Casebook Index: Interpretation - Specific policy provisions, Assessment - 2 stage

Transcription

1 GROUP: Life and Disability Insurance SERVICE: Income protection Complaint No : YEAR: 2007 Casebook Index: Interpretation - Specific policy provisions, Assessment - 2 stage Background In 2000, because she could no longer work as a hairdresser, due to neck and arm pain, C made a claim ( the first claim ) under an income protection policy she had arranged with P in 1995 ( the policy ). In 2001, P accepted the claim and paid C a Total Disability benefit ( the TD benefit ). In June 2001, C s vocational skills and job options were assessed and a vocational assessment was provided to P. In March 2003, an Occupational Medicine Specialist assessed C and provided a report to P ( the Occupational Medicine Specialist s first report ). In December 2003, after being provided additional information, the Occupational Medicine Specialist provided P with a further report on C s capacity to work ( the Occupational Medicine Specialist s second report ). In April 2004, P wrote to C and advised it expected and required her to disclose her involvement in a company in which she was a director. P also advised that, because C was engaged in an occupation and was no longer totally disabled, in accordance with the Occupational Medicine Specialist s second report, she could only claim a Partial Disability benefit ( the PD benefit ). In May 2004, in response to a request from P, the Occupational Medicine Specialist provided further information about C s capacity to work. In the same month, C wrote to P to dispute its decision to only pay her the PD benefit and asked P to pay her the vocational retraining allowance provided in the policy. In February 2006, an Occupational Physician, assessed C and provided a report to P ( the Occupational Physician s report ). In May 2006, an occupational assessment report was completed, which listed occupations to which C may be suited. This was provided to the Occupational Physician, to enable him to determine C s capacity to work in the occupations to which she was suited. In May 2006, while attending a rehabilitation session at a pool, C slipped and fell down the stairs ( the accident ).

2 In June 2006, the Occupational Physician provided P with a further report ( the Occupational Physician s second report ). In October 2006, P wrote to C and advised it was discontinuing the PD benefit, because it had been paid for 2 years, the maximum period specified in the policy. C disputed P s decision and requested a deadlock letter so the matter could be referred to the ISO. P subsequently advised C that deadlock had been reached. In November 2006, C made a further claim to P ( the second claim ), because she was unable to work as a result of the accident. In December 2006, P wrote to C and advised that it could not accept the second claim. In January 2007, P wrote to C and advised that deadlock had been reached and she could refer the second claim to the ISO. Assessment In considering a claim for disability insurance, the ISO Office applies a 2-stage Assessment process which reflects the process adopted by the court in Edwards v The Hunter Valley Co-op Dairy Co Ltd & Anor (1992) 7 ANZ Insurance Cases If a finding is made that the insurer has not acted reasonably in forming or declining to form an opinion about whether the claimant meets the requirements set out in the policy definition, the ISO Office will evaluate the medical evidence and replace the insurer s decision with its decision. However, if there is insufficient medical evidence to be able to replace the insurer s decision, as part of the initial Assessment process, the ISO Office will obtain independent medical evidence on which to base its decision. Assessment Stage 1 After careful consideration of the available information, the Case Manager did not believe P had acted reasonably in forming its opinion about whether C was eligible for the TD benefit. The reasons were as follows: The TD benefit When C made the first claim, P had to consider whether there was a complete and continuous inability by reason of Sickness to perform [C s] normal occupation [as a hairdresser]. However, this definition only applied for the succeeding twenty-four (24) months, after the expiry of the waiting period of 90 days. According to P s records, C ceased work in

3 December 2000 and, therefore, the waiting period expired in March Accordingly, the definition only applied until March After March 2003, P had to consider whether there was a complete and continuous inability by reason of Sickness to engage in either [C s] normal occupation or to perform any gainful occupation for which [she was] reasonably suited by education, training or experience. After evaluating the information provided, the Case Manager concluded that C was only reasonably suited by education, training or experience for one of the 3 occupations shown in the June 2001 vocational assessment. In the Occupational Medicine Specialist s second report of December 2003, he highlighted limitations which would preclude C from working as a hairdresser, but said the limitations would not preclude her from working in areas such as retailing/retail management; small business management; or tutoring. In May 2004, the Occupational Medicine specialist advised P he was unable to answer the question about whether C was able to work in this or in other work for which she is suited by education, training or experience. He explained that with chronic pain syndrome, it was not possible to predict what type of day C might have and that this was why, in December 2003, he recommended a part-time work trial. Because the medical evidence was that C no longer had a total disability when the Occupational Medicine Specialist s second report was provided to P, the Case Manager believed P was no longer liable to pay C a TD benefit. However, after receiving the Occupational Physician s first report, P needed to determine whether C s situation had changed and whether she was then totally disabled. In the Occupational Physician s first report, he stated that C s work capacity was extremely limited and would be limited to about one hour per day of non physical activity. The Occupational Physician s second report indicated C had a capacity to work and did not support a decision to reinstate the TD benefit. The PD benefit After ceasing to pay the TD benefit, P paid C the PD benefit. According to the policy, the PD benefit was payable for a maximum period of 2 years. The most beneficial interpretation was that the 2 years began from the date the PD benefit was first paid. Because P ceased paying the PD benefit more than 2 years after it began paying the PD benefit, the Case Manager believed P had acted more favourably than provided by the terms and conditions of the policy. Given the medical evidence that C was not totally disabled and the PD benefit had been paid for more than 2 years, the Case Manager concluded P s decision to discontinue both the TD benefit and the PD benefit in October 2006, was reasonable.

4 The second claim P declined the second claim, because [t]he medical information received d[id] not support an incapacity to work consequent to this accident. P did not believe the accident would, in itself, cause work incapacity. However, because C s doctor had certified C s incapacity to work on 8 November 2006 and that she was unable to work for 90 days, the Case Manager believed the onus was on P to obtain medical information to properly consider the claim. Because P did not do this, the Case Manager concluded P s decision to decline the second claim was not reasonable. In February 2007, an Occupational Medicine Physician provided a report to ACC, in which he said he believed the accident did not cause any new injury, but increased C s pre-existing back pain. As such, the disability was related to the first claim. Under the policy, [a] subsequent period of Disability which occurs within 6 months of the termination of the TD benefit, will be treated as a continuation of the earlier period of Disability, provided it arises from the same or a related cause. Therefore, because the medical evidence was that C s incapacity was due to her pre-existing spinal pains, the second claim related to the first claim and P was required to consider whether there was a complete and continuous inability by reason of Sickness to engage in either [C s] normal occupation or to perform any gainful occupation for which [she was] reasonably suited by education, training or experience. However, the medical experts had not commented specifically on whether this was the case and, as a result, there was insufficient medical evidence for the Case Manager to be able to consider the second claim. Consequently, the Case Manager believed C needed to be reassessed by an occupational specialist to determine whether she was totally disabled in terms of the policy wording and advised P that enquiries about C s capacity to work would be referred to the Occupational Medicine Physician. Vocational Retraining Allowance The policy provided a lump sum vocational retraining allowance of up to 6 times the monthly benefit, where the TD benefit was payable. P made a payment to C for a course she attended in When this was being discussed C also asked about doing a diploma in business. It appears that, at the time, P made an informal decision not to support this form of retraining. In May 2004, C again enquired about the vocational retraining allowance. At the time, C was not eligible for the benefit because she was being paid the PD benefit. However, in responding, P did not mention this and just provided some general comment about the vocational retraining allowance.

5 Because C enquired about the benefit, specifically relating to a business diploma and this tied in with some of the occupations suggested in the vocational assessment report, the Case Manager believed P should have considered funding the business diploma course under the vocational retraining allowance. The Case Manager did not believe P could rely on the fact it overpaid C (on the PD benefit), or had offered additional assistance, as grounds for declining to pay the vocational retraining allowance. The Case Manager concluded that C should submit a proposal to P, applying for the vocational retraining allowance for P s consideration. Assessment Stage 2 In response to the question raised by the Case Manager, the Occupational Medicine Physician said he believed there were a number of causes of C s incapacity to work, including possible depression. However, the Occupational Medicine Physician indicated he was unable to determine the effect these other issues had on C s capacity to work without a psychiatric assessment. Based on the information provided by the Occupational Medicine Physician, the Case Manager believed C fulfilled the criteria for the TD benefit. P had queried if C was entitled to a TD benefit, if she worked as a company director of a homestay business. This was because the policy provided that, in order to be entitled to a TD benefit, the person must not be engaged in any occupation. Information provided by C indicated she had worked for 15 minutes a week at the beginning of 2004, but this reduced to 15 minutes per month and was at this level in March 2007 when she ceased work. P had suggested that this qualified as being engaged in an occupation. In accordance with the principles applied in Allan v National Mutual Life Association of Australasia Ltd (1993) 9 SR (W A) 68, Mercantile Mutual v Selikas [2000] NSWCA 331 and National Mutual Life Association Australasia Ltd (t/a AXA Australia) v Financial Industry Complaints Service Ltd & Ors [2006] VSC 121C, the Case Manager did not believe it was reasonable for P to argue that C was engaged in [an] occupation, if she was only working for 15 minutes per month. Having regard to all the circumstances, the Case Manager did not believe C was engaged in an occupation and concluded that C was entitled to the TD benefit and the waiver of premium benefit. Partial Disability P advised the Case Manager that it believed a PD benefit would not be payable if C ceased to have a total disability. This was on the basis that the Recurrent Claims clause would prevent a further PD benefit being paid. However, after reviewing the policy wording covering the period for which the PD benefit was payable, P s solicitors said [t]he wording of this clause is entirely unhelpful, describing one section as completely vague and, in a file note, acknowledged it was a vague policy.

6 After considering the position, the Case Manager believed that, if C was to become partially disabled again, the partial disability clause would not in itself prevent a further PD benefit being paid. However, if C was to become partial disabled, then it must be considered whether the Recurrent Claims clause would prevent a PD benefit from being paid. If C were to become partially disabled it would for all purposes, be deemed to be a continuation of the earlier period of [partial disability] if it arose from the same or a related cause occurring within six (6) months from the ceasing of payments relating to that [partial disability]. In practice, if C became partially disabled again, it would not occur within 6 months of her earlier period of being partially disabled. As such, the Recurrent Claims clause would not apply to prevent her from being eligible for a PD benefit, following a period of total disability. As a result, the Case Manager concluded that C would be able to apply for a further PD benefit, if she were to become partially disabled, following a period of total disability. Vocational retraining allowance P had offered C a payment of 3 months benefits as compensation, because it did not follow the procedure as set out in The Case Manager advised the offer would need to be made in writing to enable C to decide whether to accept it. If C accepted the offer, she would also be able to apply for a reduced vocational retraining allowance of 3 months, because she was now Totally Disabled. The Case Manager advised P it would need to tell C how to apply for this further allowance. P subsequently accepted the conclusions reached in stage 2 of the Assessment and the complaint was settled on this basis. Result Complaint settled