MLC LIMITED v O'NEILL

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40564/00 MASON P HANDLEY JA HODGSON JA

Tuesday 22 May 2001 MLC LIMITED v Elizabeth O'NEILL

1 MASON P: This appeal challenges a verdict that upheld the respondent's claim under a policy of insurance. The life insured was the respondent's husband, Anthony O'Neill. The primary judge found that Mr O'Neill had suffered a "Heart Atack" within the meaning of the policy. Judgment was entered for the relevant sum specified in the schedule to the policy plus interest totalling a verdict of $258,146. 2 The relevant terms of the policy were as follows: MLC Life Limited (MLC) will pay to the policy owner or the policy owner's executors administrators assigns or other successors in title the benefits set out on the schedule subject to the conditions of the Policy….

2. Payment of Benefits. When MLC is satisfied that it has proof of the life insured's age or proof of any other matter it requires and that an event giving rise to a claim has happened it will pay the benefits...MLC will not consider a Vital Health Condition which has not been diagnosed by a Medical Practitioner....

3. Vital Cover Benefits MLC Life guarantees to pay the amount specified in the Schedule for either:

b. The life insured being first diagnosed as suffering from one of the Vital Health Conditions as specified and defined wherever used in this Policy as follows:

Heart Attack This means the death of a portion of heart muscle (myocardium) as a result of inadequate blood supply. The diagnosis is based on clinical Electro Cardiogram (ECG) and biochemical assessment with the three following criteria normally being present:

. a history of typical chest pain . confirmatory new ECG changes . elevation of cardiac enzymes above standard laboratory levels of normal" 3 On 7 May 1998, Mr O'Neill experienced chest pain when running or jogging. He consulted his general practitioner the next day and was referred to a consultant physician, Dr Bigg, who first examined him on 28 May 1998. Much later, in March 2000, he was examined by Dr Farrar, a consulting cardiologist. 4 The medical evidence tendered at trial consists of four medical reports admitted without objection, oral elaboration or cross-examination. Three are from Dr Bigg and one is from Dr Farrar. The first two reports respond to correspondence which was not put in evidence. 5 Dr Bigg's initial report, dated 29 May 1998 states: Cardiac Evaluation

History: By way of background, some weeks back he had a day of praecordial tightness following heavy physical exercise the preceding day. In essence, he decided to go for a run to get himself fit, having been somewhat sedentary for over a year beforehand.

In day-to-day (sic) life he also has noticed breathless when climbing stairs, and he also experiences palpitations, which by the cadence he described, are probably sinus tachycardia rather than a tachyarrhythmia.

He does have a history of recurrent syncope, but in circumstances that are explainable, eg. micturition, the sight of "medical procedures". I understand an ECG done a couple of years ago following such an episode was unremarkable.

Risk factor profile: . Recent hypertension . Hyperlipidaemia - cholesterol earlier this month 5.2, with triglycerides 1.2, having been 5.8 previously. . Bad family history of relatively premature CAD.

Other problems: . Mildly abnormal LFTs - has just had an ultrasound of his gallbladder etc. - hepatitis serology negative. . Surgery involving both knees, and tonsillectomy . Medications - nil

Physical examination: He was in no distress at rest, but is 30 kg above the upper limit of ideal body weight. Blood pressure was 146/98. No cardiac failure. Slightly tender in the epigastrium, but not so over the anterior chest wall or over the lower cervical/upper thoracic spine.

At rest: The 12 lead ECG was unremarkable. The resting echo shows apicoanterior hypokinesis - query stunned myocardium, query small infarct.

With exercise: He achieved 10 mets, which is a good work performance. At peak exercise he was breathless, and the heart rate of 177 was near maximal. There was no pain. However, he had an apicolateral extension of his resting apicoanterior wall motion abnormality.

Assessment: Dr Ng, there is evidence of significant myocardial ischaemia in this young 38 year-old man. As he has achieved a good work performance, the initial treatment can be medical - but aggressive medical treatment.

Recommendations: 1. I recommend he be enrolled in a Cardiac Care Programme. We have one running at this Centre, but there may be a suitable one close to home that you could arrange for him. In essence, we need to grab this opportunity to intervene to improve his prognosis. Additionally, if he enters the Programme from the Bowral Diagnostic Centre, the review stress test evaluation in 2 months can determine whether we need to consider angiograms.

2. Such Programmes involve dietary consultation and a number of other education initiatives, and I have given him literature on this today. I have also organised for he and his wife to formally see the Dietitian.

3. Because aggressive control is required in the hope of regressing his coronary artery disease, I have started him on Lipitor 20 mg per day.

4. With his hypertension and myocardial ischaemia, I have started him on Norvasc, and I have also told him to start taking sublingual Cardiprin.

5. If he does come to the Cardiac Care Programme here, I will report back after the further evaluations. If not, may I recommend you consider a review stress test evaluation in 3 months.

6 His second report consists of a letter addressed to a senior claims consultant at MLC Limited, the appellant. It states: I have just read your correspondence in regard to Mr Anthony O'Neill - Policy Number 1625-3999U.

Whilst you are correct in the literal interpretation of the wording of your policy, you would not be correct if you were making a claim that Anthony O'Neill has not had a heart attack. The echo abnormality that I detected was confirmed on coronary angiography. Whilst you might argue that Anthony's situation does not fit the restrictive criteria that you advance, I would argue that your criteria for diagnosing AMI has not kept pace with the times and that your clients will suffer as a result of the inadequacy of your current definition of AMI. 7 On 10 November 1998, Dr Bigg reported: I respond to your letter of October 29 re Mr Anthony O'Neill - DOB 21/12/59.

Mr O'Neill has a significant resting wall motion abnormality - both on echocardiography and subsequent coronary angiography. Focal abnormality in the myocardium such as this is usually a hallmark of ischaemic damage, such as occurs when an artery supplying the heart muscle is obstructed, rendering the muscle served by that artery deficient in blood flow, causing a "heart attack".

The MLC policy outlines the usual diagnostic criteria for an acute myocardial infarct (heart attack) - ie, a change in the electrocardiogram accompanied by elevation of cardiac enzymes.

However, their criteria are - in my opinion - too restrictive. First, some patients - usually with smaller events - do not present to Hospital with their acute infarct. The symptoms may not be so dramatic, and can be easily dismissed as due to something else. Accordingly, no ECG change or enzyme elevation can be recorded if the patient does not present to medical attention. Furthermore, even if they did present to medical attention, in some cases of smaller events, the ECG can be a false negative.

In this day and age, with the advent of myocardial scanning techniques such as echocardiography and nuclear medicine scans, patients can have 'heart attack scars' picked up on scan, with the patient being oblivious to the fact that they have had a heart attack. Usually, if one goes back through the history, one can often find a period of unexplained breathlessness and fatigue, plus or minus vague chest discomfort. This was the situation with Anthony O'Neill.

In summary, MLC are correct if they interpret their policy 'to the letter'. I take great issue with them on examining their correspondence, when they make a big deal of his history not being "typical". If Doctors were to use their tight criteria, we would send home many patients from Casualty with small infarcts, because they did not fit a text book description with the nature of their chest pain.

In conclusion, MLC can probably argue that Mr O'Neill did not fit their tight criteria, but it is a pretty unacceptable policy if they are going to use such tight criteria, and ignore the greater accuracy provided by the newer scanning techniques.

I hope this is of assistance to you. I have included some attachments from Otto's textbook. 8 It will be seen that Dr Bigg's diagnosis followed an ECG, but an ECG which he considered to be "unremarkable". It will also be seen that his diagnosis was not based at all upon a biochemical assessment. It was particularly the latter absence that was relied upon by the insurer at trial as the basis of the policy not responding to the plaintiff's claim (see CB 11D). 9 Dr Farrar reported in the following terms on 16 March 2000: Thank you for asking Mr O'Neill to call at the rooms of Independent Medical Opinion on 15 March 2000.

It seems that he was well until May 1998 when during a lunch time run around an oval near his work, he developed chest tightness which persisted throughout the afternoon, and was present the next day. He called on his own doctor, Dr Ng of Ingleburn, who referred him to cardiologist, Dr Roland Bigg.

I understand that the latter examined him, took an electrocardiogram and arranged exercise electrocardiography. I do not have any report of that exercise test. However, Dr Bigg also arranged an echocardiogram.

As I mentioned I do not have the report of the exercise electrocardiography but Dr Bigg did demonstrate a focal wall abnormality in the myocardium both by echocardiography and at subsequent coronary angiography.

Mr O'Neill does not appear to have had any significant illnesses in the past. He has had operations to each knee.

In his family history his wife and three children are well. Of two brothers, one aged 47 has late onset diabetes and two sisters also have late onset diabetes. His mother also has late onset diabetes and is treated for hypertension. His father has had two coronary artery bypass operations for obstructive coronary atheroma. The first was at age of 58 and then at the age of 72. He is now aged 74. Subsequently he has had a pacemaker inserted and this was one month ago. He also is being treated for hypertension.

The latter, as can be seen, suffers from coronary artery disease.

Mr O'Neill smoked only between the ages of 15 and 19 and has not smoked since. He works as a building supervisor and has a good deal of driving to do. Because of some mild hypertension he was given Amlodipine 5mgs daily, in addition to Atorvastatin 10mgs daily and Aspirin 100mgs daily.

He said that at the time of his original illness in 1988 his serum cholesterol was 5.6mm/L per litre and now it is 3.6mm/L per litre.

Examination. On examination there was no evidence of heart failure or arrhythmia. The blood pressure when standing was 132/100 and when supine was 132/99. I understand that readings lower than these have been obtained by his family doctor and I did not attach great significance to the elevated diastolic pressure in this one instance.

I think it is important to have documentation of the exercise electrocardiogram. I do not have Dr Bigg's report, but Mr O'Neill has not been told that he had an abnormal exercise electrocardiogram.

In July 1998 he had some chest pain and went to the emergency department of Camden Hospital and was put in the coronary care unit. He spent six days in hospital and subsequently was transferred to Liverpool Hospital for a coronary angiogram. This was said to reveal a 30% obstruction on the right coronary artery, but otherwise no abnormality.

In February 1999 he had further chest pain which lasted for some two hours and he went to Concord Hospital. There is no record that he was admitted there. In the past six months he denies any chest pain or tightness or any chest discomfort. He says that he now feels well.

The electrocardiogram at rest which I took this morning was within normal limits.

1. On 15.3.00 at the rooms of Independent Medical Opinion.

4. The pain which the patient experienced could well have been cardiac pain because it was described as a tightness and was directly related to physical effort.

The items that you asked me to give particular attention to are listed hereunder:

1. The pain that Mr O'Neill originally complained of was consistent with cardiac pain because it was described as a tightness and was directly related to physical effort.

I have been unable to demonstrate any electrocardiographic changes but as I said I cannot say that the electrocardiogram was abnormal in the original instance and the results of the exercise electrocardiograms are not available. To be able to answer that question completely I would need to see those results. I understand that cardiac enzyme studies were not carried out.

2. His symptoms were consistent with those of a heart attack.

4. i) I believe that his symptoms were consistent with a heart attack. ii) In 1998, for the diagnosis of myocardial infarction, there was no insistence on a cardiac abnormality being shown on the echocardiogram. It was usually used as confirmatory evidence, and outmost myocardial infarctions had a regional wall abnormality of movement. iii) See above.

As far as echocardiographic criteria are concerned, a localised regional wall abnormality or hypoactivity is usually caused by an ischaemic lesion. You mention that the abnormality shown by echocardiography could have arisen at any time.

It is true that in Mr O'Neill's family history there is both ischaemic heart disease and diabetes which makes his heredity more likely to be contributing to an ischaemic heart lesion.

I should be pleased to answer your letter promptly if I could see the revised conditions which you said were sent to Mr and Mrs O'Neill on 25 May.

I think it likely under the circumstances that Mr O'Neill did have a heart attack but it must have been very small for his cardiac function is satisfactory and he continues to be asymptomatic. 10 The primary judge set out Dr Bigg's report of 10 November 1998 in his judgment. He concluded that it was implicit in the doctor's reports that the diagnostic procedures he used reflected more modern and more efficacious techniques than utilising simple ECG and biochemical assessment. He also accepted the opinion expressed in the passage which has been set out above that ECG testing could produce a "false negative". 11 The insurer's reliance upon the diagnostic tools specified in the policy was rejected because it would lead to the result that an insured had in fact suffered a myocardial infarction clearly demonstrable by the latest diagnostic aids and procedures yet benefits would not be payable. 12 His Honour held that it was the intention of the parties that benefits be payable if the insured suffered a myocardial infarction, ie the death of a portion of heart muscle, so long as the occurrence could be demonstrated by a proper diagnosis. He placed some reliance on the fact that the policy had been entered into in 1993 whereas Dr Bigg used diagnostic techniques deemed appropriate five years later in 1998. Citing Johnson v American Home Assurance Company (1998) 192 CLR 266 at 272, he held that such an approach to the policy would avoid an absurd or manifestly unjust result. 13 As the appellant submits, the judge's reasons were in essence that if the life insured suffered the death of a portion of heart muscle and if the happening of that occurrence was demonstrated by a proper diagnosis acceptable to modern medical science, entitlement was established. 14 It was submitted by the appellant that this overlooks the introductory words in paragraph (b) of the definition of "Heart Attack" which referred to the life insured: being first diagnosed as suffering from one of the vital health conditions as specified and defined ". (emphasis added) 15 It is further submitted that the words emphasised make it clear that there must be a diagnosis and that it is not possible to treat "Heart Attack" as a term having a meaning independent of the words which specify and define it in the policy. In particular, the portion of the definition of "Heart Attack" which explains that the diagnosis is based on clinical electrocardiogram ECG and biochemical assessment

operate as an effective dictionary as to the manner in which the relevant diagnosis must be established before the policy responds. I would accept these submissions. 16 The trigger of liability is a diagnosis which, in the case of heart attack, is stipulated to be based on clinical ECG and biochemical assessment. In my view, the words "diagnosis is based on" import an imperative in the context. It is not suggested that such methods of diagnosis in combination are incapable of identifying myocardial infarction. The fact that other methods of diagnosis existed in 1993 or were discovered later cannot alter the contract the parties in fact entered into. Dr Bigg described the policy's criteria as: the usual diagnostic criteria for an acute myocardial infarct (heart attack).

17 His report indicates that some non acute infarcts which he described as "smaller events" do not show themselves in an ECG. Dr Farrer's report is substantially similar in effect. 18 These matters may readily be accepted, with the consequence that some "heart attacks" may be outside the definition chosen in the policy, but this does not alter the policy or enliven the respondent's claim which is based solely on contract. (There had been an issue pleaded which relied upon the Contracts Review Act 1980 but that addressed a completely different part of the case at trial and does not remain part of the case on appeal.) 19 Before us the respondent effectively supported the reasoning of the primary judge. It was submitted that the prescription of the types of required diagnosis was indicative and not imperative. Reliance was placed upon the presence of imperative language elsewhere in the policy. I do not accept this submission nor do I accept the related submission that the words commencing "The diagnosis is based on" are not an essential part of the definition of heart attack. I accept that this is a matter of impression, but my clear impression is that the definition of heart attack is a composite one and, whatever the scope of the concluding words, there must be a diagnosis based on ECG and biochemical assessment. 20 In my view the contract is clear in its plain terms at least as regards the matter that is determinative in the appeal. There is lacking that ambiguity which would trigger the contra proferentem rule that the respondent invokes. The rule is described as a principle of last resort in the case law (see McCann v Switzerland Insurance Australia Limited (2000) 176 ALR 711 at 726-7 and Roulston Clarke Pty Limited (in liq) v FAI General Insurance Co Limited (2000) 11 ANZ InsCas ¶61-473 at 75,417). 21 The vital deficiencies in the respondent's claim were essentially twofold. First, the diagnosis could not be based on an "unremarkable" ECG and secondly there was no biochemical assessment at all. 22 It is not necessary in the particular case to determine the meaning and scope of the words "with the three following criteria normally being present" or the words which follow them. The learned trial judge raised various hypothetical difficulties based on the language used. I am inclined to think that some of his Honour's difficulties are exaggerated, but I need not dwell on them because the respondent's case did not suggest that a rational diagnosis was incapable of arising from the two diagnostic criteria stipulated as the essential tools. 23 One matter which was debated today was whether the presence of a diagnosis by a medical practitioner (as defined), that is based on the two diagnostic criteria mentioned is a sufficient event that would effectively require the insurer to be satisfied of the existence of the relevant matter giving rise to a claim. That question would depend in part on construction of clause 2 and the policy as a whole. It is sufficient to say that the issue does not arise in the present case because of the two substantive deficiencies in proof on the respondent's case that have been identified. 24 I propose the following orders: 1. Appeal allowed 2. Verdict and judgment set aside. In lieu, verdict and judgment for the defendant with costs. 3. Respondent to pay appellant's costs and to have a certificate under the Suitors' Fund Act if qualified. 25 HANDLEY JA: I agree. 26 HODGSON JA: I also agree. One argument put forward by the respondent caused me some concern, namely the submission that the policy could not reasonably be read as requiring the application of technology that may become outdated. The policy is one which can be renewed for many years, and it is conceivable that as time goes by the diagnostic criteria set out in the policy may come to be discredited scientifically and replaced by quite different criteria. It would be, it seems to me, unfair to persons insured under this policy if that substantially deprived them of the benefit of the cover given by the policy. 27 The situation at the present seems to be that the diagnostic criteria set out in the policy, namely clinical electrocardiogram and biochemical assessment, are still regarded as appropriate diagnostic methods, and are still considered as satisfactory for detecting major heart attacks. There are, however, new techniques that can detect less severe heart attacks. 28 The construction adopted by the President has the effect that the cover only relates to the more major attacks that can be detected by the methods specified. However, if at some time in the future those methods became discredited, and diagnosis of heart attacks was by some quite different means, it would be a matter of concern if a continuing policy of this kind became ineffective. It may be that that problem would be dealt with, not as a matter of construction of the contract, but as a matter under the Trade Practices Act concerning the conduct of the insurer in promoting these policies. However the question for us is purely a matter of construction. 29 There is some force in the submission for the respondent that the wording in the clause, "the diagnosis is based on" certain procedures does not expressly state that the diagnosis "must be" based on those procedures. However, it seems to me as a matter of construction that this must be the effect of the particular provision: otherwise the provision would effectively be surplusage. 30 I concur in the orders proposed by the President. 31 MASON P: The orders will be as indicated. ********

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