What Constitutes unreasonableness in TPD Claims – is the pendulum swinging back in favour of Insurers?

The New South Wales Supreme Court has taken the decision making processes of insurers and trustees to task in the first half of 2014 – has the recent decision in Birdsall v Motor Traders Association of Australia of Australia Superannuation Fund Pty Ltd [2014] NSWSC 632 swung the pendulum back in favour of insurers and trustees?


In Lazarevic v United Super Pty Ltd [2014] NSWSC 96 and Folan v United Super Pty Ltd [2014] NSWSC 343, the Supreme Court of NSW handed down judgments that clarified what constitutes a “reasonable” decision by an insurer and trustee when deciding when to refuse or accept an insurance claim for total and permanent disability (“TPD”) and took the insurers and trustees to task about the reasonableness of their decision making.

In Lazarevic,1  and Folan, the insurer’s decisions indicated a failure to fairly consider and evaluate all of the evidence, which weighed heavily against the notion that the plaintiff was likely to ever engage in suitable work.

The underlying themes of both decisions appear to be that an insurer, in considering the validity of a TPD claim must evaluate all of the evidence, consider the actual likelihood of the insured obtaining work (rather than merely considering theoretical possibilities) and not pick or rely on evidence that would favour the denial of a claim.

The Decision in Birdsall v Motor Traders Association of Australia Superannuation Fund Pty Ltd

In Birdsall v Motor Traders Association of Australia of Australia Superannuation Fund Pty Ltd [2014] NSWSC 632, the Supreme Court of NSW again considered the reasonableness of the decision of the insurer and trustee in refusing a TPD claim. The evidence relied upon by the insurer and trustee in refusing the claim primarily involved:

  1. medical evidence that suggested the Plaintiff’s medical condition did not prevent him in engaging in other work 2;  and
  2. evidence which supported the availability of alternative employment and availability of employment which the Plaintiff could perform.3  

Notwithstanding, the insurer’s and trustee’s decision was still found to be unreasonable as the insurer failed to take into account the Plaintiff’s (unsuccessful) applications for alternative employment.

The Court, in making its own decision, considered that the Plaintiff did not satisfy the requirements for TPD under the Policy. Whilst the decision was ultimately successful for the insurer and trustee, the decision does not provide any comfort to insurers or trustees regarding the reasonableness of the decision making process.

Whilst reiterating that the primary test is “unreasonableness”, the decision in Birdsall repeats the themes underlying the decisions in Lazarevic and Folan and shows that the Court will consider all aspects of the matters taken into account (or not) in judging whether the decision of the insurer and trustee was unreasonable.

1 – See for our summary of this decision.
2 – see [133] to [137].
3 – see [138] to [145].
4 – see [146] to [147].

Related News

What happens if you, as an insurer, have not yet concluded whether or not to indemnify an insured, and a third party commences Court proceedings against your insured (with the indemnity decision still pending)?

When these types of claims arise, an insurer (and its panel firm) can continue to act for an insured on a “reservation of rights” basis.

Read More

Can you sue if a “registered” company is “in liquidation”, “under administration” or has become “deregistered”? 

It is common to see Court proceedings commenced in the name of an individual or against an individual.   But sometimes, Court proceedings are commenced by

Read More

The Briginshaw-test

Did you know that the Briginshaw-test requires a higher standard of evidence in civil matters where serious allegations are made, such as fraud. This principle

Read More

Get in touch

Contact our team today

Stay informed

Keep up-to-date with our regular news and insights

This field is for validation purposes and should be left unchanged.
William Roberts Lawyers


Level 22
66 Goulburn Street


Level 21
535 Bourke Street


Level 8
300 Ann Street


Level 19
Singapore Land Tower
50 Raffles Place