August 5, 2014
In this legal case, the plaintiff sued his insurer after his group salary continuance claim was discontinued because he was deemed to be no longer disabled. The case highlights the difficulties insurers and the courts can experience when dealing with mental health claims.
At a Glance
Source: Judges’ decision notes, with commentary by Terry Ward, claimant
Topics covered: mental health, disability claims, employer-sponsored insurance, occupation definition
Terry Ward was employed as a Director – Tax and Legal Services with a large accounting firm. In his capacity as Director, Mr Ward was responsible for around 20 direct reports, and worked between 50-60 hours a week in a specialised area of taxation law.
In early 2009, Mr Ward suffered a major depressive illness. He took six weeks off, utilising his sick-leave, before returning to work part-time. Unfortunately, while Mr Ward was keen to return to work, his performance deteriorated, and he found he was no longer able to perform all the tasks for which he was employed.
In November 2009, Mr Ward left work for the last time.
Group Salary Continuance policy
As part of his employment contract, Mr Ward was offered group salary continuance cover, as an ‘add on’ to his group life and disability cover, provided by MetLife. Mr Ward took out the policy because “it seemed like a good idea” and premiums were subsequently deducted from his salary.
Mr Ward said he did not receive any financial advice from his employer, and the only information he was able to find about the policy was a two-page flyer on his employer’s website. “I didn’t even know who the insurer was at the time,” he said.
While speaking with his firm’s human resources department following his depressive episode, Mr Ward became aware that he could be entitled to claim on his GSC policy.
He submitted the relevant forms and after three months of ‘negotiation’ Mr Ward began receiving monthly partial disability payments, dated from 31 August 2009 to 26 November 2009. He then received a full disability benefit, paid monthly.
He said he found the claims process “quite distressing”, and that he frequently had to chase up the insurer for his payments.
As part of his claim, Mr Ward was offered rehabilitation services, however he gained little benefit from his meeting with the rehab officer, who had limited experience dealing with white-collar professionals suffering from mental health concerns.
In December 2010 MetLife determined that Mr Ward was no longer ‘disabled’ for the purposes of the policy and ceased claims payments.
Definition of disability under the policy
The term disabled or disability is relevantly defined to mean solely as a result of illness occurring whilst this policy is in force a covered person is:
- Unable to perform at least one income producing duty of his or her occupation
- Not working in any occupation, whether or not for reward, and
- Under the regular care and following the advice of a medical practitioner.
Illness means sickness, disease or disorder.
Income producing duty means a duty of the covered person’s occupation that generates at least 20% of the covered person’s monthly income.
Occupation means the employment or activity in which the covered person is principally employed by the employer.
Definition of partial disability under the policy
Partially disabled or partial disability means a covered person:
- Has been disabled for at least 14 days out of the first 19 consecutive days of the waiting period
- Is unable to work in their occupation at full capacity as a result of the illness, resulting in disability
- Is working in their occupation or any other occupation but only in a limited capacity
- Is earning a monthly disability income less than their monthly income
- Is under the regular care and following the advice of a medical practitioner.
After MetLife stopped the payments, Mr Ward contacted his firm and told them that the insurer considered he was capable of returning to work. The firm said they did not care what the insurer said, and requested an independent report, from someone other than Mr Ward’s regular doctor or psychologist.
“I saw another psychiatrist and then a work study sort of person. After they lodged their reports, the firm fired me for inability to meet my work contract obligations.”
Mr Ward said he felt like he was trapped between a rock and a hard place.
This was not the way I thought the policy should work
“The insurer said I was fine; the employer said I was unable to carry out the duties of my position. I felt I was a pawn: there was nothing I could do. The two parties who held my future in their hands had mutually incompatible positions and both refused to do anything to sort out the confusion. Basically it was my problem.
“This was not the way I thought the policy should work.”
Feeling he had no other option, Mr Ward sought legal counsel, and began proceedings against MetLife.
First court case
The primary issue for determination by the court was whether the claimant was disabled under the policy for the whole or part of the period from 1 January 2011 and the last day of the trial (being 27 September 2012). The policy will only respond to the appellant’s claim if he had an accrued entitlement for disability as a result of illness which occurred whilst he was covered.
In other words, Mr Ward needed to prove he was still disabled as a result of the original depressive episode which occurred during the time he was still employed by his firm, and therefore covered by the policy.
The trial judge found against Mr Ward, saying:
- He was not disabled during the relevant period because he did not have an illness
- Even if he did have an illness, he had not established that he was unable to perform at least one income producing duty
- And further, even if the claimant did have an illness and was unable to perform at least one income producing duty, that was not solely as a result of the illness.
The trial judge said he believed Mr Ward could undertake a different vocation to the duties he performed in his original role, agreeing with the counsel for MetLife who suggested Mr Ward could become an independent tax consultant.
Further, the original trial judge determined that Mr Ward was not suffering from an illness because his symptoms were attributable to his personality type.
The Judge said: ‘In my view, consistent with the expert evidence of the plaintiff’s personality type and structure and having received payments under the policy, the plaintiff adopted a position which is best described as ‘a sense of entitlement’, inasmuch as he had a right to receive ongoing payments under the policy.
‘There has not been any attempt by the plaintiff to engage in meaningful work of any kind during the relevant period, notwithstanding the strong advice of his professional advisers that he should do so, albeit on a graduated basis…
‘Contrary to this advice, the plaintiff chose to allow himself to become more entrenched in his thinking about his alleged right to payments under the policy. He has focused and obsessed on his claim instead of putting some structure and responsibility into his life.’
Mr Ward found this element of the judgement particularly unfair and ill-informed. “I was made to feel like a crook,” Mr Ward said.
“Losing the first case was quite shattering,” said Mr Ward. “Not just because of the decision, but because of the way it was framed. The case that was put up in court by the insurer was that I was some sort of malingerer who had planned an early retirement, and that there was nothing wrong with me.”
Losing the first case was quite shattering
“You’re feeling quite vulnerable anyway, and to have people say that and for the judge to believe it, really shakes your self-confidence,” he added.
The question of Mr Ward’s ability to perform duties pursuant to his occupation was also examined closely. However, Mr Ward said he was never expressly asked by the insurer, at time of application or during the claim process, to specify the tasks he performed in his role.
“To be honest, I was quite annoyed, because I felt that I’d signed up for the contract in good faith, that if I was ever in a position where I couldn’t maintain the income that I used to earn that I would have this to fall back on. All of a sudden I was being told it didn’t mean what I thought it meant,” Mr Ward said.
“Nobody ever asked me what I did for a job. That’s why it came completely out of the blue when they cut off my payments, because they were saying I could go back and do my job, but no-one had asked me what my job was.
“I was left in a position where I’d had no income for a year, and I no longer had a job.”
Grounds for appeal
There were five grounds under which Mr Ward sought to appeal the original judgement. He contended that the trial judge erred in:
- Concluding that the plaintiff’s symptoms did not constitute an Illness
- Concluding that the appellant had not proved that he was unable to perform an Income Producing Duty of his Occupation that generated at least 20% of his monthly income
- Concluding that the plaintiff’s symptoms arising out of the appellant’s alleged Illness did not prevent him from performing or undertaking at least 20% of his duties
- Interpreting Occupation as including an employment or activity other than an employment or activity in which the appellant was employed by his firm
- Concluding that the appellant could undertake the vocation of an independent tax consultant, having regard to the occupation and duties he performed for PWC without having any regard to what the appellant could reasonably be expected to earn whilst Disabled or Partially Disabled.
Court of Appeal ruling
Two of the three judges ruling on the case in the Court of Appeal found in favour of Mr Ward. In the decision notes, Judge McLure said the following in relation to Mr Ward’s health condition:
“The insurer must take an insured as it finds him or her, including their personality type and features. If those personality matters underlie, intensify or delay recovery from symptoms attributable to a major depressive disorder, they are not, casually or otherwise, relevantly separate. Moreover, there is no support in the expert evidence for allocating some of the plaintiff’s symptoms to his personality type and others to his mental illness.”
In regards Mr Ward’s skills and his ability to perform his Occupation (as defined in the policy), Judge McLure said:
“Having regard to the type of work undertaken by the appellant (advising clients on taxation and legal matters (focusing on the GST), supervising, managing and generating work for the staff in his team, marketing and other ‘rain making’ duties and his level of seniority reflected in his high charge out rate) the only reasonable finding open on the evidence is that the performance of the appellant’s duties involved problem-solving, multi-tasking and simultaneously managing a number of projects.
“The trial judge should have found that the appellant’s deficiencies in problem-solving, multi-tasking and managing a number of projects, in combination, impaired his capacity to perform all facets of his duties with the consequence that throughout the relevant period the appellant was unable to perform at least one or more duties of his position at [the firm] that generated at least 20% of his monthly salary as at mid-2009.”
The Court of Appeal ruled that the trial judge’s orders be set aside, and that MetLife pay Mr Ward the disability benefit for the relevant period.
High Court challenge
MetLife subsequently lodged a challenge with the High Court, arguing that the decision the Court of Appeal made was not one that they could have reached given the evidence presented. Specifically, MetLife has argued that lawyers for Mr Ward failed to effectively argue the case that Mr Ward was suffering from an illness.
On 14 November 2014, the High Court dismissed the challenge, upholding the WA Court of Appeal’s decision.
Mental health claims
Both trials devoted significant time to exploring Mr Ward’s condition, and what tasks he was able to perform. But as Mr Ward points out, defining the symptoms of a mental illness can be difficult, as can identifying a person’s ability to perform the tasks necessary to fulfil their occupation.
…people are getting more accepting of there being something wrong if you say you’ve had a mental health episode
“I have found that people are getting more accepting of there being something wrong if you say you’ve had a mental health episode. But then they have the view that there was something wrong a year ago, but now you’re better. They find it very hard to accept that there may have been a permanent change. If you’re a champion runner, and you break your leg, people don’t seem to have any issue accepting that your leg may heal but you’ll never be able to run at the same level again. But they don’t seem to accept that if you have some sort of mental sickness that yes, you will get better, but you very possibly won’t get back to the way you were before. And that was the case with me. I’d had quite a mentally and emotionally challenging job, which involved lots of quick decisions, and I needed to be across a number of different issues at any one time. I found that I just couldn’t do that anymore. I couldn’t concentrate on anything more than one thing at a time. Which made it impossible to do the job I had.”
The industry has devoted much discussion to the treatment of mental health conditions in recent years. In September 2013, the Financial Services Council issued new guidelines to ensure life company representatives are equipped with the knowledge and skills to engage with consumers who may have experienced mental health concerns (see: Insurers Required to Demonstrate Mental Health Awareness).
Most would agree that underwriting and claims processes have improved, but there is still room for the industry to examine additional approaches to managing clients with mental health conditions. One option could be to introduce a mandatory test or additional questionnaire, to be completed during underwriting or at claim time (see: New Approach to Assessing Mental Health Claims Needed). Further engagement with organisations such as Beyond Blue and the Mental Health Council of Australia is also recommended (see: Mental Health and Insurance Project).
The policy was offered by Mr Ward’s employer, as part of his employment contract. In relaying his experience, Mr Ward highlights that while a duty of care towards their employees may prompt employers to pursue insurance for them at a group level, this does not necessarily mean the employer is experienced/equipped to assist employees who subsequently claim on such policies.
“My memory of how it all took place is a bit hazy, but as far as I can remember, during a change to the company’s insurer, a form was sent around explaining what was changing and offering additional cover for salary continuance,” Mr Ward said. “It was just a matter of ticking a box, and the premium was calculated as a percentage of your salary, and that it would cover you for 75% of your income in the event you can’t do your job. I ticked the box and basically forgot all about it.
“Other than a regular deduction on my pay slip, that was all I heard about it. When I went and looked on the firm’s website there was no copy of the policy terms, but there was a two-page flyer with a description of what it did and a few things like the waiting period. It basically said ‘If you can’t earn your income, this will cover you, up until the age of 60’.
“In late November 2010, when I was really struggling at work after having gone back, I went to see the HR people, and asked them if the policy would cover my situation. They said yes, and that I’d need to submit a claim through the firm. I don’t think I even knew who the insurer was, it was just a policy through the firm and they would look after it.
“As soon as I’d done that, my employer basically washed their hands of it. When the insurer cut off the payments, I went back to my employer and asked them to speak to the insurer on my behalf, because they were the ones telling me I wasn’t fit to work. My employer said it was a private issue between me and the insurer.”
A financial adviser, engaged by the employer, may have been able to assist Mr Ward with his claim, and the subsequent issues. However, no such service was offered by the employer, and recent industry commentary would suggest that group insurance specialist advisers are leaving the industry, due to changes to regulatory reform and remuneration measures (see: Wholesale Definition a Solution to Corporate Remuneration Issue?).
During the initial claim process, Mr Ward was referred to a rehabilitation specialist by the insurer:
“They (the insurer) sent me to see one rehabilitation person. I spoke with her, and she had obviously been told nothing about my case, because she asked if I’d thought of getting a clerical job. When I explained what I did and the sorts of duties I was expected to do in my role and how I was having difficulty, she said there wasn’t much she could offer me.
“I think she was more related to helping people with a physical injury. She didn’t seem to have any experience with mental health issues, or with people holding professional jobs. She wanted to know exactly what I couldn’t do, and I found it really hard to explain that one of the core health problems was that I couldn’t make decisions quickly.
“The whole system seemed to be geared towards people with physical injuries, working 40 hour weeks who are paid by the hour. I was on a salary, based on performance not on how many hours I worked.”
Mental health claims are now the second highest cause of claim for income protection policies in Australia. Further, rehabilitation is being viewed as a way to assist claimants to return to work, improving claimant health and insurers’ claims durations. The recent experience of Mr Ward suggests insurers still have a way to go before all claims services are aligned to the needs of claimants.
To view a copy of the Court of Appeal’s decision, click here.