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MetLife Insurance Limited v MX  NSWCA 228
This is a decision by the NSW Court of Appeal of 16 September 2019 upholding the decision of the NSW Supreme Court that MetLife’s two declinatures of a Total and Permanent Disablement (TPD) claim should be set aside. The proceedings only concern the ‘first stage enquiry’. The Court has not yet been asked to determine whether the claimant is TPD.
The decision addresses issues which insurers and trustee’s grapple with on a daily basis, including:
MX was a former police officer seeking to recover a TPD benefit due to PTSD and depression. MetLife accepted that he suffered PTSD and could not return to work as a police officer, but declined the claim on two occasions (in December 2014 and June 2017). In rejecting the claim, MetLife relied on material that it said identified inconsistencies between MX’s behaviour and an acceptance that MX satisfied the definition of TPD in the policy. The material fell into three categories:
The TPD definition within MetLife’s policy had two limbs, being that the member:
The Court of Appeal upheld the decision of the trial judge that the first and second decisions were flawed. However, some of the Court of Appeal’s reasons were different to those of the trial judge.
The Court restated the general principles that:
Applying those principles, the Court set aside the first and second decisions. The Court’s reasoning was:
However, the Court of Appeal disagreed with the trial judge in finding that, when reconsidering a claim, an insurer can refer to a previous decision and to do so does not constitute taking into account an irrelevant consideration. The Court held that a subsequent decision will necessarily involve reconsidering a first decision. Nonetheless, the judgment suggests that when undertaking a review, the insurer should not simply consider whether it is changing its opinion. A reconsideration necessarily involves reviewing previous decisions in light of additional material and information.
A novel aspect of the trial judge’s decision was his finding about what was styled ‘the reinsurance issues’ and – in particular – his finding that the first decision was flawed because:
The Court of Appeal did not need to determine whether this aspect of the decision of the trial judge was correct. The ‘reinsurance issues’ only affected the first decision. As the Court of Appeal found that the second decision was flawed, it did not need to determine whether the first decision was flawed and declined to do so.
This leaves uncertainty in the law regarding whether, if an insurer and reinsurer disagree if a TPD benefit ought to be paid, the insurer is obliged to advise the plaintiff of that matter. Much will depend on the terms of the treaty and whether the insurer can pay the benefit without reinsurance support. In MX, the Court inferred that when forming its opinion, the insurer took into account the reinsurer’s refusal to grant prior approval of the claim. This inference was drawn in the absence of any evidence to the contrary. An insurer in this situation should consider whether to lead evidence that its decision is unaffected by the absence of reinsurer support.
The MX decision provides guidance regarding how to make a sound decision:
Further information / assistance regarding the issues raised in this article is available from the author, Catherine McAdam, partner, or your usual contact at Moray & Agnew.