Metlife Insurance Limited v MX  NSWCA 228
16 September 2019, Supreme Court of New South Wales, Court of Appeal – Meagher, Gleeson and Payne JJA
MetLife Insurance Ltd (MetLife) issued to FSS Trustee Corporation a Blue Ribbon Policy, as trustee of the First State Superannuation Scheme.
RELEVANT POLICY PROVISION:
Entitlement to benefits for total and permanent disablement (TPD) if, having been “absent from” his or her occupation “through injury or illness for six consecutive months”, the insured member “provided proof to [the insurer’s] satisfaction that [the member had] become incapacitated to such an extent as to render [him or her] unlikely ever to engage in any gainful profession, trade or occupation for which [he or she was] reasonably qualified by reason of education, training or experience”.
Who was MX?
MX was a police officer who was a member of the above scheme. MX was certified as unfit to return to work in September 2010, diagnosed with delayed-onset post-traumatic disorder (PTSD) in January 2011, and was medically discharged from the NSW Police Force nine months after diagnosis. In March 2012, MX made a claim for benefits under the policy.R
Result of claim?
MetLife did not dispute that the first limb of the definition of TPD was satisfied – MX was hurt on duty, and continued to suffer from an illness which continued to incapacitate him from his occupation for six consecutive months. However, MetLife denied the claim on 1 December 2014, on the grounds that MX had not become incapacitated to such an extent as to render him unlikely to ever engage in any gainful profession, trade or occupation for which he was reasonably qualified by reason of education, training or experience (the ETE clause).
Second declinature of claim
MetLife subsequently denied MX’s claim for a second time. MetLife’s declinature was on the basis that, despite the medical opinions agreement on the diagnosis of PTSD, and that it was unlikely MX would return to employment outside the NSW Police Force, MetLife was not satisfied that while MX was an insured member of the scheme he was 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 reason of education, training or experience (the second limb of the provision).
Initial proceedings: Questions for determination
(1) Whether, in refusing to accept MX’s claim, Metlife had acted in breach of its statutory and/or general law duties?
Primary judge answered affirmatively.
(2) Whether Metlife breached its duty to act reasonably in considering the claim made by MX?
Primary judge answered affirmatively.
Metlife sought leave to appeal – what was challenged?
MetLife challenged the following findings by the primary judge:
- MetLife’s reasons for its decision were inadequate;
- MetLife had failed to act fairly and reasonably in evaluating the evidence, including medical reports;
- MetLife’s process of consideration was unreasonable because it took into account an irrelevant consideration (the first decision) when reconsidering its decision;
- MetLife had not acted reasonably in its consideration of MX’s claim.
Findings on appeal: per Gleeson JA (with whom Meagher and Payne JJA agreed)
Reasonably and fairly?
In considering the question of incapacity, and determining whether it was satisfied that the extent of the insured member’s incapacity answered the terms of the ETE clause, the insurer was required to act reasonably and fairly. Breaching one or more of these implied obligations deprives the decision of contractual effect. , 
Distinction between acting reasonably in the formation of an opinion (process of consideration), and the formation of a reasonable opinion (the outcome itself). For the process of consideration, an insurer misdirected itself in law if it took into account an irrelevant consideration. 
MetLife’s consideration of the medical opinions as to whether MX was totally and permanently disabled was not undertaken reasonably and fairly. , 
Adequacy of Reasons?
To merely refer, as MetLife did, to competing medical opinion with respect to MX’s capacity did not explain why MetLife preferred the view of one doctor to the competing medical evidence of MX’s treating doctor and a forensic psychiatrist. 
It was open to the primary judge to conclude that MetLife’s reasons were inadequate, and that the insurer, in breach of its contractual duty, failed to act fairly and reasonably in considering MX’s claim. 
It was not an irrelevant consideration for MetLife to have regard to its first decision and the reasons previously furnished for declining the claim. -