A Christchurch lawyer who unsuccessfully sued his life insurer for breach of contract after his claim for a $NZ1.2 million ($1.11 million) terminal illness payout was denied, has lost his appeal to overturn the High Court decision. 

Hugh Catherwood made the terminal illness claim under the life insurance policy he bought from Asteron Life in 2009 via his broker. He was formally diagnosed with cancer in January 2019 and sought to have early payment of life cover from the insurer. 

Asteron Life has welcomed the Court of Appeal decision made this month. 

“Prior to the initial legal challenge, Asteron Life carefully considered the customer’s claim and invited the customer to provide additional material to support his position, and this was dealt with through Asteron Life’s robust claims review process,” the insurer says in an email to insuranceNEWS.com.au. 

“Asteron Life’s position throughout has remained that the customer’s medical condition, though distressing, did not meet the definition of a ‘terminal illness’ as defined in the life insurance policy.” 

Before Mr Catherwood lodged his claim the insurer had advised his broker that to consider an early payment of life cover under the policy, it required “supporting medical information in the form of copies of all reports, test results, specialist referrals and any other relevant information [as well as] the latest specialist letter … with information regarding prognosis”. 

The claim form was submitted in February 2019 and Asteron Life asked if Mr Catherwood was going to provide supporting medical notes including the latest specialist review outlining his prognosis.  

Mr Catherwood directed Asteron to get in touch with his oncologist who said the chance of his patient “dying in the next 12 months is low ie. less than 10%” based on the treatment plan suggested, which includes surgery and chemotherapy. 

Asteron ultimately rejected the claim in April 2019 after reviewing the supporting documents and prognosis on grounds that Mr Catherwood did not meet the definition of terminal illness as set out in the policy.

The life insurer reviewed its initial decision at Mr Catherwood’s request and maintained there was no reason to change its mind about it. 

By then Mr Catherwood had completed treatment and his oncologist confirmed there were no signs of cancer in his body. 

For the life benefit to be paid out, the policy stated that life expectancy needed to be not greater than 12 months “regardless of any available treatment”.  

The case came down to the interpretation of those words and whether they meant ignoring the effect of treatment, or despite the effect of treatment. Mr Catherwood argued that without treatment he would have had a life expectancy of less than 12 months. But the courts did not agree with his interpretation. 

“It would be highly strained, and artificial to suggest an insured was entitled to a terminal illness benefit when treatment was available which meant the insured was not likely to die within 12 months,” the High Court ruling last year said. 

“Asteron has not breached the terms of the contract of insurance by interpreting the definition of ‘terminal illness’ and ‘terminally ill’ by taking into account the effect of available medical treatment on Mr Catherwood’s life expectancy.”