Reasons for Decision
This matter arises from a decision made by the member, a life insurer, to cease
payment to L of disability benefits under an income protection policy.
The policy and the first claim
The policy provided for guaranteed renewability. The monthly benefit for total
disability was $3,000.00 and the benefit period under the contract expired on L’s
The policy commenced on 1 March 1991. In his application for insurance, L
described himself as “Owner and Operator of Company using Backhoes” and
stated that 90% of his time was spent sourcing new contracts and 10% of his
time was using the equipment.
At L’s request the policy was upgraded with effect from 1 February 1995. L
made a claim later in 1995 for depression and alcohol abuse. The member
ascertained that L had been treated for depression shortly before his policy was
upgraded and the member avoided the upgraded policy. However the policy as
originally taken out remained in force and L was paid benefits from 9 July 1995 to
31 October 1997.
The second claim
L was due to return to full time work on 1 November 1997. However he suffered
an injury to his right shoulder on 12 October 1997. At the time of this injury, L
was in business as an earthmoving contractor and owned a bobcat and a small
truck on which the bobcat could be moved from job to job. A new claim was
lodged and benefit payments for the new claim commenced on 11 November
1997. L was paid total disability benefits until 10 July 1998 when he commenced
part time work in a bottle shop owned by his wife. Full benefit was paid while L
was partially disabled until 22 September 1998 as L stated he was not receiving
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any income. After 22 September 1998 L was paid 82% of the monthly benefit
until 5 July 2000 when the member ceased making payments.
This dispute centres on the member’s decision to refuse to pay benefits from 5
The relevant policy definitions
The relevant definitions in the polic