A different approach to ETE clauses

The decision in Jones v United Super Pty Limited adds a further challenge for insurers in making decisions on Total and Permanent Disablement (TPD) claims.

The Court has reinterpreted the Education, Training and Experience (ETE) clause, stating that an entry-level job which a claimant may be able to perform without further education, training or experience is not necessarily one for which a claimant is reasonably suited by education, training or experience.

The Court held that the insurer must direct its attention to the insured's vocational history to date and to occupations for which that vocational history fits the claimant.

Previously the Education, Training and Experience (ETE) clause has been interpreted by looking at whether a claimant will need to undertake further education, training or experience to be able to work. After the Court of Appeal decision in Dargan[1] in 2013, insurers could be comfortable assuming that if anything more than a short qualifying course of training or certification is required to enable the claimant to undertake work, the claimant will likely be TPD. If no training or certification or further education is required, then the claimant won't be TPD.

The interpretation in Jones will likely severely restrict the range of occupations for which claimants might be suited, to occupations they have already undertaken. Under this interpretation a claimant who has only ever worked as a labourer, but who has the physical capacity to work in a sedentary position, will meet the TPD definition.

This is a decision of a single judge of the Supreme Court of NSW and is not binding on other single judges of the Supreme Court. In the absence of an appeal to the Court of Appeal the law on ETE clauses is unfortunately unclear.

The facts

The plaintiff, Mr Jones, was born in 1982 and completed his School Certificate in 1998. He left school at the end of year 10. He served an apprenticeship with a roofing contractor which he completed in March 2003, qualifying as a tradesman roof plumber. He subsequently gained a number of additional tickets including Professional Association of Climbing Instructors, asbestos removal, safe work at heights ticket, OHS induction, explosive power tools, and a 20-tonne non-slew crane licence.

On 10 December 2002 he suffered a repetitive strain injury of the lower back when lifting metal roofing and wall sheets over a parapet wall to a fellow worker. Pain restricted his ability to perform the full range of his duties and it worsened. He was subsequently diagnosed with a disc prolapse at the lumbosacral level of moderate degree on the left posterolateral side with displacement of the left S1 nerve root. He underwent a hemi-laminectomy in June 2003 which provided immediate relief.

He returned to work in October 2003 as a roofing supervisor with a reduced but continuing requirement to engage in heavy lifting. He remained in various supervisory roles until he eventually ceased work in late 2011.

Although the operation in June 2003 was successful it did not entirely resolve his complaints. He continued to have pain in his lumbar spine which radiated down the back of his left leg. His symptoms became more troublesome again in 2011 when lifting heavy asbestos sheeting into a bin. He noticed soreness in his back which increased significantly and he developed pain in his right leg which became more severe than the back pain.

He ceased working on 10 October 2011 when his employer closed down. Its jobs and employees were transferred to other contractors, however, the plaintiff did not resume work.

TPD claim

The TPD definition under the policy was as follows:

What is Total and Permanent Disablement?

1.3 TPD in respect of an Insured Person who was gainfully employed within the six months prior to the Date of Disablement is where:

1.3.1 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 Remunerative Work for which the Insured Person is reasonably fitted by education, training or experience.

The plaintiff's claim was declined by the insurer and trustee. The plaintiff commenced proceedings. The insurer agreed the plaintiff could not return to his pre-injury tradesman duties but was not convinced that, based on his current physical restrictions along with his education, training and experience, he would never return to some form of meaningful employment. In this respect the insurer referred to a number of vocational options that had been identified which did not require retraining and which it considered the plaintiff had the functional capacity to perform, including:

  • Retail sales (hardware);
  • Courier/delivery driver;
  • Console operator; and
  • Customer service advisor/telemarketer.

The findings

Did the insurer breach its duty to the insured?

His Honour, Brereton J, found that the insurer’s decision to decline the plaintiff's claim was void for error of law, in that it:

  1. took too narrow a view of the concept of 'unlikely to be able to engage in Regular Remunerative Work', in failing to have regard to the psychological obstacles and competitive disadvantages that would adversely impact the plaintiff's ability to gain employment, thus failing to take into account a significant component of the plaintiff’s incapacity; and
  2. treated jobs for which no further training was required, although unrelated to his education, training or employment, as jobs for which the plaintiff was fitted by his education, training or employment.

Education, Training and Experience clause

His Honour found that the insurer treated the occupations suggested by the vocational assessors as work for which the insured was 'reasonably fitted' by his education, training or experience, not on the basis that he had any particular education, training or experience that prepared him for those occupations, but because they were 'entry-level' positions for which no further training was required.

However, a job which a person may be able to perform without any further training is not necessarily one for which he or she is reasonably fitted by their previous education, training or experience.

His Honour further stated that 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. Therefore the ETE clause 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 their prior education, training and/or experience.

The purpose of the ETE 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 which can be performed without further education, training or experience. The policy insures the capacity of an insured to perform regular remunerative work 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.

His Honour stated that the first question an insurer should ask is: for what occupations is this claimant fitted by his or her education, training and employment? His Honour asserted that it is a mistake first to 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/s for which their education, training or experience has prepared them.

The insured's training in this instance was in the roofing industry, and his vocational experience was as a manual labourer in the roofing industry. This was not to say that there may be no other occupation to which the plaintiff may be able to adapt; but if there was, it was not one for which he had been fitted by his past education, training and experience.

His Honour found that the work of a retail sales assistant, service station console operator, courier/delivery driver or customer service adviser/telemarketer was not work for which the insured was reasonably fitted by his education, training or experience; even if it was conceivable that he might be able to adapt to it, without undergoing further formal training, that had nothing to do with his education, training and experience.

Although the insured may have had some discrete transferable skills, that is not the same as being fitted for an occupation by education training and experience.

In this respect, His Honour found that the identification of some transferable skills in the vocational assessment report obtained by the insurer, which may be applied in another occupation, does not necessarily mean that the worker is fitted by experience for the second occupation.

We are grateful for the assistance provided by Andrew Dickson, Lawyer - Risk & Insurance, in preparing this Insight.

[1] Hannover Life Re of Australasia Ltd v Dargan [2013] NSWCA 57; 83 NSWLR 246

Rebecca Whittle

My clients' business interests are front of mind for me every day.

Rebecca Whittle Partner

Rebecca is an expert in commercial litigation and insurance and has 27 years' experience advising a wide range of clients including major Australian general and life insurers and the government sector, both State and Federal. Rebecca is recognised as a leading insurance and government litigation lawyer.

Rebecca's breadth of expertise covers:

  • Defending government agencies from claims in negligence
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  • Acting in complex insurance litigation
  • Advising general insurers and life insurers on coverage issues including non-disclosure and misrepresentation
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Rebecca's government sector clients include NSW Health and NSW Police. Her reputation as a highly skilled litigation lawyer is testament to her ability to protect her public sector and financial services clients from public scrutiny through achieving out of court settlements in hundreds of litigation cases.

Rebecca represents a number of Australia's major life insurers. One of her career highlights was success in the Court of Appeal in Manglicmot v The Commonwealth Bank Officers Superannuation Corporation Limited, involving group life insurance and an examination of the duties owed by a trustee of a superannuation fund to its members when entering into a new policy of life insurance.

Rebecca also acts for a number of the firm's significant government, corporate and banking clients on a wide range of commercial litigation which, has resulted in a depth of expertise in mining and construction litigation, defamation, negligence and breach of contract.

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