TPD: delay and duty of good faith December 22, 2018

Sargeant v FSS Trustee Corporation [2018] NSWSC 1997

Delay in deciding claims

100 As already noted, the question is whether MetLife’s failure to make a decision on Ms Sargeant’s claim by 3 September 2015 or, alternatively, by 3 September 2016, was a breach of MetLife’s obligations to act reasonably and fairly in dealing with the claim. Stevenson J considered such a question in Shuetrim v FSS Trustee Corporation [2015] NSWSC 464. An appeal from his Honour’s judgment succeeded in part (TAL Life Ltd v Shuetrim, referred to above at [14]) but this particular issue was not addressed in the appeal.
101 Mr Shuetrim was a former police officer making a claim for TPD cover where the policy terms were similar to, or the same as, those in this case. Mr Shuetrim lodged his claim in February 2013. In September 2013, the claim not having been determined, he commenced proceedings against MetLife. The claim was formally declined by MetLife in January 2015. The case came on for hearing in March 2015.
102 It was argued on behalf of Mr Shuetrim that MetLife had already, before its decision to decline the claim in January 2015, breached its obligations as insurer by failing to decide the claim. It was not necessary for Stevenson J to decide this point, but his Honour indicated that he did not accept it. One of the factors his Honour took into account in reaching his conclusion was that during the period from February 2013 up until the end of 2014, the solicitors acting for Mr Shuetrim were regularly (and often repetitively) serving medical reports and other material on the insurer.
103 A similar issue arose before Robb J in Hellessey v MetLife Insurance Ltd [2017] 19 ANZ Insurance Cases 62-152; [2017] NSWSC 1284, another TPD claim by a former police officer. Ms Hellessey’s claim was made in January 2012 and rejected (for the first time; it was subsequently reconsidered and rejected on a number of further occasions) in December 2014. It was contended on behalf of Ms Hellessey that the delay between the making of the claim and the December 2014 decision was such that MetLife had breached its duty by not deciding the claim at an earlier point. The contention was described by the parties as involving “constructive rejection” of Ms Hellessey’s claim (as his Honour noted at [131], the term is not entirely apt).
104 His Honour stated (at [775]) that a finding of constructive rejection should not be made merely on the basis of the passing of time and it was necessary to consider the reasons for MetLife’s delay. His Honour added (at [779]):
An important factor weighing against a finding of constructive rejection is that, given the length of time that did elapse, neither Ms Hellessey nor the Trustee communicated to MetLife a warning that if it did not make a determination within a reasonable, specified time, MetLife’s failure to act would be treated as a constructive rejection. Where a significant period of time has elapsed with the insurer taking various steps from time to time to put itself in a position to make its determination, it may be difficult for a trustee or a claimant to establish constructive rejection if they have not, so to speak, made time of the essence by giving an appropriate notice to the insurer.
105 His Honour’s decision was upheld on appeal (MetLife Insurance Ltd v Hellessey [2018] NSWCA 307). This aspect of it was not challenged and so it was not dealt with by the Court of Appeal.
106 As already noted, the particulars in Ms Sargeant’s Statement of Claim alleged, in substance, that the evidence provided on Ms Sargeant’s behalf in support of her claim had been sufficient to satisfy MetLife of its validity, but that MetLife, rather than accepting the claim, sought out contrary material and conducted further investigations in the hope of being able to find a way to refuse it.
107 In evaluating this allegation, I think that there are a number of features of Ms Sargeant’s claim which need to be taken into account. The claim was dependent on self-reporting by Ms Sargeant. As early as 2010, the possibility of exaggeration had been raised by Dr Bentivoglio. This had nothing to do with MetLife; Dr Bentivoglio’s report was written before the insurance claim was even made.
108 Dr Paul’s April 2012 report, produced as part of MetLife’s initial investigation of the claim, suggested that Ms Sargeant was in fact fit to work. Dr Paul’s report of June 2013, based on the surveillance of 2012, confirmed that view. This was not a case where MetLife was dependent solely on its own interpretation of the surveillance; Dr Paul’s own opinion was that the surveillance appeared inconsistent with what Ms Sargeant told him and her claimed level of disability. There was no suggestion that Dr Paul’s opinion in this regard was other than an independent one given in good faith.

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