The recent case of Percy v Sovereign  NZHC 1573 is a reminder of the limited nature of the Court’s inquiry in the context of a disability benefit/ income protection claim.
Where an insurer’s decision about disability cover is under scrutiny, the question is whether the insurer acted in good faith, took account of relevant information available to it, and reached a decision that was reasonably open to it. It is only if the insurer has failed to form a valid opinion that the Court will determine the matter itself, on the basis of the trial evidence. If there has been no such failure, it makes no difference that the Court may have reached a different view.
The relevant decisions in this case were Sovereign’s decisions to discontinue payment of a total disability benefit to the policyholder and to decline his total and permanent disability claim. The Court was also required to consider an alternative claim that the policyholder was eligible for a partial disability benefit.
In Percy, Her Honour Justice Katz reviewed the evidence of the insurer’s decision-making processes. The Court concluded that it had not failed to reach a valid opinion reasonably open to it. The primary claim did not succeed.
The position with regards to the claim for a partial disability benefit was less straightforward. The Court noted that in this case, the policyholder never presented any evidence to Sovereign in support of a partial disability claim, because he had never made such a claim, being adamant that he was entitled to the full benefit. The Court further noted that, as a result it would have been difficult, if not impossible, for Sovereign to assess the extent of any partial disability. The Court did not identify any error on the insurer’s part and so concluded that it was not entitled to undertake its own assessment of partial disability. So, this claim also did not succeed.