in TAL Life Ltd v Shuetrim [2016] NSWCA 68 at [61]-]62]. McLelland J said:

Where under a contract, rights or liabilities depend upon the subjective state of mind of a party, eg the party’s approval, opinion or satisfaction, of or about something, it can be a difficult question whether the party is subject to an implied obligation in reaching that state of mind, or failing to reach it, as the case may be, to be bound by objective standards of reasonableness … However in the field of insurance, it is well established that where under a contract of insurance an element of the insurer’s liability is expressed in terms of the satisfaction or opinion of the insurer, the insurer is obliged to act reasonably in considering and determining that matter.

   He added:

To say that an insurer must act reasonably in forming or declining to form an opinion is not to say that a Court can substitute its own view for that of the insurer. As North J pointed out in Doyle at 529, ‘reasonable persons may reasonably take different views’. Unless the view taken by the insurer can be shown to have been unreasonable on the material then before the insurer, the decision of the insurer cannot be successfully attacked on this ground.

  1. The importance of recognising that ‘reasonable persons may reasonably take different views’ was emphasised by the High Court of Australia in Minister for Immigration & Citizenship v Li [2013] HCA 18 at [75]-[76]. The context was different but the principle is analogous. Hayne, Kiefel and Bell JJ referred to House v The King (1936) 55 CLR 499 at 504-505 and the principle that ‘it is not enough that an appellate court would have taken a different course’. And they added that ‘Unreasonableness is a conclusion which may be applied to a decision which lacks an evident and intelligible justification’.