Kon v AMP Life Ltd [2006] NSWSC 1304

New South Wales Supreme Court

CITATION : Kon v AMP Life Ltd [2006] NSWSC 1304

HEARING DATE(S) : 27/09/06, 28/09/06, 29/09/06, 04/10/06

JUDGMENT DATE : 4 December 2006

JURISDICTION : Equity Division

JUDGMENT OF : Barrett J

DECISION : Short minutes to be brought in

CATCHWORDS : INSURANCE - income continuation insurance - construction of contract of insurance - meaning of "usual occupation" - contractual definition of "remunerative work"

CASES CITED : Duncan v Prudential Assurance Co Ltd (1999) ANZ Ins Cas 61-433 Hooper v The Accidental Death Insurance Company (1860) 5 H&N 546; 157 ER 1297

PARTIES : Michael Kon - Plaintiff AMP Life Ltd - Defendant

FILE NUMBER(S) : SC 4748/03

COUNSEL : Mr M. Dempsey SC/Mr G.J. Watkins - Plaintiff Mr G. Curtin - Defendant

SOLICITORS : DGB Lawyers - Plaintiff Mallesons Stephen Jaques - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BARRETT J

MONDAY, 4 DECEMBER 2006

4748/03 MICHAEL KON v AMP LIFE LTD JUDGMENT 1 The plaintiff sues upon a contract of insurance issued by the defendant and described as a policy of "income continuation insurance". The plaintiff claims, first, a declaration that, in the events that have happened, he is "unable to work" within the meaning of clause 3 of the contract and that the defendant has breached the contract and, second, judgment for damages, interest and costs. 2 The contract is evidenced by two documents given by the defendant to the plaintiff. One is a certificate, the other a set of "rules". The certificate commences: "This is your Certificate. It sets out details of your policy, including who owns it, who is insured, and the amount of cover you have when this policy starts. The rules of this policy are in the Policy Rules we sent you with the Certificate. Together, the Policy Rules and Certificate form the contract with us. Please keep them in a safe place." 3 The contract goes on to name the plaintiff as both "Policyowner" and "Insured person" and says: "We pay the person who owns the policy. We call that person you. The insured person is the person who must be ill or injured for us to pay." 4 The insurance began on 29 November 2000 and is expressed to end on 31 May 2017. 5 The main operative part of the certificate is as follows: "We pay a monthly benefit if Michael Kon is unable to work. He is unable to work if he: · is so ill or injured that he can't do his usual occupation, and · is under the ongoing care of his doctor for that illness or injury; and · does not do any remunerative work. Please note, if Michael Kon does any remunerative work, but earns less than he did before he became unable to work, we may keep paying a reduced monthly benefit. We call this the Recovery feature . It is explained under the next heading." 6 The "next heading" refers to payment of a reduced amount if the plaintiff does any remunerative work but earns less than he did before he became unable to work. No claim is made in the proceedings by reference to this provision and it may be left to one side. 7 The main operative part of the certificate has a parallel in the rules. Paragraph 3 says: "We pay you if the insured person is unable to work. The insured person is unable to work if: · they are so ill or injured that they can't do their usual occupation; and · they are under the ongoing care of their doctor for that illness or injury; and · they do not do any remunerative work. However, for some people, after they have been unable to work for 2 to 5 years, the first dot point of definition of 'unable to work' will change." 8 The rules go on to explain that the two or five year limit applies only if a reference to it appears in the certificate. Since there is no such reference in this case, the limit need not be mentioned further. 9 It is also made clear by the rules that payments are monthly in arrears. 10 Of the expressions used in the main operative part of the certificate, only one is defined. There is a definition of "remunerative work" in paragraph 68 of the rules: "An insured person is engaged in remunerative work if they are doing work in any employment, business, or occupation. They must be doing it for reward – or the hope of reward – of any type." 11 Neither the certificate nor the rules define "usual occupation" in the sense of ascribing a particular meaning to the particular expression. But the rules do expand upon the concept of inability to "do" one's "usual occupation". After referring to "the definition of 'unable to work' … set out in rule 3 and the Certificate", a section of paragraph 68 of the rules under the heading "Unable to work" goes on to repeat the relevant part of paragraph 3 and continues: "To help you understand our approach, when we assess the insured person's ability to do their usual occupation under the first dot point at the top of this page, the assessment is based on their capacity to carry out any one duty or combination of duties, which is critical to the proper performance of their usual occupation ." 12 Taken together, the certificate and the rules embody a scheme of monthly payment such that if, for a particular month, the insured person is "unable to work", in the sense described by reference to the three cumulative conditions, a payment will be made after the end of that month. There is, however, a "waiting period" which is four weeks. The defendant is not obliged to make any payment unless "the insured person has been unable to work for the waiting period" (these words appear in the rules but are consistent also with the certificate). It follows, as I see it, that onset of a state of "unable to work" marks the beginning of the "waiting period", that the obligation to pay becomes operative four weeks later (assuming that the state of "unable to work" then continues to subsist) and that that obligation is such that a payment becomes due at the end of each succeeding month if the state of "unable to work" has continued throughout that month. 13 There may, of course, be circumstances in which a state of "unable to work" can be seen from the outset to be permanent. A case of severe brain damage is an obvious example. In other instances, a state of "unable to work" may be of a temporary or fluctuating kind. A plumber who breaks an arm but recovers will be "unable to work" only until the break heals. If the plumber later breaks the other arm, a new state of "unable to work" will arise. 14 The plaintiff's contention is that he became "unable to work" at a point in June 2001 and that his entitlement to payment crystallised, as it were, on 11 July 2001 at the end of the applicable "waiting period". The defendant accepted and acted upon a claim submitted by the plaintiff in September 2001 on that basis. Payment of monthly benefits commenced accordingly. On 16 September 2002, however, the defendant notified the plaintiff by letter that his claim "no longer satisfies the policy definition for Total Disablement" and that it had "ceased your claim from 11 February 2002". The letter went on to say: "The reasons are: · Based on all the evidence available to us and in particular, an Independent Psychiatrist report from Dr Lee, indicated that you are fit to return to work in your usual occupation or in any occupation for which you are suited by your education, training or experience, either on a full time or part time basis. On an ex-gratia basis, AMP has decided to pay your claim, up to the date of this letter. A cheque will be forwarded shortly." 15 The plaintiff's solicitor thereafter engaged in correspondence with the defendant which, by letter faxed on 16 September 2002, confirmed the original decision. The letter also said: "A senior medical officer and our Legal area has now reviewed the medical evidence in relation to Mr Kon's claim and has determined, on the basis of Dr Lee's report of 26 November, 2001 that the claim does not satisfy the policy definition of Total Disablement. Dr Lee is a senior specialist psychiatrist with considerable experience in the assessment of Major Depression and Mood Disorder. A copy of his report has been forwarded to Dr Noonan to enable him to discuss it with Mr Kon. The reports of Dr Noonan, the General Practitioner, were considered as was Mr Kon's acknowledgment that he continues to attend his place of work as before the lodgment of his claim." 16 In the result, therefore, the defendant made payments to the plaintiff in an aggregate sum equivalent to the monthly amounts that would have been payable under the policy from 11 July 2001 to 7 August 2002. It is the contention of the plaintiff that he became "unable to work" in June 2001 and that he continued "unable to work" thereafter. The parties have agreed that, if the plaintiff's contention is correct, a sum of $205,667.57 is applicable to the balance of the period from the end of the "waiting period" until trial for which payments have not been made. That balance consists of the period between 7 August 2002 and 7 October 2006. 17 On the plaintiff's approach to the case, there is no separate treatment of individual monthly periods. The plaintiff has thus undertaken the onus of showing that he was "unable to work" throughout each and every one of the relevant monthly periods. 18 For the plaintiff to succeed in claims so formulated, he must show that, throughout that period (a) he was "ill or injured" ("Element A"); (b) he "can't do his usual occupation" ("Element B"); (c) his inability to "do his usual occupation" resulted from the extent and effects of his illness or injury ("Element C"); (d) he was under the ongoing care of his doctor for the illness or injury ("Element D"); (e) he did not "do any remunerative work" ("Element E"). 19 The medical evidence establishes that the plaintiff has, on a continuing basis since 2001, suffered from a depressive psychological illness for which he has been under the ongoing care of his general practitioner, Dr Noonan. He has also received specialist psychiatric treatment from Dr Durrell from time to time. Dr Synnott, a psychiatrist retained by the defendant, saw the plaintiff on an isolated occasion in 2003, and was initially of the view that the plaintiff was not ill. Upon further examination in October 2005, however, Dr Synnott was of the opinion that the plaintiff was suffering from a major depressive disorder. It is clear, in my view, that his evidence, taken as a whole, is not inconsistent with the conclusions of Dr Noonan and Dr Durrell. The onus that rests with the plaintiff in relation to Element A and Element D may be taken to have been discharged in respect of the whole of the period from 7 August 2002 to 7 October 2006. 20 That leaves for consideration Element B, Element C and Element E. 21 In addressing Element B, it is necessary at the outset to determine what the contract means when it refers to "usual occupation" and what the plaintiff's "usual occupation" is to be taken to be. Two questions arise in relation to the relevant concept of "usual occupation". The first is as to time: when the contract speaks of the plaintiff's "usual occupation", to which point of time does it direct inquiry regarding the plaintiff's activities? The second question is as to precision with which the "occupation" must be identified. 22 As to the first question, it seems to me that the "usual occupation" is to be identified at the time of the occurrence or onset of the illness or injury said to ground the right to recover under the contract. Attention is focused on the plaintiff's activities at the time of the illness or injury, rather than at the time of the making of the contract. The approach to construction in this case should, in this respect, be the same as that taken by Franklyn J (with the concurrence of Kennedy and Walsh JJ) in Duncan v Prudential Assurance Co Ltd (1999) ANZ Ins Cas 61-433. His Honour said, at p.74,922: "Relevantly, 'total disability' is the inability of the insured, by reason of an injury which has so occurred, to perform the duties of the insured's 'usual occupation'. It necessarily follows, in my view, that 'usual occupation' there referred to is that of the insured at the time of the injury. That may or may not be the insured's 'usual occupation' at the time of taking out the Policy. To limit the meaning of 'usual occupation' to that current when the Policy was taken out would render the definition of 'total disability' meaningless. If that occupation had ceased to be the insured's occupation at the date of the injury there would not necessary be any duty relevant to it for the purpose of the definition."