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The Federal Court of Australia set aside an AFCA determination, finding that section 54 of the Insurance Contracts Act 1984 (Cth) does not overrule an insurer's decision in circumstances where a requirement of a clause in question in a policy is an inherent limitation of cover.
In issue
- What was the correct 'Date of Disablement' under the policy of insurance in question?
- Whether the plaintiff could rely on section 54 of the Insurance Contracts Act 1984 (Cth) (ICA) to claim Total and Permanent Disablement (TPD) benefits under a policy of insurance, at an earlier point in time.
The background
Ms Buckland was a member of the Australian Retirement Trust, a superannuation fund of which Australian Retirement Trust Pty Ltd (ART) is a trustee. ART held an insurance policy issued by Art Life Insurance Ltd (Insurer) that included provisions for Total and Permanent Disablement (TPD) benefits; Ms Buckland was an insured person under that policy (policy).
The policy provided for payment of TPD benefits where certain defined events occurred, one of which (the contentious clause) was the insured satisfying the requirements of the term 'Date of Disablement'. Date of Disablement was relevantly defined to include:
(i) where an Insured Person is Gainfully Employed, the later of:
(A) the date the Insured Person ceases all work... due to the Injury or Illness for which the Insurance Benefit is being claimed, and
(B) the date on which a Medical Practitioner... certifies in writing that the Insured Person is permanently unable to work again due to the Injury or Illness for which the Insurance Benefit is being claimed.
Ms Buckland ceased work due to an illness on 17 September 2021 and commenced receiving monthly income protection benefits from 18 October 2021.
On 22 August 2022, Ms Buckland's doctor, Dr Jacobs completed a medical certificate (Jacobs Certificate) stating that Ms Buckland's symptoms presented a 'barrier to [her] return to work'. She lodged a TPD claim which was accepted and the TPD benefits were calculated from 22 August 2022 (Insurer's Decision).
On 2 February 2023, another doctor, Dr Burgess, completed a medical certificate which stated that Ms Buckland 'has in fact been incapacitated since she ceased working on 21 September 2021' (Burgess Certificate). Relying on the Burgess Certificate, Ms Buckland sought a recalculation of the TPD benefits payable (i.e. from 21 September 2021, rather than August 2022). As a result, she sought a review of the Insurer's Decision from AFCA.
AFCA determined that Ms Buckland was able to rely on section 54 of the Insurance Contracts Act 1984 (Cth) (ICA) to challenge the Insurer's decision, concluding that TPD Benefit was payable to her from the 21 September 2021 (being the date set out in the Burgess Certificate). The Insurer appealed this determination to the Federal Court (Court).
The decision at trial
As to the issue of the 'Date of Disablement', the Court construed that term by reference to the plain language of the contentious clause. On that basis, it found that the relevant date was 22 August 2022, noting that the parties' intention was that the Date of Disablement be defined with reference to the date on which Ms Buckland became permanently unable to work again, as opposed to date of certification. The Court observed that if the intention were otherwise, it would have been easy to provide in the contentious clause.
The Court also found that Ms Buckland could not rely upon section 54 of the ICA to overturn the Insurer's Decision, noting that:
- The demand for additional payment (by reference to the Burgess Certificate) effectively sought to reformulate the original claim based upon new and different evidence, and therefore amounted to an attempt to reformulate the cover provided by the policy. Permitting Ms Buckland to do so would offend the principle that a court, when applying section 54 of the ICA, looks at the claim that was actually made.
- Ms Buckland's failure to obtain a medical certificate certifying her as permanently unable to work again due to injury or illness, was not an 'act or omission' within the scope of section 54 as it was not possible for a medical practitioner to make the diagnosis of the level of Ms Buckland's incapacity prior to August 2022.
- The making of a prediction by a medical practitioner (and embodied in a certification) during the policy period, that the insured will be unable to return to work in the future, is a restriction or limitation inherent in the cover.
- The policy is multifaceted, providing benefits arising from several identified circumstances, with each of the benefits payable by reference to specific temporal occurrences. If section 54 applied in the manner alleged, it would produce the outcome by which Ms Buckland would be eligible for dual benefits over the same period.
The Court allowed the appeal and set aside the decision of AFCA with no order as to costs.
Implications for you
This decision demonstrates that section 54 will not apply to an inherent restriction or limitation in the policy. It is also a timely reminder of the principles that a court will apply when interpreting contracts and in particular, highlights the importance of the plain text and commercial intentions of the parties when it comes to policy interpretation.
Australian Retirement Trust Pty Ltd ATF Australian Retirement Trust v Buckland [2025] FCA 1563
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