Hoare v Mercantile Mutual

The plaintiff ticked beside the last quoted sentence. 7 It is interesting, in the light of subsequent submissions about the nature of the policy, that in its application form the defendant described it as "a life policy". 8 In the third paragraph headed "Declaration" the plaintiff acknowledged, inter alia, that he had read and understood the questions in the personal statement and in particular acknowledged his duty of disclosure to the defendant; that each statement he had made to the defendant or any other person in relation to the insurance and in his personal statement was true and correct; that the defendant would rely on those statements in deciding whether to issue a policy and its terms and premium; that he authorised any medical practitioner to disclose any information about him in relation to the insurance or any claim; and that the statements made in the application were true and correct. 9 The policy terms were included in a document headed "Merc Income Protection" and "Merc Business Expenses Plan". The document set out to explain "key features" to assist a person applying for insurance to decide whether the income protection policy would meet his or her needs and to compare it with other policies he or she may be considering.

The Policy Terms 10 The defendant agreed to pay the plaintiff the relevant benefits under the policy if he was totally disabled as a result of an illness or injury, although if the premium had not been paid the defendant did not have to pay any benefits and may cancel the policy. The non-payment of premium is not a relevant issue in the present case. 11 "Totally disabled benefit" provided that to receive a monthly benefit the plaintiff must be totally disabled for the duration of the waiting period. There was also a provision for partially disabled benefit, which was not relevant to the present case. 12 Under the heading "If You Die", it was stated:- "An additional monthly benefit is payable as a lump sum if you die while on claim." 13 Clause 6 provided for benefit reductions. The defendant was only prepared to pay seventy five per cent of the "actual income". Accordingly, in the case of the plaintiff, the actual income of $80,000, as he disclosed, entitled him to an annual payment of $60,000 being $5,000 per month. 14 Clause 6 provided for benefit reductions in the event of the plaintiff's receiving moneys from other sources whilst totally disabled and in consequence of that disablement. Thus, in those circumstances, the policy topped up the difference between the moneys received from either workers' compensation payments or various forms of welfare payments or any payments made under any other disability, injury or sickness policy to $5,000. 15 The policy was index linked, clause 8 stating that the defendant automatically adjusted the monthly benefit every year at the renewal date by "the indexation factor". The same clause provided that the plaintiff was not required to pay the premium whilst "on claim", those words being defined as:- "A totally disabled benefit period or a partially disabled benefit period as the case may be." 16 Clause 9 dealt with the premium, which was stated to include the policy fee, government charges and any administration charges. It continued:- "We calculate the premium at the policy start date and at each renewal date. For the life of this brochure, the minimum premium is $300 pa where it is paid annually, $309 pa where it is paid half yearly and $315 pa where it is paid monthly." 17 Under the heading "Variation of Premium Rates", it was stated:- "The premium may vary if premium rates change. We can only vary it if we vary premium rates for all similar policies. If we do make any changes, we will give the policy owner three months notice." 18 The policy terms concluded with a number of definitions and, under the heading "Totally Disabled/Total Disability", it was stated:- "(i) Occupation categories 1, 2 and 3: Injury or illness that stops you performing one or more of the duties of your regular occupation necessary to produce income as confirmed by a medical practitioner and you are not engaged in any other gainful occupation."

It was common ground that the plaintiff fell within occupation category 3. 19 The defendant issued a Policy Document notice to the plaintiff stating the policy number; his name as the policy owner and life insured; the policy start date of 14 January 1998; the policy expiry date of 14 January 2014; the monthly benefit of $5,000; the occupational category as 3; the benefit period being to age 65 years; the waiting period being 30 days; and the amounts payable by way of premium.

The Claim 20 In about April or May 1998 the plaintiff made a claim for total disability and, by letter dated 30 July 1998, the defendant forwarded to him a cheque for $3,518.61 "representing a progressive payment of your claim". That was for the period 19 June 1998 to 18 July 1998 and was stated to be calculated on the basis that the defendant had determined that earnings for the year were $52,059.29 rather than "$80,000 as disclosed on your application". This figure was derived from the net profit derived by The Hoare Family Trust for the financial year ended 30 June 1997, although, for that year, the gross income of the plaintiff was disclosed, in his Income Tax Return, as $26,042 and, after various deductions the taxable income was stated to be $21,089. 21 Thereafter payments continued to be made and, in circumstances which do not require any elaboration, by 2 July 1999 the payment for the period 19 May to 18 June 1999 had increased to $5,000 per month and the waiver of premium payable, namely $217.98, gave rise to a total amount, which the defendant paid to the plaintiff of $5,217.98. Payments continued based on $5,000 per month, which was adjusted, until September 1999. 22 In paragraph 9 of his Summons, issued on 7 June 2000, the plaintiff alleged that from 19 June 1998 to 19 September 1999 he was paid monthly benefits amounting to $66,430.91, which the defendant did not admit, but which did not seem to be in issue on the hearing. 23 In paragraph 10 he pleaded that by letter dated 8 October 1999 the defendant advised him that it would not pay him any further total disability benefits under the policy on the basis that it had advice from his treating doctor that he was not totally disabled and able to resume some work on a part time basis. The defendant admitted this allegation. 24 The defendant asserted, in paragraph 6 of its Defence, that it entered into the policy on the basis of the information provided in the application form; and in paragraph 7 that the application stated, inter alia:- "(a) that the plaintiff's actual income was $80,000; (b) that his occupation was licensed builder; (c) that a description of his present duties was supervisor 'Home Reo's'; (d) that twenty per cent of his time was spent in manual work; (e) that the date of his last consultation with a doctor was 1996; (f) that the reason for that consultation was a common cold; and (g) that to the best of his knowledge he did not have any neck, back, shoulder or knee problems, broken bones, repetitive strain injury, gout, muscle or joint problems." 25 The pleading alleged that these statements were untrue and constituted misrepresentations; that the plaintiff failed to comply with his duty of disclosure; that if the representations had not been made or if the plaintiff had complied with his duty of disclosure the defendant would not have issued the policy or would not have issued it on the same terms and conditions and for the same premium; that the plaintiff had failed to disclose details of his income and entitlement to payments and had breached his duty of utmost good faith; and that the defendant denied that he was prevented by illness or injury, as defined in the policy, from performing one or more duties described in the application as comprising his regular occupation. The claim that the defendant would not have issued a policy was not pursued. 26 The plaintiff replied that the defendant was estopped from "avoiding the policy" for various reasons, and "from relying on the alleged misrepresentations or non-disclosures" for the same reasons. 27 On the hearing Ms Oakley stated that the defendant had not and was not purporting to avoid the policy and that, subject to its being established that the plaintiff was totally disabled within the meaning of the policy, and that had he disclosed the true position an exclusion for neck pain would not have been imposed in the policy, it would continue to make payments to him conformably with s.28(3) of the Insurance Contracts Act 1984.

The Basis Of The Defendant's Defence 28 The defendant's Defence proceeded on the basis that the plaintiff was insured under a contract of general insurance, which is defined by s.11(6) of the Insurance Contracts Act as one that is not a contract of life insurance. 29 The same Act defines a contract of life insurance as one that constitutes a life policy within the meaning of the Life Insurance Act 1995. 30 A "life policy" within the meaning of the latter Act is defined in s.9(1) as meaning:- "(1) Subject to sub-section (2), each of the following constitutes a life policy for the purposes of this Act: (a) A contract of insurance that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life; … (e) A continuous disability policy; … (2) A contract that provides for payment of money on the death of a person is not a life policy if: (a) by the terms of the contract, the duration of the contract is to be not more than one year; and (b) payment is only to be made in the event of: (i) death by accident; or (ii) death resulting from a specified sickness."

It was not submitted that sub-s.(2) applied. 31 Section 9A defines a continuous disability policy as being one, subject to that section, that is, by its terms, to be of more than three years' duration; and under which a benefit is payable in the event of the death, by accident or some other cause stated in the contract of the person whose life is insured, or injury to or disability of the insured as a result of accident or sickness, or the insured's being found to have a stated condition or disease. 32 Sub-section (3) provides:- "A contract of insurance is not a continuous disability policy if the terms of the contract permit alteration, at the instance of the life company concerned, of the benefits provided for by the contract or the premiums payable under the contract." 33 Sub-sections (4) and (5) provide:- "(4) A contract of insurance the terms of which permit alteration, at the instance of the life company concerned, of the benefits provided for by the contract is not thereby excluded by sub-section (3) from being a continuous disability policy if, by those terms, the only alterations that are permitted to be made are alterations that improve the benefits and are made following an offer made by the life company and accepted by the owner of the policy. (5) A contract of insurance the terms of which permit alteration, at the instance of the life company concerned, of the premiums payable under the contract is not thereby excluded by sub-section (3) from being a continuous disability policy if the terms of all contracts of the same kind as the contract only permit such alterations if they are made on a simultaneous and consistent basis." 34 The plaintiff asserted that the policy was a life policy and, accordingly, that s.29 of the Insurance Contracts Act applied. Sub-section (1) thereof provides:- "(1) This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into: (a) failed to comply with the duty of disclosure; and (b) made a misrepresentation to the insurer before the contract was entered into; but does not apply where: (c) the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or (d) the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds." 35 There was, in my opinion, a failure by the plaintiff to comply with his duty of disclosure and he did make misrepresentations in respect of his income, neck pains and occupation. Therefore, prima facie, the section applies. The question then is whether it ceases to apply by dint of the provision of sub-s.(c). I am not satisfied that the defendant would have entered into the contract into which it did, which I assume is "the contract" to which reference is made. That lack of satisfaction does not arise because of the failure to disclose the neck condition, because I am not satisfied that the defendant has established that an exclusion would have been imposed. Rather, I am satisfied that had the defendant known the true amount, it would have insured for a lesser figure. The evidence of Mr Robinson was unchallenged on this point. 36 Therefore, in my opinion, s.29 does not apply because, in relation to the benefit payable, the defendant would not have entered into "the contract" and, therefore, the insurance contract cannot be avoided, by recourse to sub-s.(4), and the other provisions of s.29 do not apply.

Total Disability 37 I have referred to the three matters the plaintiff must show to establish total disability. He has alleged, and I accept his evidence in these regards, that he is suffering from neck pain and that he is not engaged in any other gainful occupation. Ms Oakley cross-examined the plaintiff thoroughly about each of these matters. Notwithstanding that cross-examination I do not consider that she has established that the plaintiff is not suffering in the way in which he alleges, which is confirmed by various medical reports tendered in Exhibit A, nor do I consider that he is engaged in any other gainful occupation. An attempt was made to establish that he had been employed by a Mr Peter Grant. Mr Grant was subpoenaed, on short notice, to appear, but did not do so. Not only did Ms Oakley not press compliance with the subpoena, but she expressly withdrew the assertions she had made to both the plaintiff and his wife to the effect that the plaintiff had worked for Mr Grant. She said, Tp.55:- "Further enquiries have been made, concerning the evidence that he was intending to give, and, on the basis of those enquiries, I have been instructed that my client does not seek an adjournment to meet Mr Grant's convenience and withdraw the matters I put to Mr Hoare in cross-examination, to the effect that he had done work in the past week for Mr Grant and to Mrs Hoare." 38 The plaintiff's evidence as to his incapacity and not engaging in gainful employment was corroborated by his wife, who was a most impressive witness. 39 I find it unnecessary to rehearse their evidence, which is to be found in their statements, which are Exhibits C and D respectively and which, notwithstanding, as I have said, the careful cross-examination of Ms Oakley, were not in any way dented. Further, there was no other evidence called, which would contradict their evidence on these points. 40 The third matter the plaintiff had to prove was that he was suffering from an injury which was confirmed by a medical practitioner. He brought forward no evidence to establish this, but the defendant did. The defendant referred the plaintiff to Dr Suzanne C. Homolka, an occupational physician. By letter dated 6 July 1999 she was advised that the defendant was considering a claim for disability benefits by the plaintiff and it was confirmed that she would examine him on behalf of the defendant on 29 July 1999. 41 Dr Homolka was advised that the stated disability was neck pain and asked to include in her report, although not necessarily limiting it to these matters, the following:- "1. Your opinion on the diagnosis and causation and a full medical/surgical history. 2. Physiological and psychological effects. 3. Presenting symptoms and your opinion on the effect they have on his ability to perform the duties of his usual occupation. 4. His current condition. 5. Full details of his current capabilities. Please list the duties of his usual occupation and identify the duties he is currently able to perform based on his job description at the date of disability. 6. Do you consider he is disabled? If so, to what degree do you consider he is disabled, if at all? If you do not consider he is disabled, are you able to provide us with an approximate date you believe he ceased to be disabled and would have been capable of returning to any work, irrespective of lack of available work or employment. 7. Prognosis, short term and long term. 8. Do you consider he would be able to resume his usual occupation or be capable of performing any other work for reward in any occupation or work which he is reasonably capable of performing by reason of education, training or experience, on a part time or full time basis? If you consider he is capable of any work, we would appreciate your opinion on the number of hours you feel he is capable of working (regardless of any restriction on the number of hours available to him as a result of being employed for specific hours or lack of available work). 9. Full details of all steps, measures or treatments which may, could be or have been undertaken to facilitate a return to work for him. 10. Are there any complications which you feel may have prolonged the period of disablement? 11. Full details of previous and current treatment including names of treatment providers. 12. Any other information which you consider would assist us in considering this claim." 42 It seems strange to me that Dr Homolka was not told the nature of the employment the plaintiff had asserted in his application he was undertaking. It may well be, however, that the reason for this is quite simple. The defendant did not accept that the plaintiff was engaged in work of the type and to the extent he asserted. Its case was that far from him spending only twenty per cent of his time engaging in manual work, he spent the whole of his time doing so, with which he agreed. Therefore, as Mr Seton submitted, the defendant could not have it both ways. It could not assert, on the one hand, that he was in fact engaged in manual work for one hundred per cent of the time, so as to demonstrate that he had made a misrepresentation, but have him medically assessed for the purpose of determining total disablement on the basis that he was only engaged in that type of work for twenty per cent of the time. 43 Dr Homolka's report, which is dated 3 August 1999 and commences at p.80 of Exhibit A, is highly favourable to the plaintiff. It provides further support for the neck condition of which he complains and for his inability to perform, at the least, one of the duties of his regular occupation. She set out his history in detail and the result of her clinical examination of him. She considered various x-rays and scans and, offered the following summary and opinion:- "In summary therefore Mr Hoare is a fifty year old, previously self-employed carpenter/builder who has now remained off work since July 1998 as a result of a chronic neck problem. The diagnosis is, in my opinion, one of chronic soft tissue injury of the cervical spine musculature, with a degree of incapacity being contributed to by poor posture, disuse, and general lack of physical fitness, as well as a degree of functional overlay. Further management should, in my opinion, be aimed at restoring Mr Hoare's neck function through appropriate neck-specific exercises and improving his general physical fitness level. Further physiotherapy to teach him and supervise such exercises, together with regular swimming is recommended. Deep tissue massage may also be of benefit. With respect to his working capacity he is, in my opinion, considered permanently unfit for his previous duties as carpenter/builder, but fit for suitable alternative employment in occupations not requiring heavy lifting or straining in excess of 10 kg, repetitive bending, or remaining in one position for long periods - e.g. salesman. Mr Hoare is, in my opinion, permanently partially but not totally disabled, and a full vocational assessment followed by intensive rehabilitation is recommended. In view of his long-term absence from gainful employment, any return to work program should be on a time-graduated basis working initially four hours per day."

In offering this opinion Dr Homolka was obviously not considering the terms of the definition of "Total Disability". 44 In answering the specific questions Dr Homolka said that in her opinion the plaintiff was considered permanently incapacitated for the full duties of his pre-injury occupation: question 3; that he was, in her opinion, considered fit only for the administrative tasks of his business: question 5; and that he was considered permanently unfit for his usual occupation but fit for alternative employment within the above restrictions: question 8. 45 Whatever criticism may be offered of the failure of the plaintiff to call medical evidence to establish the one further matter necessary to meet the test of total disability, the evidence of Dr Homolka did establish it. As I have said, she provided powerful corroboration for his other relevant complaints. 46 Accordingly, I am of the opinion that, within the terms of the policy, the plaintiff has established that he is totally disabled.

An Exclusion For Neck Pain 47 The defendant called Mr Scott Douglas Robinson, whose witness statement of 31 October 2000 is Exhibit 1. Mr Robinson has been employed as an insurance underwriter for twelve years and has worked for the defendant in that capacity for seven and a half years. He processed the plaintiff's application and was shown copies of various documents including the application form, the Policy Document, a report from Waratah Medical Centre dated 5 December 1997, and p.2 of a report by CRS Australia, which he was told was dated 6 September 1999. 48 He said that in assessing an application for income protection insurance the defendant relied on the information in the application as being truthful "rather than requiring proof of the facts asserted therein". 49 In paragraph 7 he stated that he had been asked to comment upon whether and in what way the issue of the policy would have been different if the information disclosed in the application had been correct, especially in regard to the plaintiff's stated occupation. 50 He referred to the information given by the plaintiff in relation to "occupational details" and "health history". 51 In paragraph 16 he said that had the plaintiff nominated his true occupation and work duties on the application, then in light of the content of the report from Waratah Medical Centre of 5 December 1997, the defendant would have sought further information about the neck pain suffered by the plaintiff in May 1997 by requiring him to complete a "neck questionnaire" before it considered offering cover. He said that was not sent to the plaintiff because he did not believe that the neck problem presented a working difficulty for a person whose primary work duties were supervisory as disclosed in the application. He continued, paragraph 19, that had the plaintiff nominated his true occupation and work duties in the application then, in the light of the content of the report from Waratah Medical Centre of 5 December 1997:- "I would have imposed on the policy an exclusion for injuries to the plaintiff's cervical spine and neck. The reason for this is that a recent neck disorder would have been more of a concern for a person performing mostly manual work, as compared to someone doing only 20% manual work." 52 In paragraph 20 Mr Robinson said that the defendant did not issue income protection policies with a monthly benefit of more than seventy five per cent of the gross monthly income before tax but net of expenses. 53 Mr Robinson annexed the application form, the schedule setting out the policy details, a two page medical report on the defendant's letterhead from Waratah Medical Centre, one page of a report from CRS Australia - Bega received on or about 6 September 1999, one page of the defendant's underwriting guidelines in respect of an income protection policy, the neck questionnaire and certain further underwriting guidelines in respect of such a policy. 54 In cross-examination, Tp.61, he was referred to the medical report, which he agreed was received by the defendant on or about 1 December 1997. He looked at it before making a decision as to whether to accept the plaintiff's application for insurance. He was then referred to the report from CRS Australia, which he said, Tp.62, he saw only "a few months ago". He agreed he had seen it before he swore his affidavit of 31 October 2000. 55 Mr Robinson was cross-examined on the CRS report and he agreed that it recorded a diagnosis that the plaintiff "has a chronic soft tissue neck injury". He also agreed it said:- "It appears that Mr Hoare's income protection policy provides for his benefit to be paid if he is unable to perform any of his duties of his previous trade. The medical reports supplied make it obvious that this is a fact."

These questions were asked and answered without objection. 56 Mr Robinson said that he did not recall seeing the report from Dr Homolka. He agreed that when a claim was made under an income protection policy a management file was created by the defendant within which records are kept by the claims officer handling it. The claims officer in the present case was Ms Alma Goldman. He accepted that Dr Homolka's report was received by the defendant by at least 19 August 1999. 57 At Tp.66 Mr Robinson was cross-examined about paragraph 16 of his affidavit in which he had said that had he known of the plaintiff's true occupation, namely that he was engaged in eighty per cent manual work and twenty per cent supervision work, he would have sent the neck questionnaire. He said he would have done that for further information because when an underwriter looks at certain injuries or illness account is taken of the applicant's occupation and duties. He continued:- "If someone is doing a sedentary job whereby they get a sore neck, it probably would not have been of concern, it could be overlooked. But if somebody is doing a manual job, such as a carpenter or taxi job, those sorts of things, then the neck would have been of more relevance." 58 Mr Robinson said that the information in the Waratah Medical Centre report would have "activated the neck questionnaire being sent out", it noting that on 19 May 1997 the plaintiff had neck pain. The question whether the plaintiff had ever suffered from or required treatment for any pain or disorder of the back or neck was marked in the affirmative. The author of the report had also written that the plaintiff first consulted him on 19 May 1997 with neck pain, and that that was the only consultation with that doctor, but it continued:- "But he has been seen by different doctors at this medical centre on six occasions over 2 years period." 59 In relation to the further elaboration on the neck pain it was stated that the duration of the injury was "none" and time off work was "none". 60 Mr Robinson agreed that if the neck questionnaire had been sent out the application would have been considered after its receipt from the plaintiff or the doctor, and:- "Q. It might have been that the answers you got from the questionnaire would not have altered your decision, it might have been that the answers would have altered your decision? A. Quite correct, yes. Q. So, in other words, in paragraph 18 when you say that you did not send the neck questionnaire, because you did not believe the neck problem disclosed in annexure C presented a working difficulty for a person whose primary duties were supervisory, that evidence is totally inaccurate, isn't it? A. Can I rephrase my previous answer, your Honour? HIS HONOUR: I think you are being asked another question. Answer the question please? A. Yes, from my previous statement, that would appear incorrect. SETON: Q. If you had been informed that the neck pain had resulted in the plaintiff being provided with anti-inflammatory medications which promptly terminated the neck pain, had you been given that information, you would have written the same policy that, in fact, you did, isn't that the case? A. No, I would probably put an exclusion on it more than likely. HIS HONOUR: Q. Would you have put an exclusion in or wouldn't you have put an exclusion in? A. Depending on what was in the questionnaire, if the client had stated that. Depending on the number of days the pain actually went on for, I would put an exclusion, yes. If it was treated straightaway and the pain went straightaway, then more than likely I would not have, no.": Tpp.66-67. 61 Mr Robinson said that the number of days required for the plaintiff to experience neck pain before an exclusion would have been included was more than two. He could not point to any underwriting guidelines that specified that number of days and he agreed there is a lot of discretion in underwriting. 62 Mr Robinson agreed that he would have looked closely at the application form and the medical report from Waratah Medical Centre. He agreed there were discrepancies between the application and the medical report, particularly in that the application did not disclose that in May 1997 the plaintiff had consulted Waratah Medical Centre for neck pain. He also ascertained from the medical report that the plaintiff had seen other doctors in that practice between 1994 and May 1997 on six occasions. 63 This confronted Mr Robinson with the difficulty that he was willing to issue the policy without knowing what those attendances were and he gave the following explanation, Tp.69:- "A. When doctors complete reports for insurance companies, they do put in only the most significant, by their determination, injuries or illnesses. Otherwise, obviously, a report would be a lot thicker than the two pages that we currently have."

It was obvious, as this evidence was given, that it was essentially a self-serving statement, which was dealt with by Mr Seton thus:- "SETON: Q. You can never really know whether that is the case, can you, without knowing whatever the doctor's records show, that is an assumption on your part? A. Yes, quite correct. Q. Did you really write this policy knowing that neck pain had been disclosed in the Waratah Medical Centre report? A. Yes, I did, yes. Q. So, it was a conscious decision you made even knowing that neck pain had been disclosed? A. Quite correct, yes."

Objection was taken to a question that the medical report did not say for how long the plaintiff had been suffering from the neck pain. I allowed the question and Mr Robinson said that the doctor "clearly says the duration of sickness and injury was none". He continued:- "SETON: Q. You understand him to be saying that he had neck pain, that he did not have it for any period of time? A. Quite correct. Q. That is nonsensical? A. It is. Q. So, you didn't really know how many days of neck pain the plaintiff had been suffering from when you wrote this policy, did you? A. No, I didn't, no. Q. You knew, from what the entry says, that there was a possibility that he could have been suffering neck pain for more than two days, didn't you? A. It is possible, yes." 64 Mr Robinson agreed that there were inconsistencies in other parts of the health history, which put him on notice that the application had been filled in in a rather sloppy fashion. 65 At Tp.72 Mr Robinson said:- "SETON: Q. Without knowing what information the questionnaire would have provided you, had it been sent out, you are unable to state, are you, categorically, that you would have attached a policy exclusion on injuries to the cervical spine? A. That's correct, yes." 66 In re-examination Mr Robinson was referred to his evidence at Tpp.66-67, which he was given the opportunity of reading, and in response to a question as to what he wanted to say about re-phrasing his previous answer he replied, Tp.73:- "A. From memory, what I was referring to, without knowing what would have been actually in the neck questionnaire, obviously I would have been more lenient on someone doing a supervisory role than I would have been in relation to someone doing a more manual role. Now, once again, as I say, I can't see exactly how I would have treated it because I would not have known the answers to those questions at this point of time. Q. When you say more lenient, what do you mean? A. When I say more lenient, I would have considered - we have what is considered - well, we could not have offered an exclusion or we would have offered a complete exclusion and an offer to review at a later date, preferably in twelve months time. HIS HONOUR: Q. Do you say if somebody has been off for three days with neck problems rather than two, you would have imposed an exclusion? … A. Quite correct, yes. Q. Two and a half days? A. Well, unfortunately you don't say two and a half days. You say two days, three days. As Mr Seton quite correctly pointed out, there isn't any written guidelines on that. It is based entirely on the underwriter's experience." 67 The question is whether the defendant would, in the circumstances of this case, have imposed an exclusion. It was accepted that the onus was on it to establish that. 68 The plaintiff's evidence was that when he went to the Waratah Medical Centre in about May 1997 it was because muscle tightness in his chest, shoulders and neck region had returned: paragraph 11(b) of Exhibit C. He continued that the doctor prescribed some anti-inflammatory medication, which he took "and the pain resolved promptly". 69 In paragraph 12 he said that when he signed the application form in October 1997 he did not remember having attended the doctor in May 1997 nor did he remember or think about the chest pain and associated shoulder and neck symptoms. He continued:- "I had only seen the doctor once about these symptoms and they resolved themselves promptly after I took the medication." 70 The plaintiff was cross-examined about the consultation at Waratah Medical Centre commencing at Tp.28. He denied that the problem with his neck in 1997 had taken place over quite a few months, although he did go to see a chiropractor in consequence of the chiropractor's having solicited his business, and an osteopath on various occasions. However, he denied that this was in respect of neck problems, but rather "ones" down across his chest and around his shoulders and neck. He said he went to the Waratah Medical Centre and was told that he had pulled "the membrane here" and was given anti-inflammatories, which he took, "and that was the end of that. It cleared itself up. I never had a problem after that". 71 He then agreed, Tp.29, that he had a sore neck as well as sore shoulders and chest for at least a couple of months before he went to Waratah Medical Centre in May 1997, that he had x-rays "to do with this concern of your neck", and that when he went to the Waratah Medical Centre he did not complain of chest pain, but he complained that he had sore neck muscles, which was explained to him as being caused by tearing of membranes in his chest. 72 The defendant was clearly aware that the plaintiff had suffered neck pain on 19 May 1997. Mr Robinson made the decision to proceed with the insurance without carrying out any further investigations. He agreed that he had a discretion and that there were no fixed guidelines about the time for which the pain had to continue before an exclusion was imposed. 73 I must also take into account that Mr Robinson was influenced by the nature of the plaintiff's employment as disclosed in the application form, although he agreed that the neck pain together with the occupation, as he understood it, was a cause of concern. It is also necessary to bear in mind, as Mr Robinson said in paragraph 18, that the plaintiff was not requested to complete the "neck questionnaire" because Mr Robinson believed that the neck problem did not present a working difficulty for a person whose "primary work duties" were supervisory. 74 It seems to me that there was a failure by the defendant to grapple with the essential issue relevant to the imposition of an exclusion in relation to neck pain. The facts as deposed to by the plaintiff as to the extent and nature of his pain were as I have stated them and, in particular, once he had received treatment the pain problem was resolved almost immediately. The real question which, in my opinion, had to be confronted by the defendant was whether in those specific circumstances Mr Robinson would have imposed an exclusion. It is not right, as he has said in paragraph 19, that he would have done so had the plaintiff nominated his true occupation and work duties and having regard to the report from the Waratah Medical Centre. In those circumstances, as Mr Robinson pointed out in paragraph 16, he would have sought further information by sending out the neck questionnaire. As he said, depending upon the answers to that he would have considered the situation. 75 When I analyse the whole of Mr Robinson's evidence, I am not satisfied that he would, had he known of the situation in relation to the neck which I accept to have been the actual situation, have imposed an exclusion. Nor am I satisfied that without receiving further information, which would have disclosed that situation, he would have imposed an exclusion. The fact is that Mr Robinson, no doubt in the exercise of his discretion, agreed to the issue of the policy knowing of the complaint of neck pain, but without making any further inquiries about it. In those circumstances, he had to concede that he did not know the period of the neck pain.

The Nature Of The Policy 76 I have referred to the basic submissions put by the parties as to the appropriate section of the Insurance Contracts Act to be applied. Mr Seton relied, firstly, upon s.9(1)(a) of the Life Insurance Act. There can be no doubt, in my opinion, that the contract provided for the payment of money on the death of the plaintiff. I have quoted the relevant words in the policy. It provides for an additional payment by way of a monthly benefit as a lump sum if the plaintiff dies while on claim. 77 Ms Oakley submitted that s.9(1)(a) was concerned with payment "on the death of" the plaintiff, which she submitted may occur if he was or was not on claim. Her submission was that if the plaintiff was not on claim then no payment would be made under the policy on his death. I think this submission is correct. The difficulty is that s.9(1)(a) does not seek to differentiate between various positions which may be in existence at the time of the death. In my opinion the words of the policy, although limited to payment of the benefit on the death of the plaintiff whilst on claim, none-the-less are accommodated by the general words of the section "on the death of a person", if, relevantly for this policy, death occurs whilst the plaintiff is on claim. So long as the policy provides for payment on the happening of that event in certain circumstances, although not necessarily on the happening of that event in every circumstance, then, in my opinion, it responds to the statutory requirement of providing for payment on the death. 78 The alternative submission was that the policy is a continuous disability policy. It was not in issue that the policy was to be of more than three years' duration and one under which a benefit was payable in the events specified in s.9A(1)(b). I have set forth sub-ss. (3), (4) and (5). 79 Ms Oakley submitted that the first portion of sub-s.(3), namely the change of benefits, was permissible "at the instance of" the defendant. The submission was that pursuant to Term 6 benefits could be reduced. This is undoubtedly so. However, it seems to me that upon a proper construction of the policy there was an agreement between the plaintiff and the defendant for those reductions, which are not stated to be discretionary deductions, in the events contemplated by that condition and that, accordingly, the reduction takes place not "at the instance of" the defendant, but rather pursuant to the contractual terms. 80 In my opinion the words "at the instance of" mean that the benefits may be changed by the defendant unilaterally pursuant to the terms of the contract, rather than the present situation which, in my opinion, is one where the payments are regulated by the terms of the contract and not by any discretionary decision by the defendant. 81 No argument was addressed to me in relation to the change in premiums contemplated by sub-s.(3), no doubt because sub-s.(5) is accommodated by the words under the heading "Variation of Premium Rates" to which I have referred. 82 In the result I am of the opinion that the policy was a life policy falling within s.9(1)(a) and (e).

If The Policy Had Been A Policy Of General Insurance 83 I am satisfied that the plaintiff did not answer correctly the questions relating to his income, occupation or health. The contrary was barely submitted by Mr Seton and the incorrectness of the answer about his income was effectively conceded. Thus if s.28 of the Insurance Contracts Act had applied, the policy not having been avoided, there would have had to be the calculation of a reduced sum pursuant to s.28(3).

Conclusions 84 The conclusions to which I have come are:- (a) The plaintiff has satisfied me that he is totally disabled within the meaning of the policy. (b) The defendant has not satisfied me that if it had known of the true situation it would have imposed an exclusion in respect of the neck condition. (c) The policy is a policy of life insurance under the Life Insurance Act 1995 but s.29 of the Insurance Contracts Act 1984 does not apply to it. (d) By his Summons the plaintiff sought various relief. The parties were agreed that once my conclusions were stated on the primary issues argued they would, in all probability, agree on appropriate orders to be made. (e) The plaintiff is entitled to judgment for the amount he should have been paid, but has not been paid, including any increases for indexation and to interest. (f) I stand the matter over until Friday, 17 November 2000 on which date the parties should bring in Short Minutes of Order to give effect to these reasons. I shall then consider any submissions on costs. ______________

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