Some total and permanent disability policies require that the insured cannot return to their usual occupation and will not ever be able to engage in any employment, business or occupation for which they are reasonably fitted by education, training or experience. This is known as an ETE clause.
Insurers had argued that in some cases this could apply to education the insured could undertake in future, to qualify for a different occupation.
Keegan Alexander partner Crossley Gates pointed to a case in Australia, in which a man qualified as a roofer. He injured his back and was unable to return to work.
His insurance claim was declined because the insurer said he could still work in hardware retail sales, as a courier, console operator or telemarketer, if he undertook future training.
The man took his case to the Supreme Court, which said the insurer had not been fair.
It appealed and said its ETE clause allowed for an element of re-education to be required.
But the Court of Appeal said the clause only looked backwards.
“The ETE clauses in New Zealand policies are usually worded similarly,” Gates said.
“Although the words ‘fitted by’ are not common, other similar words such as ‘reasonably suited by’ are, and they are likely to lead to the same outcome. In other words, they are likely to be referring to the insured’s existing education, training and experience only.”
Gates said the clause had been a problem for a while and he had advised on a number of disputes.
“It creates a major limitation on the clause in favour of insureds – the clause can only apply to education, training or experience the insured already has at the time of the disability. Like Australia, insurers in New Zealand have adopted the approach up until now that they can avoid a claim by pointing to some education or training that the insured can do in the future which will enable them to work again. To some extent, this defeats the purpose of the policy.”
Gates said insurers had to accept the clause could only be used for existing education. "The decision restricts the application of the proviso to the cover, and therefore expands the cover in favour of the insured. I suggest this is a fairer outcome."
