TPD Insurers have no duty to act as employment agents

The NSW Supreme Court has held in Dotlic v Hannover Life Re of Australasia Limited1 that in Total and Permanent Disablement ("TPD") claims it is not a life insurer's responsibility to find the member a job. Identifying a class of jobs the member is able to perform is sufficient. The matter, heard by Pembroke J, considered a claim for a TPD benefit of $100,000.

The member was a 35 year old Bosnian immigrant. In 2009 he was injured in a motor vehicle accident. He claimed and received workers compensation and statutory benefits. He made a subsequent claim for TPD in 2012, which the insurer denied, after lengthy consideration, in 2014.

Pembroke J dismissed the proceedings and ordered that the plaintiff pay the defendant's costs. His decision should be of comfort to insurers because it articulates the boundaries of what is required of them when assessing a TPD claim.

  1. Setting aside the insurer's decision. His Honour confirmed that if an insurance contract requires the insurer to form an opinion, the insurer "is obliged to act reasonably in considering and determining that matter". The plaintiff therefore needs to satisfy the court that the insurer's decision was "unreasonable" on the material that was before the insurer when the decision was made. His Honour cited High Court authority2 to support that 'unreasonableness is a conclusion which may be applied to a decision which lacks an evident and intelligible justification'. Pembroke J found that the defendant had not acted unreasonably.     
  2. Insurers do not have a duty to act as an employment agent for the member. Pembroke J considered that it is not the insurers' duty to find a particular job for a member or find a particular employer willing to employ the member. His Honour stated that it was reasonable and appropriate for an insurer to base their opinion on the considered professional advice of experienced vocational assessors. In this case, a detailed labour market analysis was not necessary. The insurers' responsibility is, rather, to "form an opinion about the probabilities" of the member's capacity to return to work, having regard to the terms of the policy.
  3. Supreme Court v District Court? His Honour was highly critical of the plaintiff's solicitors for commencing proceedings in the Supreme Court and the costs incurred in litigating the matter. At paragraphs 4-5, he said:

(a)  "The claim should have been brought in the District Court."

(b)  "The costs of this litigation bear no relation to the size of the claim…little attempt appears to have been made to ensure proportionality, economy and restraint."

(c)  "The reality of cases such as these is that the litigation is conducted as much for the benefit of the plaintiff's solicitor as it is for the plaintiff."

We consider that there are potential barriers with plaintiffs commencing TPD proceedings in the District Court, particularly claims involving trustees, even when claims are for only modest amounts. This is because:

(a)  The District Court has only limited equitable jurisdiction and has no power to grant declaratory relief.

(b)  The District Court has no general jurisdiction in relation to trusts or trustees.

(c)   Section 134(1)(e) of the District Court Act 1973 confers jurisdiction in equity in proceedings for the execution of a trust over estates of funds not exceeding $20,000 in amount or value.

Therefore, where a plaintiff seeks an order that a superannuation trustee perform its obligations under the trust, it appears the District Court would not have jurisdiction beyond $20,000.

That said, insurers should be encouraged by the court's dim view of plaintiff's solicitors litigating a matter where the costs are not proportionate to the size of the claim.

1Dotlic v Hannover Life Re of Australasia Limited [2017] NSWSC 986
2House v The King [1936] HCA 40


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