Newsletter - December 2003
Welcome to the first edition of the Flint Forensics Pty Ltd semi-annual newsletter.
This newsletter is to help keep you informed of the latest developments relevant
to Life Policies and personal and commercial litigation support. It is a free
service provided by Flint Forensics Pty Ltd.
Index
Life Insurance
The fact briefly was that the insured claimed misrepresentation on a medical
issue.
The court rejected the fact that the underwriters would have deferred the risk
if the true facts were known and therefore could avoid the policy at inception.
The principle was that the underwriter had to demonstrate that they would have
eventually declined the risk to have sufficient evidence to avoid the policy.
A summary of the findings is as follows:
- The plaintiff suffered an illness or injury whilst she was working in regular
employment for income with Queensco-Unity Dairyfoods Co-operative Association
Limited.
- That as from 17 December 1999 the plaintiff had been absent from and unable to
work because of the said injury or illness for a continuous period of at least
six months.
- That the defendant had not made a decision within the meaning of clause 19.1
of the policy of insurance as at September 2000.
- That the plaintiff was incapacitated to such an extent as at September 2000 that
she was unlikely ever to be able to work again in her "own occupation" as a result
of the said injury or illness.
- That the plaintiff in her proposal for insurance complied with her duty of disclosure
within the meaning of s.21(1) of the Insurance Contracts Act 1984 (Cth).
- That the plaintiff in her proposal for insurance made statements which were not
misrepresentations within the meaning of s.26(1) and s.26(2) of the said Act.
- That the defendant has failed to discharge its onus of proof in relation to s.29(3)
of the said Act.
The principle that came out of this case was that it was reasonable that the
insured can refuse medical treatment. The judge concluded that the insured was
unwilling to contemplate surgery. Given the lack of medical consensus as to the
utility of surgery, and given the absence of any recent assessment to confirm
the presence of a fragment which might be susceptible to surgical removal, that
reluctance cannot be regarded as reasonable.
A summary of the findings is as follows:
- Taking into account all of the evidence before me, and standing in the shoes
of the Board, I am satisfied that as at September 1999 the Applicant fell within
paragraph (b) of the definition of disability, for a number of reasons.
- I turn firstly to the causation issue in the definition. It was submitted by
the Respondent that the Applicant's disability is not to be regarded as permanent
because the reason for the permanence lies not in the nature of the Applicant's
condition but in his refusal to have surgery and undergo rehabilitation.
- In the circumstances of this case, I do not regard the Applicant's refusal to
have surgery or refusal to undergo rehabilitation as breaking the chain of causation
in this regard.
- Firstly, the Applicant's treating general practitioner and treating psychiatrist
concluded that the Applicant is psychiatrically unfit for any work, given his
depression. Each of them opined that an improvement in his psychiatric condition
depended on an improvement in his physical condition. All the doctors who examined
him from an orthopaedic perspective agreed that participation in a pain management
program, and/or surgery to repair the damaged disc, coupled with rehabilitation,
could result in sufficient physical recovery to enable a full return to work in
the future. However, there is no consensus as to whether surgery is indicated,
nor whether it is likely to produce an improvement in symptoms sufficient to facilitate
rehabilitation and a return to work. Two of the Board's medical practitioners
(Mr Williams and Mr Kudelka) disagreed about whether surgery was indicated, while
two of the medical practitioners who provided reports on behalf of the Applicant
(Dr Horsley and Mr Gillot) indicated that surgery ought to be contemplated. The
Applicant is unwilling to contemplate surgery. Given the lack of medical consensus
as to the utility of surgery, and given the absence of any recent assessment to
confirm the presence of a fragment which might be susceptible to surgical removal,
that reluctance cannot be regarded as unreasonable.
- Given the equivocal nature of the evidence in relation to the utility of surgery,
it would be inappropriate to conclude that the failure to take up the option of
surgery is a matter which should weigh against the Applicant in considering the
issue of permanence within the first part of the definition of "disability" in
s.3 of the Act.
- It was also submitted on behalf of the Respondent that the failure to take up
the option of rehabilitation is another matter which ought to weigh against a
finding that the Applicant's is disabled within the terms of s.3. It was submitted
that a reasonable person in the Applicant's shoes would have participated in the
proposed rehabilitation program, and would have recovered sufficiently to return
to work.
- The reluctance of the Applicant to participate in a rehabilitation program is
certainly more troubling than the refusal to contemplate surgery, given the consensus
that, were it to succeed in allowing the Applicant to cope with his symptoms and
thereby alleviate his depression, a return to more than part-time work in the
future might be contemplated. Again, however, on one view (the Applicant's), that
reluctance is not unreasonable because of his fear of pain and his previous experience
concerning active physiotherapy.
- I consider that the Applicant is affected by depression, and by a chronic pain
syndrome, and also that he has in effect set his mind against any rehabilitation,
partly because he is afraid of its potential to aggravate his symptoms. The test
of reasonableness in this context requires one to invest the reasonable person
with the characteristics of the Applicant, including his depression, chronic pain
syndrome, back pain, and fear of exacerbating his pain. All of these characteristics
arose in the context of the Applicant's back injury. In these circumstances, I
do not consider that the chain of causation has been broken by the Applicant's
failure to undergo rehabilitation. Moreover, it is clear on the evidence that
this situation is unlikely to change, particularly since the Applicant has put
on a lot of weight and has become further de-conditioned since 1999. In my view,
the Applicant is unlikely to be able to work for the foreseeable future, due to
his back injury and its sequelae (depression, chronic pain, etc). I am satisfied
on the evidence that the first part of the definition in s.3 is made out.
- I turn now to consider whether the Applicant falls within part (b) of the definition
of "disability" in s. 3 of the Act. I consider that he does, for a number of reasons.
- Two of the Board's practitioners (Mr Williams, Dr Baker) failed to properly address
the issue of disability. Each of them merely attributed the Applicant's failure
to improve on his abnormal illness behaviour, and then proceeded to the conclusion
that there was no organic or physical obstacle to a return to work doing small
electrical repairs etc. Dr McLellan also provided a brief report in which he asserted
the Applicant's fitness for all light duties. One of the Board's medical practitioners,
Mr Kudelka, did address the issue of restrictions, and found the Applicant fit
for "other duties", provided the Applicant was not required to bend, stoop or
lift, and where he was free to stand, sit and walk around as he feels comfortable,
for "four hours per day and possibly longer". He agreed with the extensive restrictions
imposed by Dr Horsley, as did most of the medical experts who considered her report.
- I prefer the evidence of Mr Kudelka and Dr Horsley in this case because they
each gave due consideration to the physical limitations imposed by the Applicant's
condition. Dr Baker did not in my view properly address the kinds of restrictions
( in terms of duties and hours of work) to which the Applicant would be subjected
by virtue of his symptoms. The weight of the medical evidence concerning the type
of work for which the Applicant would be able to undertake tends to the conclusion
that the Applicant may be capable, at best, of undertaking light work not involving
bending, stooping, lifting or prolonged sitting, standing or walking, for up to
four hours per day for now. Fitness for light duties was held not to exclude the
respondent from the benefits of the Death and Disablement Plan in Cavill, and
I do not consider that fitness for some "other duties" for four hours per day
prevents the Applicant here from falling within the definition of "disability"
in s. 3 of the Act.
- Put at its highest in favour of the Respondent's position, there was general
evidence from Mr Thomas as to the availability of jobs involving bench-work repair
of electrical equipment, or sales jobs in retail or wholesale electrical establishments,
and some medical evidence as to the fitness of the Applicant to perform such duties
(from Dr Baker and Mr Kudelka) but no specific evidence concerning the availability
of real positions in the marketplace for part-time (given the four-hour per day
limit prescribed by Mr Kudelka) which would accommodate the restrictions imposed
by Dr Horsley.
- For the reasons outlined above, I am satisfied on the evidence that the Applicant
is for the foreseeable future unable to work full-time in the positions that are
relied upon by the Respondent. I am also unable to be satisfied on the material
before me that there are real positions available in the marketplace to the Applicant
given his current restrictions (ability to work four hours per day etc.).
- A number of further matters were relied upon by the Respondent in support of
the decision under review. It was submitted that the Applicant lacked credit,
that he was prompted to make his application for a pension not by his disability
but by his imminent retrenchment, and that on the evidence there has been some
improvement in the Applicant's condition such that a return to employment may
be contemplated in the future if the Applicant has rehabilitation and re-training.
- The Applicant was in my view a poor witness, whose poor level of communication,
inability to answer simple questions put to him, along with continual claims that
he did not remember basic details, stood in sharp contrast to the picture portrayed
of him by Dr Horsley and indeed Dr Parekh. I consider that there was an element
of exaggeration to his presentation before the Tribunal. On balance, however,
I do not consider that he was being dishonest in his evidence. On a number of
occasions prior to his retirement, the Applicant returned to normal duties, full-time,
after having time off for his injured back. On the occasion of the last exacerbation,
the Applicant was only able to return to work part-time on light duties; he retired
shortly thereafter. In my opinion the narrative in this regard does not support
the conclusion that the basis for his retirement was a dishonest pursuit of the
pension. Finally, whilst it is clear on the evidence that the Applicant's psychological
state has improved somewhat, and that his walking, sitting and standing tolerances
have improved a little, it is also clear that he has become further de-conditioned
physically. Other aspects of his circumstances - the depression, chronic pain
syndrome, fear of surgery and of pain caused by any rehabilitation exercises -
remain. In these circumstances, I do not consider that the improvements are such
as to impact on the likely permanence of his condition. In the unlikely event
that any such changes occur, it is open to the Board to take action under s.43
of the Act.
- I consider that the weight of the evidence tends to the conclusion that the Applicant
falls within the definition of "disability" within s.3 of the Act, in that he
is permanently unable by virtue of his back injury and its sequelae to perform
"any other duties" within the terms of paragraph (b) of the definition and that
he has retired "on the ground of disability" pursuant to s31 of the Act.
The insured had got a medical opinion and a long term strategy, which he obeyed.
However, he had not gone to the doctor on a monthly basis.
The principle that came out of this case was that as he followed the doctors
instructions he was found to be under continuous care, the fact that he did not
go every month was irrelevant as the treatment strategy and instruction were given
on the last consultation and there was no need of regular treatment.
ATO Interpretative Decision ATO ID 2003/767 Income bond and life insurance policy:
date of commencement of risk.
FICS
Hot Items for an Issued Focus
This edition?s important rule and objective;
Rule 33 http://www.fics.asn.au/FICSRules.pdf : The FICS Panel decisions do not create binding precedents.
Non disclosure or Misrepresentation Policy Avoidance
In terms of the Schaffer case discussed above FICS imposes a heavy evidentiary
burden on an insurer where it seeks to avoid a contract based on non-disclosure
or misrepresentation. The insurer shall establish that in the one condition had
it been disclosed, it would not of entered into the contract on any terms. For
further reading on a determination can be found by reviewing 99-9323 (PDF).
It is pertinent to note that that in reviewing matters not disclosed, the Panel
would consider whether the insured at the time of application:
- had actual knowledge of the matters not disclosed,
- was provided sufficient information to put the insurer on notice,
- had an "honest" belief that the matters non disclosed were "minor" and did not
require disclosure,
- whether a reasonable person would consider the matters relevant,
- the types of questions asked and their clarity on the forms,
- the credibility and consistency of explanation,
- had the necessary skills, business experience and familiarity with other document
transactions and
- other factors depending on the non-disclosure item.
Further reading at FICS Bulletin 12 (PDF) ? Practice Note 1.
How many times can you go to FICS for a resolution
There is no scope to resubmit a submission to FICS for a determination after
the Panel?s determination. The Panel?s determinations D 02-11727 (PDF) and D 99-9323 (PDF) illustrate the point. Therefore as an insurer, it is practicable to put
the best position forward in the initial submission.
New FICS Procedures
The FICS Information Exchange Policy has been issued and effective 4 August 2003.
This is a four page document, a must read as there are significant changes to
consider when preparing and lodging submissions.
Further reading at Practice Notes and Procedures (PDF) issued 25 July 2003 (i.e. Practice Note 2).
High Court Judgements
Insurance ? Contracts ? Public Liability cover of operator of marine pleasure
craft used for commercial paraflying ? whether insurance a contract to which Marine
Insurance Act 1909 (Cth) applied.
Gibbs v Mercantile Mutual Insurance (Aust) Ltd (2003) HCA 39 (5 August 2003)
From 1986 the appellant operated a marine pleasure craft on the Swan River in
Perth for paraflying. He insured the vessel with the respondent against liability
to third parties. In 1989 a woman sued the appellant after receiving injuries
while paraflying. The respondent denied indemnity contending the insurance policy
was a contract under the Marine Insurance Act 1909 (Cth) and that therefore the
failure of the appellant/insured to give notice of the occurrence could not be
relieved under the provision under the Insurance Contracts Act. This was rejected
by the primary judge but accepted by the Full Court of the Supreme Court of WA
and on appeal, by a majority of the High Court: Gleeson CJ; Hayne, Callinan JJ;
contra McHugh J; Kirby J. The majority observed providing indemnity against liability
to third parties was a form of marine insurance and the activity of paraflying
took place in estuarine waters to which the Marine Insurance Act applied. (Subsequently
the Insurance Contract Act was amended to provide the Marine Insurance Act does
not apply to contacts of insurance in respect of pleasure craft). Consideration
of the relationship between marine and general insurance. Appeal dismissed.
Federal Court Judgements
Courts ? discovery ? release from implied undertaking as to use of discovered
documents.
ASIC v Marshall Bell Hawkins Ltd (2003) FCA 833 (8 August 2003)
Merkel J considered whether special circumstances justified a party being released
in the interests of the administration of justice or in the public interest from
the implied undertaking not to use discovered documents other than for the proper
conduct of the proceeding in which they were discovered.
Personal Injury
Royal Assent of Significant Injury Act in Victoria
On 16 June 2003, the Significant Injury Act was given royal assent. It applies
to all claims arising out of injuries that occur after 20 May 2003. From 1 October
2003 it applied to all claims subsequently issued, whatever the date of injury.
Injured people cannot seek damages for pain and suffering unless they are left
with a significant injury. A ?significant injury? for the purposes of the Act
is defined as a physical impairment greater than five per cent in accordance with
the fourth edition of the American Medical Association Guides to the Evaluation
of Permanent Impairment.
Structured Settlements
The federal government has now passed amendments to the Income Tax Assessment
Act 1997, which will allow income tax exemption where certain conditions are met
pursuant to the Taxation Laws Amendment (Structured Settlements) Act 2002. The
commonwealth legislation excludes death and workers compensation claims. It must
only be for personal injury. It must include at least one structured settlement
annuity and can include a lump sum as well. As part of the settlement, the insurer
must purchase the annuity from a life insurance company or a state insurer.
For income tax exemption to apply, the settlement must provide at least one annuity
providing monthly payments equivalent or greater than the current aged pension,
which is approximately $1,000 per month at the present time. The annuity must
also be CPI indexed and payable for the life of the plaintiff. The annuity must
not be assignable or commutable.
Further annuities above the pension level can also be included in the settlement
but must provide for payments to the successful plaintiff at least annually over
a 10 year period.
Interstate Claims
The decision of John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503; (2000) 172
ALR 625 has clarified the law for torts committed in Australia which have interstate
component. All questions of substance will be determined by the law governing
the place of commission of the tort.
The decision in Pfeiffer now makes a prospective plaintiff to apply the law of
the state where the accident occurred.
I have summarised the major components of motor vehicle accident law for Victoria,
New South Wales and Queensland.
Victoria
Motor Vehicle accidents that occur in Victoria are governed by the Transport
Accident Act 1986 (VIC) (?TAC?). TAC pursuant to s35 provides for a no fault,
third party compensation scheme that covers motor vehicle accidents in Victoria
and, where the vehicle is registered in Victoria, accidents that occur interstate.
It is also worth noting that finalisation of an interstate damages claim brings
to an end no fault entitlements under the Act.
The no fault scheme provides for the payment of medical and related treatment
expenses, loss of earnings and earnings capacity benefits and lump sum for permanent
impairment.
In order to take advantage of the scheme, a report of the accident must be made
to the police. In addition, an injured person must lodge a claim with the Transport
Accident Commission within one year of the date of an accident or manifestation
of injury. In certain circumstances this can be extended to three years.
A common law claim for damages is also available under the scheme but limited
in its application by virtue of TAC. In order to proceed with a common law claim
it is necessary to demonstrate that the injured person has a whole person impairment
of 30 per cent or greater or that they have suffered a serious injury. The limitation
period for common law claims for transport accidents in Victoria is six years.
This period can, in certain circumstances, be extended.
If the prospective plaintiff has not lodged a claim with the Transport Accident
Commission with the time frame allowed, they will be prevented from obtaining
an impairment assessment. They will, therefore, be prevented from proceeding with
a common law claim.
New South Wales
Unlike its Victorian counterpart, there is limited provision for no default benefits
within the NSW scheme. This is a modified common law, fault-based scheme where
some heads of damages are limited. Treatment expenses are payable where there
has been early notification of injury and the claim has been accepted.
The governing legislation is the Motor Accidents Act 1988 (NSW), as amended by
the Motor Accidents Compensation Act 1999 (NSW). The Motor Accidents Act contains
a number of specific steps that must be undertaken before proceedings for the
recovery of damages can be commenced.
Most notable is the requirement that the relevant compulsory insurer must be
notified, in the prescribed form, within six months of the date of the accident.
An extension of this time requirement is available but only where full and satisfactory
explanation for the delay can be provided. In addition, the limitation period
for the issue of common law proceedings is three years from the date of the accident.
There is provision to make an application for an extension of that time period.
For a potential plaintiff to recover damages for non economic loss they must
establish a greater than 10 per cent whole person impairment, using the fourth
edition of the AMA guidelines. In making the assessment of whole person impairment
it is not possible to combine physical and psychological impairment. There are
caps and thresholds for both economic and non-economic damages.
Within the NSW scheme and unless a claim is settled or exempted, the Claims Assessment
and Resolution Service deals with liability and compensation disputes. Only relatively
complex claims are likely to be exempted.
Queensland
Like its immediate southern sister, Queensland has a common law based system
and in this case no provision for the payment of no fault benefits. What distinguishes
the Queensland system is the regulation of the manner in which claims must be
brought. The relevant legislation is the Motor Accident Insurance Act (1994) (QLD)
as amended by the Civil Liability Act 2003 (QLD).
Potential plaintiffs must report the incident to the police and complete a notice
of accident claim form. This form must be lodged with the compulsory third party
insurer (or the nominal defendant in the case of an unidentified or unregistered
vehicle). The form must be lodged within the sooner of:
- nine months from the date of the accident;
- the first appearance of symptons; or
- one month of the date of the first consultation with a solicitor about making
a claim. Any late notice must contain a ?reasonable excuse" for the delay.
In the case of an unidentified vehicle the form must be provided to the nominal
defendant within three months of the date of the accident. This time limit may
be extended to nine months. This time limit may be extended to nine months. However,
after this time any claim is statute barred. Again, any late notice must contain
a ?reasonable excuse? for the delay.
What follows is a detailed pre-issue process including compulsory conferences
and mandatory final offers. Only after these steps have been completed can common
law proceedings be issues.
The common law proceedings must be issued within 60 days of the compulsory conference,
but there is provision for the extension of time in certain circumstances. The
overall limitation period for common law claims is three years.
Source: O?Halloran ?Interstate Claims:, LIV, October 2003 at 41-42
New Additions to Web Site
Flint Forensics Pty Ltd made a submission to the National Workers Compensation and Occupational Health & Safety Frameworks
Inquiry on 12 August 2003. Submission by Flint Forensics is number 150 on the
Productivity Commission?s web site.
Reasonable Benefit Limits table: This table is used to determine the concessional tax rates limits of reasonable
benefit limit (RBL) for a particular financial year. Includes both the pension
and lump sum RBL.
Superannuation guarantee rate: This table details the historical and current statutory superannuation charges.
Low rate threshold?post-June 83 components of eligible termination payments: This table contains the low rate threshold limits set each financial year for
the cash amount of any post-June 1983 component a person can receive that is taxed
at the lowest rates for eligible termination payments. The limit is a lifetime
limit.
Perpetual Calendar: This table is designed to work out the day of the week of a particular date
falls on. Covers 1897 to 2036.
Administrative Changes
DX Address
Flint Forensics Pty Ltd now has a DX address. Mail can now be sent via DX to
Flint Forensics Pty Ltd at DX 11319 Hurstville.
Postal Address
Flint Forensics Pty Ltd mail can continue to be posted to Sydney Head Office
at PO Box 249, South Hurstville NSW 2221.
If you are in Melbourne you can post mail to Flint Forensics Pty Ltd at GPO Box
650, MELBOURNE Vic 3001.
Similarily, if you are in Brisbane you can post mail to Flint Forensics Pty Ltd
at P O Box 10761, Brisbane Qld 4000.
Melbourne and Brisbane
I am at least once a month in Melbourne and Brisbane, so phone now to arrange
time that is convenient to you to discuss any issues you may have. Employ the
thinking of a Chartered Accounting Firm.
In the next edition, look forward to an update of the topics already discussed,
there will be a new article on the Financial Transactions Reports Act 1988 and
a continued discussion on the other states in relation to personal injurty interstate
claims that were not covered in this newsletter.
Talk to you soon,
Bruce Flint
Managing Director
FLINT FORENSICS PTY LIMITED - Assessment of Economic Loss, Expert Witness, Financial
and Other Investigations, Income Protection Risk Management, Regulatory Investigation
and Assessment, Training and Valuations
PH: 02 9584 1474 FAX: 02 9584 1475 MOBILE: 0409 18 4598
WE AIM TO PROVIDE PROFITABLE SOLUTIONS
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