On 12 December 2018, McColl JA, Meagher JA and White JA of the New South Wales Court of Appeal dismissed MetLife’s appeal of Robb J’s decision that Ms Hellessey was entitled to a TPD benefit. The appeal only related to the ‘first stage’ enquiry, namely whether in declining the claim, MetLife had breached its duties. The primary judge’s conclusion that Ms Hellessey had been so incapacitated as to engage the total and permanent disablement (TPD) definition was not challenged on appeal.

Background

Ms Hellessey was a police officer, who was retired from the New South Wales Police Force, ceasing work on 31 August 2010. Ms Hellessey acquired post-traumatic stress disorder (PTSD) and major depressive disorder as a result of events during her duties as a police officer. In February 2012, she claimed a TPD benefit from MetLife and First State Super (FSS).

TPD was relevantly defined in the policy as:

…The Insured Member having been absent from their Occupation with the Employer through injury or illness for six consecutive months and having provided proof to our satisfaction that the Insured Member has become incapacitated to such an extent as to render the Insured Member unlikely ever to engage in any gainful profession, trade or occupation for which the Insured Member is reasonably qualified by reason of education, training or experience.

As Ms Hellessey’s last day of service as a police officer was 31 August 2010, the six month period expired on 1 March 2011. Ms Hellessey alleged that she was TPD because of mental illness. The issue was the extent of her psychiatric injuries.

The determination of the claim occurred by way of procedural fairness letters which advised of MetLife’s preliminary view as to whether the material supported a conclusion that Ms Hellessey satisfied the TPD definition. Each of the procedural fairness letters invited Ms Hellessey to respond to MetLife’s assessment. Ms Hellessey’s responses to each of the letters were followed by a letter with MetLife’s decision, which on all three occasions was that MetLife was not satisfied Ms Hellessey met the TPD definition.

Ms Hellessey commenced proceedings after MetLife’s first decision, with the second decision delivered after proceedings commenced, and the third only days before trial commenced on 5 December 2016. It was this third decision, set out in MetLife’s letter of 30 November 2016, which the primary judge (Robb J) held was invalid.

Recreational activities

Ms Hellessey was a horsewoman from a young age and was often accompanied by long-time friends Ms Cleary and Mr Harvey in this pastime. Prior to making its first decision, MetLife became aware Ms Hellessey was attending and participating in horse-related activities.

In January 2012, Ms Hellessey (with Ms Cleary) registered the foal Fairymead in the Australian Pony Stud Book bred as their ‘stud’. Ms Hellessey’s Facebook statuses and posts in 2012 suggested she continued to participate in horse-related and other social events. Those entries indicated Ms Hellessey attended a Goulburn Pony Club bus trip to a mounted police unit, regional shows and club events.

MetLife obtained additional material before a fourth procedural fairness letter was sent and its third decision was made. The material comprised of subpoenaed records of the Australian Palomino Horse and Pony Association and Goulburn Pony Club, Ms Hellessey’s bank accounts, credit cards and Facebook account, Mr Harvey’s Facebook account, plus website printouts regarding sponsorship by ‘Fairymead show horses/stud’ of horse shows and events.

Lay witness evidence

Affidavits of Ms Hellessey, Ms Cleary, Mr Harvey and Ms Hellessey’s mother were provided to MetLife on 9 November 2016 in response to the third and fourth procedural fairness letters. This was weeks only before the trial.

The affidavits of Ms Hellessey’s friends described her changed and limited involvement in events and shows after 2010. Ms Cleary addressed the subject of Fairymead, saying she and Ms Hellessey jointly owned the foal registered in 2012 and Fairymead was never a business venture. Ms Hellessey’s affidavit explained her involvement in the Palomino Association and Goulburn Pony Club and various other horse-related activities without addressing the stud.

Decision at first instance

The decision of Robb J was that MetLife’s rejection of the plaintiff’s TPD claim in the third decision was not valid and effective.

In particular, Robb J found MetLife’s consideration of the sworn lay evidence was not ‘reasonable or proper’ because it did not engage with the consistent and substantial body of evidence which, when taken as a whole, substantially corroborated the opinions of Ms Hellessy’s treating medical practitioners concerning her psychological injury.

Appeal grounds

MetLife challenged Robb J’s decision in relation to the third rejection on these grounds.

• The primary judge applied incorrect legal tests to determine whether the third rejection was valid. Those tests departed from the test in Hannover Life v Jones – which was whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim.
• In considering whether the third rejection was valid, the primary judge relied on irrelevant considerations and evidence, including oral evidence given at trial and his Honour’s findings as to the credibility of certain witnesses.
• The primary judge reversed Ms Hellessey’s onus to provide proof to MetLife’s satisfaction of the matters required by the TPD definition, and instead considered that MetLife had to accept the claim unless it could justify a state of dissatisfaction.
• The primary judge did not properly determine the critical question of whether on the evidence available to MetLife, it was unreasonable for it not to have been satisfied of the matters required by the TPD definition. Instead, the primary judge tested MetLife’s conclusion by reference to his own opinion, and preferred his own evaluation where the two differed.
• The primary judge applied excessive scrutiny to MetLife’s third rejection, and imposed too high a standard of analysis on the decision.

Appeal decision

In dismissing the appeal, McColl JA, Meagher JA and White JA explained that the grounds of appeal and submissions did not always recognise the distinction between a breach of obligations to act reasonably and fairly ‘in the consideration process’ and a breach apparent from ‘the outcome of that process’.

Their Honours said the primary judge’s significant reason for concluding the third rejection was invalid was that MetLife’s approach and rejection of all of Ms Hellessey’s lay evidence was not reasonable or proper. What followed from the treatment of that evidence was significant for MetLife’s judgment of Ms Hellessey’s psychological injury and a major factor in MetLife’s reasons for discounting the evidence of medical experts who supported Ms Hellessey’s claim.

‘First stage enquiry’ test

In assessing the application of the test from Hannover v Jones, their Honours said the primary judge had properly recognised that the obligation to act reasonably and fairly applies to an insurer’s process of consideration as well as the decision.

The appeal judges concluded the consideration of MetLife’s decision making by the primary judge recognised that the process (or decision) is only to be impugned if it exceeds the ‘area of decisional freedom’ recognised by French J in another context: Minister for Immigration and Citizenship v Li (2013) HCA 18.

The appeal judges said the point made by the primary judge was that MetLife could have given bona fide consideration to the lay witness material and, acting reasonably and fairly, might have concluded that the evidence should be given little weight.

In circumstances where the primary judge found that MetLife had not engaged in that process, the appeal judges upheld the finding the third decision was not valid or effective for that reason. They said that failure was reason for the insurer not to meet the test of reasonableness in Hannover v Jones – which was whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim.

Implications for insurers assessing TPD claims

• The weighing process applied to evidence must be clearly set out in decision letters in TPD claims. If declining a TPD claim, it is important to display this process in the documentation to show there has not been a breach in considering the claim.
• Insurers must consider bodies of evidence available in their entirety. If deficiencies in the material provided by a witness are only partially addressed in the evidence provided by another witness, and that continuing deficiency is a reason for rejecting a TPD claim, insurers must explain the reasoning. If the evidence of a further witness fully addresses the deficiency in another witness’s evidence, an insurer must give proper consideration to whether the original deficiency is a reason for declining the TPD claim.