The decision rested on the precise meaning of two words in the policy. Photo: Unsplash / Scott Graham
A man who took his insurance company to court for not paying out his life insurance, despite being cured of his "terminal" illness, has had his case thrown out.
Hugh Catherwood argued his cancer diagnosis in January 2019 meant he had a terminal illness and was likely to die within 12 months - so insurer Asteron owed him $1.2 million, regardless of the fact he was still alive four years later.
The Christchurch-based senior lawyer had already received more than half-a-million dollars under his trauma cover policy, which was paid out after his diagnosis, as he underwent surgery and chemotherapy.
The Court of Appeal on Wednesday ruled in Asteron's favour, accepting the High Court's original ruling accepting the insurer's counter-argument - that Catherwood's prognosis at the time was good thanks to the available treatments, so was not "terminal".
The decision rested on the precise meaning of two words in the policy, which defined "terminally ill" as having a life expectancy of 12 months or less "due to sickness and regardless of any available treatment".
Catherwood's argument was that "regardless of" meant "ignoring the effect of". His surgeon, only referred to as "Coulter" in the court's decision, apparently told him he would die within 12 months if he did not have surgery and chemotherapy.
"The definition of 'terminal illness' in the policy contemplates my situation without any treatment, and that prognosis is as indicated by Coulter," Catherwood wrote in an email to Asteron in March 2019.
Catherwood's oncologist, referred to only as "Dr Edwards", told Asteron that without treatment, "I would expect the majority of patients in his situation would die within 12 months".
"On the other hand his disease is potentially curable if we treat it (which we are). I expect the chance of cure [is] approximately 50 percent."
Over the next few months Catherwood escalated his complaints with Asteron, which ultimately declined his claim, sparking the court battle. Catherwood soon completed his treatment, with Dr Edwards confirming the cancer had been eliminated - his patient's cancer completely gone.
In the original High Court decision, the judge said there was an "illogical" overlap between claiming both the trauma and death payouts "if Catherwood's interpretation was accepted", and that taking medical treatments into account was "the only reasonable interpretation available" when it came to defining the phrase "terminally ill".
Catherwood's appeal submitted that the judge had made mistakes on both those points, which the Court of Appeal dismissed.
"We agree with the judge that the idea that an insured can be described as terminally ill and claim an accelerated death benefit, when there is an available cure and the insured is likely to survive, is contradictory," its decision said.
"An interpretation which permitted that result could result in the payment of the death benefit to someone who is alive, in good health, and with no adverse health conditions likely to result in his or her death… An insured could be paid out the death benefit, take out another life insurance policy, ultimately die and be paid out a death benefit twice in respect of different events, only one of them being death. To us, this makes little sense."
Catherwood was ordered to pay costs.