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TPD – ETE (education training experience) clauses May 22, 2020

Sandstrom v FSS Trustee Corporation & Anor [2020] NSWSC 200

Applicable Legal Principles – Interpretation of the ETE Clause

  1. ETE clause policy wordings similar to those in the FSS Policy and the PBRI Policy have received extensive judicial consideration both at first instance and on appeal.
  2. From those cases statements of applicable principle can be refined. In the Court of Appeal’s decision in Jones (at [147] – [150]) Gleeson JA considered Brereton J’s elucidation of the meaning of an ETE clause close to the one under consideration in this case. The effect of the Court of Appeal’s decision in Jones was to approve Brereton J’s comprehensive statement at first instance in that case (Jones v United Super Pty Ltd at [71] – [72]) of the proper interpretation of the ETE clause, which is set out here in full:

“[71]   It is not necessary, in order to satisfy the TPD definition, that the insured must be incapable of any regular remunerative work, but only that he or she be incapable of regular remunerative work for which he or she is reasonably fitted by education, training or experience. The ETE clause confines the scope of the “regular remunerative work” from which the insured is disabled to that for which the insured is reasonably fitted by education, training or experience. In that phrase, the word “by” is important – it postulates a connection between the suggested future work, and the insured’s past education, training and experience. The concept of an occupation or work “for which the Insured Person is reasonably fitted by education, training or experience” directs attention to the insured’s vocational history to date, and to occupations for which that vocational history fits the insured. It refers not to any work for which the insured might have physical and mental capacity without further training, but to work for which the insured has been prepared and shaped by education, training and/or experience. The purpose of the provision is to provide a benefit for those who are disabled from following the vocations for which their past education, training and experience has prepared them – not any occupation which may be conceived, however far removed from his or her vocational history, which can be performed without further education, training or experience. The policy insures the capacity of an insured to perform regular remunerative work, not simpliciter, but in an occupation for which the insured’s education, training and experience has prepared him or her. In that way, it insures against loss of the ability to pursue those employments or careers for which the insured has been prepared and shaped by his or her past vocational history. The point is illustrated by the reverse of the current type of situation: a surgeon whose tertiary education was in medicine and whose entire vocational history was in surgery, who lost the fine motor skills required for surgery, but was otherwise physically fit, would not be reasonably fitted by education, training or experience for work as a manual labourer, even though he or she might be perfectly capable of performing it without further training.

[72]   Thus the first question should be, for what occupations is this claimant fitted by his or her education, training and employment. It is a mistake to first search for occupations which an insured might be able physically and mentally to perform without further education, training or experience, rather than to examine the insured’s vocational history and to identify from it the occupation or occupations for which his education, training or experience has prepared the insured.”

  1. In the ETE clause the word “by” in the phrase “reasonably fitted by education, training or experience” expresses the notion of a link or connection between the suggested future work and the insured’s past, education, training and experience”: Jones at [146] citing Wardley Australia Limited v the State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 525.
  2. “Unlikely Ever” to Engage in Work for Reward. The words “unlikely ever” in this group of words have been closely considered. The word “unlikely” in the formulation was once said to mean improbable in the sense of a less than 50 per cent chance: Halloran at [76] and Beverly v Tyndall Life Insurance Co Ltd [1999] WASCA 98; (1999) 21 WAR 327 at 32.
  3. But TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim [2016] 332 ALR 507 (“Shuetrim”) now expresses the most authoritative exposition of these words that binds a trial judge in this State. In that case Leeming JA (at [88] – [89]) cautioned against the illusion of mathematical precision in the application of the term, as follows:

“[88]   It seems clear to me that the headnote of White has caused some subsequent decisions to depart from what was applied in Beverley (as well as by White J herself in Wiley). Further, I accept TAL’s submission that in most cases any attempt to express a likelihood in percentage terms will have merely the illusion of mathematical precision. I also agree with TAL’s submission that the bracketed words in the TAL policy tell against the construction in the headnote. Those words confirm what flows from the ordinary meaning of the language of “unlikely ever”, namely, that where there is a real chance that a person may return to relevant work, even though it could not be said that a return to relevant work was more probable than not, the insurer would not be satisfied that the definition applies. “Unlikely ever” is, in this context, much stronger than “less than 50%”.

[89]   What follows is this. To make an assessment of TPD, it is not sufficient for the insurer to be satisfied that it is more likely than not that the person will never return to relevant work. On the other hand, if there is merely a remote or speculative possibility that the person will at some time in the future return to relevant work, an insurer will not, acting reasonably and in compliance with its duties, be able to be satisfied that the person is not TPD. The critical distinction is between possibilities which are readily contemplatable even though they may not be more probable than not, and possibilities which are remote or speculative. A real chance that a person will return to relevant work, even if it is less than 50%, will preclude an Insured Person being unlikely ever to return to relevant work.”

  1. As Leeming JA put it here in Shuetrim “the critical distinction is between possibilities that are readily contemplatable even though they may not be more probable than not, and possibilities which are remote or speculative”. The issue has also been stated as whether it is unlikely that the insured would actually obtain paid employment for which the insured was qualified by education, training or experience, not whether in theory the insured may obtain employment of that type: Halloran at [76]; Banovic v United Super Pty Ltd [2014] NSWSC 1470 and Lazarevic at [108]-[109].
  2. The distinction between possibilities that are “readily contemplatable” and those that are “remote or speculative” may be a fine one, as Leeming JA explained in Shuetrim (at [113]). Just how fine that can be is illustrated by Leeming JA’s reasoning in Shuetrim (at [110] and [111]):

“110.   Mr Rayment QC, who appeared for Mr Shuetrim on appeal (although not at trial), explained the distinction required to be drawn by the wording of the TPD definition by reference to Whiteand Beverleyas follows:

‘So you ask yourself would this definition, in our submission, something like this, is there any clinical sign to indicate to an appropriately qualified person that the claimant is likely to go back to some form of relevant work? If you only have someone saying, ‘I hope he can’ or ‘in the ordinary course with appropriate treatment he could’, then you have crossed the line into what her Honour describes as the more remote possibilities and that is, we submit, a quite important determination about a clause such as your Honours have in this case, quite important, and what it means is that if, after an appropriate period of time, no such clinical sign [has] emerged or no such matter which shows a real chance of returning to work has emerged, then the clause is satisfied.’

111.   I substantially agree with this submission. A mere expression of hope that a person will return to a relevant form of work is insufficient to sustain an opinion that the clause is not satisfied. Conversely, clinical evidence that there is a real chance of returning to work will sustain an opinion that the clause is not satisfied. However, I would not agree that an opinion in terms that “in the ordinary course with appropriate treatment a person would return to a relevant form of work” would necessarily be insufficient to sustain an opinion that the clause is not satisfied. To the contrary, I think that it might, depending on the particular facts and degree of uncertainty; it might also warrant deferring the assessment date.”

  1. The words “unlikely ever” presents special challenge for a claimant as young as Ms Sandstrom, who was barely 28 at the assessment date. As Leeming JA explained in Shuetrim (at [208]):

“Relatively young people whose medical or psychological condition is uncertain will find it harder to prove to an insurer’s or a Court’s satisfaction that they are unlikely ever to return to work for which they are fitted by education, training or experience”.

  1. The relative youth of a claimant though obviously relevant to an insurer’s consideration, comes with recognised risks of error. As Ball J pointed out in Ziogos (at 102]), when an insurer reaches the view that a claimant “would be able to return to work because she had so many working years of her life” it is important not to confuse “what was possible with what was likely and unlikely”.
  2. “Regular Remuneration Work”. The two MetLife policies do not contain a definition of “Regular Remuneration Work”, as that expression appears in some TPD policies. The wording in the FSS Policy and the PBRI Policy is that the Insured Member is “unlikely ever to engage in any gainful profession, trade or occupation”. In my opinion to “engage in any gainful profession, trade or occupation” is a similar concept to undertaking regular remunerative work. It is difficult to see how one could “engage in” a “gainful profession, trade or occupation” without doing something that closely approximates regular remunerative work in that profession. Therefore, the case law in relation to “Regular Remuneration Work” has some relevance to a case such as this, although it should only be viewed cautiously as it is clearly not decisive in this case, because the precise policy wording is different.
  3. Looking at that case law, the capacity to perform “Regular Remuneration Work” is different from the capacity to perform a particular work task; and it does not follow that because a person is physically capable of performing one or more work tasks, that the person has an ability to engage in regular remunerative work: Hannover Life Re of Australasia Ltd v Colella (2014) 47 VR 1; VSCA 205 (“Colella”) and Jones v United Super Pty Ltd at [77].
  4. A person can be reasonably fitted for “Regular Remuneration Work” by reason of education, or training, or experience, or a combination of those factors: Hannover Life Re of Australasia Ltd v Dargan (2013) 83 NSWLR 246; [2013] NSWCA 57 (“Dargan”). A claimant may require further training to pursue another occupation after the termination of his employment, leading to the assessment of whether the claimant was TPD. The fact that some further training may be required, does not preclude a conclusion that the claimant was reasonably fitted to carry out the further occupation: Dargan at [44]. In Dargan, for example, a heavy vehicle driver had already obtained a certificate to become a taxi driver and only needed to pass a subsequent week long course to ensure that he was able to retain that certificate: Dargan at [40]. He was found not to be TPD. But in Halloran the claimant had ceased to be employed in a role of greasing machinery and in the three years after leaving that employment he completed a TAFE course qualifying him for white collar work. Brereton J held in Halloran that at the time of suffering his injury the claimant was not qualified for that work “by reason of his education, training and experience”: Halloran at [35] and Dargan at [40] – [41].
  5. Dargan also decides (at [46]) that even part-time work may qualify as Regular Remuneration Work but casual work or other work of an intermittent nature would not qualify as Regular Remuneration Work. Bathurst CJ said in Dargan at [46]:

“[46] The question of whether Mr Dargan suffered Total and Permanent Disable-ment, notwithstanding his ability to undertake part-time work as a taxi driver at the relevant date, depends on whether such part-time work was Regular Remuneration Work as that term is defined in the policy. The definition provides that a person is engaged in regular remunerative work if they are doing work in any employment, business or occupation. There is no limitation on the work being full-time or part-time. The limitations are that the work must be remunerative, that is done for reward or hope of reward and must be regular. The word regular means something occurring at fixed times or uniform intervals (see the definitions in the Shorter Oxford English Dictionary and the Macquarie Dictionary). Thus, it would not in the present context include casual work or other work of an intermittent nature. However, the word regular would not on a literal construction exclude part-time work. In the present case Mr Dargan was able to work regularly, albeit on a part-time basis as a taxi driver, at least from June 2008. Subject to passing the course, there was nothing to suggest he would not have been capable of doing this at the time of assessment and as I indicated the contrary was not put. It follows, in my opinion, that Mr Dargan was capable of doing Regular Remuneration Work.”

  1. The Time to Determine TPD Status. The time at which a claimant suffers TPD is capable of a general answer, which was discussed by Ball J in Ziogos at [86] as follows:

“[86]   …Generally, and subject to the terms of the policy, the question whether a member suffers from TPD is to be determined as at the expiration of the qualifying period specified in the policy. In the normal case, it is at that point of time that the insured person’s cause of action under the policy arises: see Giles v National Mutual Life Association of Australasia Ltd (1986) 4 ANZ Ins Cas 60-751 at 74,529 per Pidgeon J, cited with approval by Brereton J in Halloran v Harwood Nominees at [33]. See also Stevenson J’s discussion in Shuetrim v FSS Trustee Corporation [2015] NSWSC 464 at [51]ff. However, that will not always be the case. Where the right to make a claim under the policy depends, as in this case, on the formation of an opinion by the insurer in relation to a matter concerning the future which itself is uncertain, the position is less clear. It is difficult to see how the insurer could be in breach of the policy until the claim is made and the opinion is formed or the insurer fails to form the opinion in breach of its duty of utmost good faith. In those cases, the question whether the member suffers from TPD should be determined at the time the insurer forms its opinion or fails to form its opinion consistently with its duty of utmost good faith. In addition, as Pidgeon J pointed out in Giles, it is possible to take into account subsequent events to the extent that they shed light on what was likely at the time the assessment was to be made.”

  1. W.I.B. Enright and R.M. Merkin also argue that the “as at” date, or date for assessment to determine TPD status, is the expiration of the applicable qualifying period as the relevant date: Sutton on Insurance Law (4th ed, Thomson Reuters, 2014, Volume 2) at [21.430]. The parties conducted this case on the basis that the “as at” date was 9 March 2011, the expiry of the qualifying period, being six months after Ms Sandstrom commenced being absent from her employment with the police. But for reasons which will become clear in Stage II, if the “as at” date is the date of the insurer declining Ms Sandstrom’s claim, 24 July 2015, it is difficult to see how the Court’s consideration of Ms Sandstrom’s claim would produce a different result.
  2. The Use of Subsequent Medical and Other Evidence. It is not uncommon in the consideration of TPD claims for a party to contend that medical and other expert opinions expressed subsequent to the date upon which the insurer is required to assess whether or not a claimant is TPD should be taken into account when examining the claim at the earlier required date for assessment. Provided medical reports are pertinent to a claimant’s condition at the relevant assessment date, such opinions may be taken into account by the Court when it is considering the probability of a claimant being able to engage in relevant work at the date at which an insurer is required to assess TPD: Shuetrim at [150]. As McPherson JA explained in McArthur v Mercantile Mutual Life Insurance [2002] 2 Qd R 197 at [23] this conclusion accords with the principle that the court does not speculate, when it may know: a statement approved in Jones at [194]; and see also Finch at [18].

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