Insurers should also be mindful that, if a policy interpretation issue arises and the insurer makes “belts and braces” amendments to the policy to put its meaning beyond doubt, then an insured may attempt to use that against the insurer.
The facts
This proceeding was issued by Mr Catherwood, who held a life insurance policy with Asteron. The policy included a death benefit which would be paid if Mr Catherwood died or became “terminally ill”, which was defined in the policy to mean that: “Your life expectancy is, due to sickness and regardless of any available treatment, not greater than 12 months”.
In January 2019, Mr Catherwood was diagnosed with cancer and made a claim for the death benefit under his policy. This claim was, however, declined because, with treatment, Mr Catherwood’s life expectancy exceeded 12 months. Accordingly, Asteron considered that he was not “terminally ill” within the policy definition. Mr Catherwood challenged this, arguing that the words “regardless of any available treatment” in the definition of “terminally ill” meant that his life expectancy should be assessed “without regard” to the impact of any treatment – and not “despite” any available treatment, as Asteron contended.
Approach to interpretation
The High Court approached the interpretation exercise in three stages. First, the common-sense meaning of “terminally ill” – the High Court declared that it would be contradictory to describe someone as “terminally ill” when there was an available cure. Next, the High Court looked to the policy’s surrounding context. The High Court observed that Asteron offered an optional trauma recovery benefit in addition to the death benefit and expressed the view that there would be considerable and illogical overlap between those benefits if Mr Catherwood’s interpretation were correct. Finally, the High Court considered Australian authorities dealing with similar subject matter, which illustrated the reasonableness of taking into account the likely outcome of available treatment when deciding whether someone was terminally ill.
The Court of Appeal upheld the High Court’s decision, noting, however, the policy was not “well worded”.
Changes to policy wordings
While the Courts’ decisions are not surprising, this case demonstrates how ambiguity in policy wordings can lead to protracted and expensive litigation.
Further, after Mr Catherwood issued these proceedings, Asteron amended the policy definition of “terminally ill” – a fact which Mr Catherwood latched onto, arguing in the High Court that this was evidence that his interpretation of the policy was correct. While the High Court did not engage with this argument and the Court of Appeal’s decision makes no reference to it, this case demonstrates that some insureds will nevertheless attempt to rely on post-dispute policy amendments as evidence to support their interpretation.
Insurers should be aware that any changes made to a policy wording after an interpretation issue has been raised could be relied on as evidence supporting the insured’s interpretation.
Such arguments are unlikely to succeed and the authority to support the proposition that commercial entities may change the wording of contracts to improve the clarity of expression, and that this does not of itself mean that the earlier wording did not already express the meaning the entity intends to convey. However, debates as to the effect of a policy wording change are not uncommon and the effect of the decision in Bathurst will not dissuade all insureds from running the argument.
The Supreme Court’s decision in Bathurst Resources Ltd v L&M Coal Holdings Ltd makes it clear that post-dispute conduct (as opposed to subsequent conduct more generally) will rarely be admissible.
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