AMERICAN HOME ASSURANCE CO v WHITFELD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, MEAGHER and POWELL JJA 18 August 1997, 18 August 1997 [1997] NSWCA 18 Insurance Policy — construction — respondent injured in football game — appellant insurer of Aust Rugby Union — meaning of 'permanent disability' in policy — extent of permanent injury and effect on ability to undertake employment Mason P The appellant, American Home Assurance Company, issued a personal accident benefits policy to the Australian Rugby Union and affiliated organisations, insuring, amongst others, all registered members of that Union. The central provision in the policy was a promise in consideration of the payment of the premium and subject to the conditions, special provisions and memoranda contained in the policy endorsed thereon or attached thereto, that: "if during the policy period any of the events specified in the schedule shall happen to the insured person...we will pay the compensation specified in the schedule in the manner hereafter described." The schedule nominated three different types of benefits, and this appeal concerns section A, "Capital Benefits". The schedule directs the reader to what is referred to as "Events | to 18". When one turns to the table referable to events 1 to 18, one finds reference to "PERSONAL ACCIDENT, Injury resulting in" - and then 18 different consequences enumerated. These consequences include death, a range of disablements and medical injuries, and one item, item 18, described as emergency ambulance transport. For each item there are three scales of benefit depending upon whether the insured person is a "Senior", a "Junior" or a "Schools" (player). The respondent in this case was a "Senior". The lump sum benefits referable to each of the 18 events differ, ranging from $250,000 for four of those events to $250 for event 18. Immediately after the reference to event 18 appears the following: "Any permanent disability not enumerated above will be paid for in proportion to the degree of permanent disability as compared with the cases enumerated above without taking into account the occupation of the insured person." The policy contains definitions of "injury", "total disablement", "permanent" and "disability". The respondent in this case suffered injury on 14 June 1992 when playing for The Barker Old Boys Rugby Union Football Club in a second grade game. During the game an opposing player kneed the respondent in the head, neck and upper back. The blow dissected the respondent's left internal carotid artery, causing an ischaemic stroke in the left parietal region of the brain. The respondent was admitted to Royal North Shore Hospital where he was treated by a variety of specialists. His primary symptoms were disordered receptive functions and speech, nausea and vomiting. He recovered in a sense, and returned to his employment approximately seven weeks after the incident. Subsequent tests have shown that while the left parietal infarct has resolved, the respondent's left carotid artery remains completely occluded. I will refer to his residual symptoms later in the judgment. 2 UNREPORTED JUDGMENTS At trial in The District Court before his Honour Judge Christie QC there were essentially two issues. The first was whether the then plaintiff suffered a permanent disability. The second was the proportion of the permanent disablement represented by the particular injury, it being at trial apparently common ground that item 2 of the table was the one that was engaged if permanent disability was established. That item provided a figure of $250,000 for a Senior who suffered "Permanent Total Disablement". The first issue, namely did the plaintiff suffer a permanent disability, was dealt with rather summarily by the trial judge. A summary of the argument put on behalf of the defendant appears in the affidavit of Mr Shields which has been provided to the Court today. In para3 of that affidavit he says that the argument put to the trial judge was to the following effect: "We concede that the Plaintiff is objectively medically disabled. That does not mean that he is disabled within the meaning of the policy. The definition of disability focuses upon a claimant's ability to obtain and/or keep employment for which they are qualified by reason of their age, experience and qualifications. At the time the Plaintiff was injured he was a casual high school teacher working in an intensive language facility. Since being injured he has completed a masters degree in communications and gone on to be employed as a lecturer in communications at the University of Technology. He works 40 hours a week and there is no suggestion that he will not be able to retain that position. The Plaintiff is unhappy about the time which he says it now takes him to do things but that is not what is required. In my submission he has done very well in a career sense since the injury." The learned trial judge said that on the defendant's own medical evidence he had no difficulty in finding upon the required standard that the plaintiff had suffered within the meaning of the policy a permanent disability. Before this Court, that finding was challenged in essence by two separate arguments. The first argument is that found summarised in para3 of the Notice of Appeal, it being contended that the trial judge was wrong in finding as a matter of fact that the respondent had suffered a permanent disability within the meaning of the policy. The issue was whether there was a "disability" within the definition of the policy. It is not in dispute that if there were, the disability was permanent as defined in the policy. The expression "disability" is defined in the following terms: "DISABILITY means disability which substantially handicaps You from obtaining or keeping employment or from undertaking work on Your own account provided that any such employment or work is of a kind which apart from the Injury would be suited to Your age, experience and qualifications." The central issue was whether the undoubted physical and permanent injury sustained by the respondent was one which substantially handicapped the respondent from obtaining or keeping employment or from undertaking work on his own account. In Tilmans Butcheries Pty Ltd v The Australasian Meat Industry Employees Union (1979) 27 ALR 367 at 382, Deane J said that: "the word 'substantial' is not only susceptible of ambiguity, it is a word calculated to conceal a lack of precision. In the phrase 'substantial loss or damage' it can mean in an appropriate context real or of substance as distinct from ephemeral or nominal. It can also mean large, weighty or big It can be used in a relative sense or can indicate an absolute significance, quantity or size." URJ AMERICAN HOME ASSURANCE CO v WHITFELD (Mason P) 3 In the present case, the context in which the word "substantial" appears is that relating to the interference with the injured person's capacity to obtain or keep employment or to undertake work on his own account, provided that any such employment or work is of a kind which apart from the injury would be suited to his age, experience and qualifications. In his written submissions, counsel for the respondent submitted that the insured person does not need to show that he or she has been unable to obtain or retain suitable employment. All that is required is a substantial handicap in obtaining or keeping employment or from undertaking work on their own account in areas of employment which would otherwise be suitable. I agree with this summary. The pre-injury position of the respondent was that he had completed his Higher School Certificate. He had spent six months at the Australian Defence Force Academy, leaving that for reasons of choice rather than incapacity. He had commenced a Bachelor of Arts and Diploma of Education course at Macquarie University. He had been commissioned as a lieutenant in the Army Reserve and he had taught in an intensive language centre. He had also commenced a Graduate Diploma in Communication Management at the University of Technology. As the learned trial judge indicated, there was no real dispute about the medical issue. In my view, the evidence amply supported the judge's conclusion that there was a substantial handicap within the meaning of the definition. I refer only to three pieces of evidence. First there was the evidence of the appellant's own witness, Ms Goldberg, a clinical psychologist, who said: "CONCLUSIONS: Prior to this accident Mr Whitfield had succeeded in overcoming adolescent problems and was highly competitive and successful in academic, sporting and social pursuits. He was inclined to be extremely goal oriented and perceived himself as having a good personal and professional future. The traumatic injuries, subsequent stroke symptoms and ongoing life threat have significantly undermined his previously good adjustment. Persistent problems of depersonalization, nightmares and sleeplessness; hypersensitivity and arousal, impulsive aggressiveness and irritability and pervasive feelings of depressed helplessness are all directly related to a Post Traumatic Stress and Adjustment Disorder. Mr Whitfield displays the cardinal Post Traumatic Symptom Disorder of dysregulated physiological arousal - distorted perceptions and cognitions - and dysregulated behavioural responses. Such chronic Post Traumatic Stress Disorder symptoms are often associated with life threatening experiences. The resulting problems in personality and psychosocial adjustment also create ongoing stresses and exacerbate the symptoms of this highly achievement oriented young man. Inefficiency in visuospatial functioning suggest the possibility of residual organic impairment that may be related to the stroke. Ongoing psychotherapy is recommended to help him in long term adjustment to what appears to be a chronic Post Traumatic Stress Disorder." Secondly, Dr Phillips, a consultant psychiatrist, reported: "Mr Whitfield's capacity for employment has been reduced as a consequence of his injury. The symptoms mentioned above would preclude him from various occupations (particularly as a consequence of post traumatic epilepsy) and will 4 UNREPORTED JUDGMENTS probably reduce his capacity to undertake other occupations, the latter being a consequence of relatively poor emotional control." And thirdly, Dr Garrick, a neurologist said: "T consider that the patient's working capacity has been significantly affected by his injury, such that fulltime and overtime work of high level postgraduate professional character that would have been expected without brain injury is unlikely to ever be achieved. His risk of stroke in the distant future is related to the accumulation of cardiovascular risk factors including later life development of hypertension, diabetes, hypercholesterolaemia, commencement of cigarette smoking or the development of a coagulation disorder. Should such factors evolve, then he is dependent on significantly less extracranial cerebral circulation than other subjects and may have a significantly greater risk of stroke damage should such risk factors evolve." That disposes, in my view, of the point that was the second ground argued in this appeal. The other way in which the appellant sought to attack the judge's finding that there was a permanent disability in this case was a new ground not foreshadowed in the Notice of Appeal or the written submissions and communicated yesterday to counsel for the respondent. The leave necessary for the point to be ventilated was opposed. I would however grant the leave in order to dispose of the contention on its merits lest the point surfaced elsewhere in relation to the construction of this policy. The argument goes thus. It was submitted that it had not been shown that an event within the policy had occurred because it was common ground that that which resulted from the accident was not any one of the 18 events referred to in the schedule to which reference has already been made. The fatal difficulty with this argument, in my view, is that the sentence immediately following item 18 makes it pellucidly clear that the policy regards as a compensable event a range of disabilities falling outside of the 18 that are listed, provided they satisfy the requirement of being "any permanent disability not enumerated above". The very terms "not enumerated above" make it plain that the cover extends beyond the literal terms of the 18 events. The fact that those words are followed with the expression "will be paid for" makes it equally plain that the policy covers any additional "permanent disability". The argument of the appellant, in my view, would leave those words with no work to do and must be rejected. As I said earlier, there were two issues fought at the trial. The one that obviously occupied the bulk of the submissions to the trial judge was that of determining the appropriate proportion represented by the permanent disability suffered by the respondent. According to his Honour's judgment, and I do not understand this to be in dispute, the case proceeded below on the basis that item 2, "Permanent Total Disablement" was the point of reference, and the issue was whether the particular disability established in the evidence was of one proportion or another, always referable to that item of the schedule with its figure of $250,000 for Seniors. His Honour records that the defendant advanced the proposition that the correct percentage to be applied would be somewhere around 10 or 15 per cent. The plaintiff had contended for a higher percentage. His Honour indicated an initial attraction to 30 per cent, but in the light of the medical reports which he re-read having reserved overnight, he was marginally persuaded that 30 per cent would be a little on the niggardly side, and he awarded 35 per cent and then translated that into a monetary sum. URJ AMERICAN HOME ASSURANCE CO v WHITFELD (Mason P) 5 As I understand the submission of counsel for the appellant, it was accepted that this percentage determination was within an appropriate range. If I have misunderstood the submission in that regard, I would say that in my view it does appear to be within an appropriate range having regard to the medical evidence, some of which I have already referred to. The real points that were made in attack on the assessment at 35 per cent were twofold. Firstly, it was argued that his Honour had applied a false test of proportionality by failing to have regard to all of the 18 items in the schedule, and secondly, it was said that his Honour had taken into account the occupation of the respondent contrary to the requirement in the sentence commencing "Any permanent disability", which I have already recorded. I would reject both of these arguments. As to the first, it seems to me that the parties were quite correct at trial in fighting the case on the basis that this was a situation where item 2 was engaged, subject only to the question of determining what percentage of total permanent disablement was involved. The submission that one has to somehow or other balance the whole 18 items ranging from death through categories of disablement and categories of medical injury to the final category of emergency ambulance transport, seems to me to be an impossible task. It is not what the fair reading of the sentence requires. Rather, what the reference to a "proportion to the degree of permanent disability as compared with the cases enumerated above" requires is that the court find the most appropriate item provided it is a permanent disability and then fix upon an appropriate proportion referable to that item. As I said, the parties, correctly in my view, treated this as a case where it was a proportion of permanent disablement as described in item 2. The second argument related to a passage in the judgment, at page 104 of the appeal book at G-R, where it was submitted that the trial judge had taken into account the occupation of the insured person in breach of the requirement in the sentence to which reference has been made. The passage is one where his honour said: "T accept, and indeed it is not advanced by the plaintiff that I should not accept, that in assessing what proportion of a permanent and total disablement is the plaintiff's entitlement I should not take into account the fact that he has a occupation of academic nature which, it would seem, is an occupation quite stressful to the plaintiff and that stress is added to by reason of the injuries that he suffered." I do not see that that involved taking into account the particular occupation of the insured person. Rather, it was having regard to the fact that the respondent by virtue of his pre and post-injury capacities, was a person who would be likely to find his occupation as one where he would be using his brain rather than his brawn, and one where stress would have a significant impact upon his capacity substantially to obtain or keep such type of employment. For those reasons I would reject the two specific attacks that were advanced in the appeal upon the way that his Honour arrived at his determination of a 35 per cent proportional figure. Accordingly, I would propose that the appeal be dismissed with costs. Meagher JA I agree. Powell JA I also agree. Mason P Those are the orders of the Court. Appeal dismissed with costs. UNREPORTED JUDGMENTS Counsel for the appellant: J E Maconachie QC with B Shields Solicitors for the appellant: Ebsworth & Ebsworth Counsel for the respondent: C R R Hoeben SC with D J Hooke Solicitors for the respondent: Stacks The Law Firm