Meaning of “unlikely ever” – less than 50% probability test not applied

TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim [07.04.16]

Does the Australian Court of Appeal’s interpretation of “unlikely ever” in a Permanent Total Disablement insurance policy claim suggest that the English courts might also veer away from the mathematical “probability test” approach?

Australian case law is persuasive in England and Wales. As Kennedys’ partners from our Australia and Asia Pacific offices meet in London this week to discuss their jurisdictions we reflect on a notable case this year and the future of the probability test.

Background

This appeal case by TAL Life Ltd (TAL) and MetLife Insurance Ltd (MetLife) related to group policy claims for Permanent Total Disablement (PTD). The claims were for A$200,000 and A$600,000 respectively. 

Both policies included similar wording for PTD which required:

…proof to the satisfaction of [the insurers] that [Mr Shuetrim] has become incapacitated to such an extent as to render [him] unlikely ever to engage in or work for reward in any occupation or work for which [he] is reasonably qualified by reason of education, training or experience.”
The main focus was the meaning of “unlikely ever.

TAL’s policy also had an express policy condition that if the evidence was unclear then the decision on satisfaction of the PTD criteria could be deferred.

Mr Shuetrim’s claim for PTD claim arose due to epicondylitis and anxiety disorder. The group policyholders were the trustees of the insured scheme. The trustees only needed to pass on money to Mr Shuetrim if they got money from the respective insurers.

Unhappy about the delay, Mr Shuetrim sued the group policyholder for each insured scheme and each insurer. Medical evidence continued to be collated. TAL rejected the PTD claim in its letter of December 2014, using July 2012 as the relevant point for assessment of incapacity (which was following completion of an arthroscopy). TAL apparently made no reference in that letter to medical information after July 2012, in respect of which it came under some criticism from the Court of Appeal.

MetLife’s decision to decline the claim was set out in a letter of February 2015, but without pinpointing July 2012 as the relevant point for assessment.

Decision

When the cases were first considered by the Australian court Mr Shuetrim won and the court applied the test that “unlikely” meant a probability of less than 50%.

However, at the appeal both insurers ultimately won. The Court of Appeal stated that the court judgment headnote of White v Board of Trustees [1997] was criticised, despite in at least two court cases White having being treated by the Australian courts as authority for the proposition that “unlikely” means a less than 50% chance. In other words, the headnote did not accurately reflect the judgment in White.

The Court of Appeal stated that the test is whether there is a “real chance” that a person will return to relevant work (according to the specific policy definition), even if that chance is less than 50%, as this will preclude an insured person being unlikely ever to return to relevant work. “Unlikely ever” was regarded as much stronger than “less than 50%”. A remote or speculative possibility that the insured person shall work was not enough to decline a PTD claim. 

The court also commented that:

"Relatively young people whose medical or psychological condition is uncertain will find it harder to prove to an insurer’s or a court’s satisfaction that they are unlikely ever to return to work for which they are reasonably fitted by education, training or experience.”

While accepting that the ultimate onus was on Mr Shuetrim to show that he satisfied the definition of PTD, the court distinguished this from the evidentiary onus on the insurers to “introduce evidence” to show that specific occupations were open to Mr Shuetrim.

On the effect of appropriate medical treatment on the assessment of PTD, the court stated that this might depend upon the facts. Also, the degree of certainty or uncertainty of the effect of appropriate treatment would need to be considered, which might also justify deferring the assessment date for PTD.

The Court of Appeal accepted that it was almost certain that Mr Shuetrim’s left elbow would improve with time.

Implications

The stand out point from this Australian case is the Court of Appeal’s criticism of the mathematical and scientific approach involved in using 51:49 when considering the meaning of “unlikely ever”.

Whilst this Australian case will merely be persuasive, it is likely that it could be referred to in the English courts, particularly given the sparsity of case law in England for PTD claims, whether these are made under protection policies or personal accident policies. It could also, in different contexts, suggest that the appetite might be to veer away from the mathematical approach.

In addition, it is notable that the Australian court referred to the role of PTD insurers in “introducing evidence” of jobs that are open to the insured person.

This case also supports the stance that if a person can do part-time work they would not satisfy PTD. This accords with the approach of the first court judgment in the English case of Walton v Airtours Plc & Sun Life of Canada [2002] – the question of part-time work versus full-time did not arise in the Court of Appeal’s consideration of the Walton case.