Insurance Company found to have acted reasonably and fairly in the assessment of a claim: Newling v MetLife Insurance Limited [2019] NSWCA 149

21 June 2019, Supreme Court of New South Wales, Court of Appeal – Bell P, Leeming JA and Emmett AJA

Relevant policy provision

MetLife Insurance Ltd (MetLife) issued a policy of insurance to the FSS Trustee Corporation (FSS), as trustee of the First State Superannuation Scheme, which provided superannuation benefits for members of the NSW Police Force. Under the policy, if an insured member suffered total and permanent disablement (TPD) MetLife would pay FSS a sum in respect of the insured member.

Who was Ms Newling?

Ms Newling was a former officer of the NSW Police Force and a member of Scheme. She completed a claim form summarising her condition as “severe symptoms lumbar radiculopathy”, stating she was permanently incapacitated, thus suffering TPD under the Scheme.

Result of the claim?

MetLife was not satisfied that Mrs Newling was incapacitated to such an extent as to render her unlikely ever to engage in any gainful profession, trade or occupation for which she was reasonably qualified by reason of education, training or experience. MetLife provided to Ms Newling documentation which contained possible adverse information on 2 March 2015 and in a subsequent letter included a summary setting out matters of significance and conveyed its reasons for forming the view that some of the material was “against TPD”, on 15 July 2015. After receiving no response from Ms Newling, MetLife declined the claim on 14 August 2015. MetLife confirmed to FSS the opinion that had previously been communicated, for the reasons previously communicated, on 7 January 2016.

Initial proceedings

Ms Newling’s submissions

Ms Newling submitted that:

  1. MetLife owed her a duty of good faith and fair dealing, had an obligation to act reasonably in considering and determining its opinion, and had an obligation to consider and determine whether it should form an opinion on the question of whether the definition of TPD in the policy was satisfied.
  2. MetLife had breached that duty in its declination of her claim.

MetLife’s submissions:

MetLife submitted that:

  1. A duty was owed of good faith and fair dealing, but at all times it had complied with this duty.
  2. At all times it acted reasonably in considering and determining its opinion and that it had acted in accordance with its obligation to consider and determine whether it should form an opinion on the question of whether TPD was satisfied.
  3. It’s decision to decline the claim was made in accordance with the doctrine of procedural fairness.

Questions for the primary judge:

Whether, in declining Ms Newling’s claim, MetLife:

  • Breach its duty to Ms Newling, or
  • Failed to act reasonably in considering and determining its opinion, or
  • Formed an opinion that was not open to MetLife acting reasonably and fairly in the consideration of Ms Newling’s claims, and
  • Failed to consider and determine whether it should have formed an opinion on the question of whether the definition of TPD in the policy was satisfied.

Primary Judge: Answered all questions “no”

What was appealed?

Ms Newling’s contention on appeal

Ms Newling contended the primary judge:

  1. Had failed to consider whether MetLife acted reasonably and fairly in assessing and determining her claim,
  2. Had erred in applying an incorrect “test of unreasonableness”,
  3. Had erred in finding that MetLife was not obliged to give reasons for declining the claim, and
  4. Had failed to treat MetLife’s letters of 14 August 2015 and 7 January 2016 as separate declinatures, and had failed to give reasons for the determination

Finding on Appeal: Per Emmett AJA (with whom Bell P and Leeming JA agreed)

(1) Adequacy of reasons?

MetLife had provided adequate reasons – a trustee was not required to give reasons for the exercise of a discretion imposed by the relevant trust instrument, and it was arguable that a member of the Scheme would not be in any different position so as to be entitled to require FSS to give reasons simply because FSS had arranged to insure against any liability that it might have had to a member in respect of the Scheme. – [73]

(2) Duty of good faith

The duty owed to Ms Newling did not require MetLife to prefer the opinion of treating doctors over consulting doctors. It was not a breach of such a duty for greater weight to be given to independent consultants than treating doctors, particularly in this case, given much of the opinion evidence of the treating doctors was dependent upon the history provided by Ms Newling. – [79]

(3) Reasonably and fairly in assessment and determination

MetLife provided reasons that were sufficient to enable Ms Newling to know and understand why the opinion was reached, and there was no basis for concluding that it did not act reasonably and fairly when doing so. – [84]

(4) Treatment of the letters

It was artificial to treat the letters as separate decisions.

Findings on appeal: Per Bell P

  1. It was not necessary to decide whether the obligation to act fairly and reasonably in circumstances where an insurer owed a duty of good faith to an insured person gave rise to an implication that the insurer was required to give reasons for a decision. – [2]