MetLife Insurance Limited v MX [2019] 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:

  • How to determine which of conflicting bodies of evidence to accept
  • The weight to place on a claimant’s own statements, noting they may be self-serving.


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:

  1. Overseas travel, including multiple overseas trips. The claimant said that the travel was not inconsistent with his symptoms as he always travelled with family and only to areas he described as ‘quiet areas’.
  2. Involvement with a surf life saving club, including serving drinks, organising functions, swimming and surfing. The claimant said he was able to do this as he regarded the club as a safe place and his involvement was voluntary. That was supported by a witness, ‘AX’, who said the club did not rely on the claimant. The claimant also said these activities were supported by his psychiatrist as such engagement prevented him isolating himself.
  3. Participation in a sporting event over eight days from Sydney to Melbourne to raise money for cancer. The claimant said two things regarding this event: his psychiatrist had recommended he exercise and participate in activities away from the home, and his involvement could be justified on the basis a close relative had cancer.

The TPD definition within MetLife’s policy had two limbs, being that the member:

  • Was absent from his occupation as a police officer through injury or illness for six consecutive months
  • Has provided proof to the insurer’s satisfaction that he has become incapacitated to such an extent as to render him unlikely ever to engage in any gainful profession, trade or occupation for which he was reasonably qualified by education, training or experience.

Court of Appeal decision

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:

  • An insurer’s duties in determining a TPD claim encompass the process undertaken in reaching the decision, as well as the actual outcome, namely the decision.
  • It is uncontroversial that in this context, an insurer’s decision can only be set aside if ‘the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim’.
  • The reasons for a decision can assist in determining whether the insurer’s process of consideration of the claim was undertaken fairly and reasonably. However, the Court declined to determine whether an insurer must give reasons. Similarly in Newling, the NSW Court of Appeal did not determine whether an insurer must give reasons for its decision.

Applying those principles, the Court set aside the first and second decisions. The Court’s reasoning was:

  • MetLife did not weigh the significance of the difference between undertaking paid employment and the nature and content of the claimant’s activities, including volunteer work.
  • While acknowledging that the claimant did not hold medical qualifications, his own statements as to what he could not do, expressed by reference to his psychological condition, should not be ‘put out of consideration’. However, when assessing the weight to be placed on such statements, the Court said that the insurer’s reasons must assess the significance of the claimant’s own statements and whether they undermine or affect the views of the insurer’s doctors.
  • Some IME doctors considered the claimant’s activities were inconsistent with his reported symptoms. However, the treating psychiatrist disagreed and noted that some of the activities were engaged in on medical advice. The Court found that MetLife erred in that its reasons did not address whether the claimant’s statements and the opinion of the treating psychiatrist undermined the view of the IME doctors that there were inconsistencies between such activities and his reported symptoms.
  • Doctors’ opinions that the claimant ‘ultimately’ would have the capacity to work, and that there was no reason why he could not return to full time work (provided it was not policing), did not directly address the issues relevant to TPD. Thus the insurer was in breach in relying upon these opinions as not supporting the claim.
  • The insurer was not entitled to rely on the opinion of a psychiatrist IME that the claimant’s condition might improve with certain treatment and as such, was in breach for two reasons. Firstly, the insurer did not take any steps to determine whether the claimant would receive the treatment. In the absence of those enquiries, the possibility that the claimant would return to work if he received the treatment was speculative. Secondly, the treating psychiatrist said the treatment was contraindicated for the claimant.

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.

What was not considered by the Court of Appeal?

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 insurer took into account an irrelevant consideration, namely that its reinsurer had refused to grant prior approval of an outcome favourable to the claimant, and
  • That procedural fairness was not provided, as the insurer failed to disclose to the claimant that it was in a position of conflict regarding its own interest under the treaty with the reinsurer and its contractual duty to the claimant.

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.

How to make a ‘sound’ decision

The MX decision provides guidance regarding how to make a sound decision:

  • The process of making the decision, as well as the final decision made, are both scrutinised, thus a decision which is sound can be set aside if the process of reaching the decision was flawed. However, the judgment does not provide guidance regarding what degree of error in process will lead to an otherwise sound decision being set aside.
  • If the insurer relies on reasons to support the reasonableness of its decisions, those reasons must explain how the insurer reached its decision, including addressing what weight is given to the claimant’s statements, why that weight is afforded and whether such statements undermine an IME’s opinion. The reasons must also weigh the significance of the difference between undertaking paid employment in appropriate occupations with any inconsistent material.
  • IME doctors should be provided with and asked to consider the claimant’s explanation of any inconsistent activity and the opinion of any treating doctor regarding that activity.
  • A doctor’s opinion can only be said not to support TPD if the doctor addresses the permanency of the claimant’s condition.
  • If a vocational expert has identified roles or occupations for which a claimant is suited, the doctors should be asked to consider whether the claimant can perform those roles.
  • Finally, in re-determining a claim, an insurer can and by necessity will refer to earlier decisions. Earlier decisions are a relevant, rather than an irrelevant, consideration.