CR377 Interpretation and application of the restriction period

by Case ReportsInterpretationTopics & Cases

CR377

Interpretation and application of the restriction period due to a breach of the 20% rule in terms of section 54 of the Long-Term Insurance Act, 52 of 1998

Insurer applying restriction period at the end of the premium paying period (policy year)

Background

1. The policy was an investment policy that commenced on 1 June 2007.

2. The Complainant needed to withdraw the funds from the investment as she needed the cash for oncology treatment.

3. The insurer declined her request for the reason that the policy was in an extended restriction period which only ended on 1 May 2017.

4. The Complainant had increased the monthly premium in July 2010 and June 2011.

5. Both increases had breached the 20% rule in terms of Section 54 of the Long-Term Insurance Act.

Discussion:

6. The insurer’s interpretation was as follows:

• The premium paying calendar (premium period) year starts on 01 June and ends on 31 May of the next year. The extension of a restriction period takes into account the total premiums received in the calendar year/premium period to determine if a client has breached the 20% rule as per The Long-term Insurance Act. The change could therefore be affected anytime during the colander year and only if, by the end of the calendar year (31 May,) the increased premium breaches the 20% rule will the restriction period be extended from that date onwards.”

7. The insurer therefore applied the extended restriction period from the end of the premium paying period as it held that it was only at the end of the premium period that it could be determined if an excess premium had been received. The restriction period was extended for a further 5 years until May 2017 as the excess premium, following the increase in June 2011, was only calculated at the end of May 2012.

8. The Long-term Insurance Act states:

“”restriction period” means a period of 5 years which commences…
a) on the date with the first premium period begins; or
b) during a premium period after the first such period, on the first day of the month in which an excess premium is received by the insurer.” (own emphasis)

9. “Excess premium” is defined by the Act as follows:

“…means a premium which is received by, or becomes due to, a long-term insurer during a premium period and which-
a) by itself exceeds;
b) when aggregated with all premiums already received, and still be to received, during the premium period, exceeds; or
c) …
By a rate of more than 20 per cent, the higher of the total value of the premiums received by the long-term insurer during any one of the two premium periods immediately preceding that premium period…” (own emphasis)

10. Having regard to the bold type above, we wrote to the insurer and advised that we were of the view that the extended restriction period must be calculated from June 2011 for a further 5 years, thus ending June 2016.

Result:

11. The insurer accepted our view. The restriction period was amended to expire on 1 June 2016.

GB
October 2017

CR379 Interest on late payment

by Case ReportsInterest on Late PaymentsTopics & Cases

Interest on late payment CR379

Dispute about calculation of payment in respect of a disability claim based on psychiatric grounds; whether interest payable.

Background

1. The complainant last worked on 21 January 2014. She lodged a disability claim in respect of depression (for a lump sum) with the insurer on 10 March 2014. At this time the cover amount was R3 675 000.The claim was repudiated in October 2014, and an ongoing dispute about this arose. At all times the complainant continued to pay premiums.

2. The insurer eventually asked a psychiatrist well-versed in insurance matters to assess the complainant. His report, dated 16 July 2016, concluded that her multiple symptoms prevented her from working, but that it was still premature to consider her condition permanent. He recommended admission to hospital for an observation period and treatment in a multidisciplinary setting. The complainant was subsequently admitted to hospital, following which her psychiatrist reported that her psychiatric and physical symptoms impaired her capacity to return to work, and recommended medical boarding.

3. The insurer admitted the claim on 6 August 2015. By this time the lump sum had increased to R3 895 500.

4. The insurer determined the date of disability to be 21 January 2014, and the lower amount of R3 675 000 was paid, together with a refund of premiums from January 2014. No interest was paid. The complainant claimed the higher amount, ie R3 895 500, on the basis that this was the amount payable at the date when the claim was admitted.

5. The insurer’s position was that permanence of a depression claim could not be determined until up to two years of treatment had been undergone, but that the date of disability, as determined by the insurer, governed the cover amount payable.

6. The Chief Medical Officer’s reasoning was set out as follows:

“A medical condition is calculated as permanently disabling using the following logic:
• The day the impairment prevented the claimant from going to work, provided that
• The impairment has been treated adequately, according to guidelines laid down by the appropriate specialist group
• Permanence can only be determined once treatment of the condition has failed
• Only then can it be calculated that the date of permanence is the day that the impairment initially prevented the claimant from going to work, or when the impairment commenced

The reasons for this are the following:

• Some conditions need to be treated for up to two years before ‘permanence’ can be established
• In this time many claimants are unable to work and have no other source of income, and their policies might lapse
• It will not be possible to pay out claims if the date of permanence is considered that date when it was determined that treatment had failed, and the policy had lapsed
• It is logical that permanence often can only be determined after a while, and should therefore be retrospectively applied to the date that the impairment actually commenced or was diagnosed”.

7. Our office requested a copy of the claim acceptance letter from the insurer. The letter furnished to us, dated 13 August 2015, reads as follows:

“Good day

CONFIRMATION OF PAYMENT

Thank you for all the documents submitted to date. We are happy to confirm that we have now received all the outstanding information needed for the payment of your claim.

We confirm that payment has been made as follows on 12/08/2015:

Payee
[Complainant]

Amount
R3 765 000 (CLAIM AMOUNT)
R18 637.00 (REFUND OF PREMIUMS)”

Arguments concerning interest
8. The question of interest on the capital amount from 21 January 2014 had been raised by our office, in the course of the investigation of the complaint.

9. The insurer’s response was that the medical evidence in support of the claim was received on 28 July 2015, and the claim paid on 12 August 2015, so no interest was payable.

10. It was contended that this position was in line with the Life Offices Association (LOA) guideline on interest for late payment of claims, which is to the effect that interest is payable on an equitable basis (even if there is no liability in law) once a claimant has duly submitted proof of entitlement to the insurer (the claim documentation) and it is shown that the insurer, having had a reasonable time to consider the claim, did not make payment. (The LOA guideline indicates that an insurer should be able to make a decision on a disability claim within 120 days.)

11. Our office had then pointed out that the insurer had derived value from non-payment of the benefit after January 2014, as it retained the value of a benefit which the insurer decided accrued to the complainant as at January 2014. We had expressed the view that it was not equitable for an insurer to require the insured to wait for a long period while permanence was established and then to receive a lump sum disability benefit as at the disability date many months prior to the determination of permanence, without interest being paid.

12. The insurer’s senior legal adviser responded as follows:

“The client’s own specialists indicated over an extended period of time that she is in fact not permanently disabled, alternatively failed to properly substantiate the claim. As late as 16 July 2015 [the psychiatrist] still advised that her condition does not present permanent disability. From the medical evidence it appears that right up to admission of the claim on 6 August 2015, it was not all that clear whether the definition of permanent disability has been met. Further, my understanding is that the client failed to follow the optimal treatment procedure prescribed by the medical practitioner. However, [the insurer] gave the client the benefit of the doubt in admitting the claim. In doing so, I believe [the insurer] has already acted fairly and equitably towards the client”.

13. The insurer’s product actuary commented as follows:

“[The insurer’s] stance has been strict application of the contract and ASISA guidelines and I don’t think this can be disputed. The contract states when the benefit is calculated (date of event) and the guidelines refer to receipt of all relevant information, which only happened shortly before the payment. But given that it was a marginal call on admitting the claim (there’s a strong argument for no claim), [the insurer’s] view is that it has gone beyond fairness already and further compensation (interest) is unfair. Overall, it’s hard to see a strong case for inclusion of interest on the grounds of fairness given the overwhelming sense of fairness in paying the claim. While the claim was admitted, there’s a significant ‘ex-gratia’ element to the decision and the amount, which implicitly includes additional compensation beyond the letter of the contract. Even without this, the contract, agreed to by the customer, clearly states the benefit amount and the industry guidelines recommend no interest be paid”.

Discussion

14. The case was referred to an adjudicators’ meeting for discussion.
15. The policy provided that:

“The Cover Amount is determined as at the date on which the Life Covered became Occupationally Disabled. This date must be confirmed by [the insurer’s] Chief Medical Officer”.

16. The meeting was satisfied that the Chief Medical Officer’s decision to confirm 21 January 2014 as the date on which the Life Covered became Occupationally Disabled (as defined in the policy) had been a rational and reasonable exercise of his discretion to determine the date of disability. The insurer admitted the claim on 6 August 2015, a confirmation that by that date it considered the complainant to have met the requirements of the definition. These included the requirement for permanence, as treatment of the condition was shown to have failed over a long period, establishing that the disability was of a permanent nature. 21 January 2014 was the last date that the complainant had worked, and this must retrospectively be considered the date the disability commenced. This date determines the applicable cover amount, which in January 2014 was R3 675 000. Premiums paid after the date of disability were correctly refunded.

17. The meeting then considered the question of interest.

18. Our rules enjoin us to accord due weight to considerations of equity (Rule 1.2.4). Specifically, Rule 3.2.6 provides that we may “order a subscribing member, in addition to any other recommendation or determination made, to pay interest to a complainant on the pertinent sum at a rate and from a date that is considered to be fair and equitable in the circumstances”.

19. We are not restricted by the LOA guidelines on the payment of interest, although we will obviously take these into consideration.

20. The meeting was of the view that the insurer had not taken account of the prejudice to the complainant inherent in being obliged to wait until permanence could be established (in itself a reasonable requirement), but then having her benefit backdated to the date on which her permanent condition was retrospectively determined to have begun. There had been no consideration of the fact that she had been without the benefit from this date of disability, and that the insurer had had the use of the money over that period.

21. The comments of the senior legal adviser appeared to blame the complainant for the fact that it was not proved from the outset that she was permanently disabled. This was at odds with the more compelling view of the Chief Medical Officer that it was logical that permanence could only be determined after a while.

22. It was also ironic that insurers have sometimes used the reverse argument to defend a claim apparently lodged late (outside policy time limits for lodging claims). For example, if a claimant waits out a period of unsuccessful treatment and then lodges a claim, the argument is made by some insurers that the claim should have been lodged soon after the diagnosis or first day unable to work, regarded as the “date of disability”. Some insurers then use this “late lodging” as a contractual defence against paying a claim.

23. The comments of the product actuary made out a case that the insurer had “gone beyond fairness already” in admitting a claim on which there was a “strong argument for no claim”, and therefore a “significant ‘ex-gratia’ element to the decision”.

24. The problem with this was that at no stage did the insurer indicate to the complainant that it had made an ex gratia decision, or that it was making a decision to admit the claim based on fairness even though it considered that there was a strong argument for no claim. Payment was not couched or offered as a settlement in view of any stated arguments for no claim. The claim was simply admitted and paid. The rationalisations were only made after the fact.

25. It was so that the insurer only received the final medical information which it accepted as confirming permanence in July 2015. Strict compliance with the LOA guidelines for paying interest on late payment would support payment of interest “once the claimant has submitted proof … that would satisfy a reasonable insurer that he has a valid claim in terms of the policy; and the insurer has had a reasonable time to consider the claim”.

26. However the meeting was of the view that the strict application of the provisions of the contract in conjunction with the industry guidelines produced a result which was unfair.

27. It was noted that it is not an uncommon situation for a date of disability to be determined retrospectively, for example where permanence can only be established after a period of unsuccessful treatment, and in our experience it is the usual practice that insurers pay interest on a lump sum as from date of disability, or pay arrear monthly disability payments as from date of disability.

28. The meeting was of the view that this particular case cried out for some accommodation of the complainant’s position, on grounds of equity. It viewed the insurer’s attitude as one of “trying to have its cake and eat it”, in that it was not prepared to pay the higher lump sum value as at the date of admission of the claim, but also was not prepared to pay interest from the retrospectively determined date of disability.

Result

29. A provisional ruling was made against the insurer in the following terms:

31.1 The complainant was not entitled to the higher benefit value of R3 895 500. Payment of the benefit value of R3 675 000, being the value applicable as at 21 January 2014, was correct.

31.2 The insurer must pay interest to the complainant on the claim value as at the date of disability, calculated from 8 July 2014 (being 120 days after the complaint was received) to date of payment, at the rate offered by Standard Bank on deposits for a period of 12 months.

30. The insurer accepted the provisional ruling, and interest in the amount of R242 952 was paid to the complainant.

SM
October 2017

CR365 Pre-existing conditions Disability benefit claim

by Case ReportsDisabilityTopics & Cases

CR365
Pre-existing conditions
Disability benefit claim; pre-existing conditions clause does not cover complainant’s condition
Background:
1. The complainant had two policies, being a Personal Loan Protection Plan and a Credit Card Protection Plan, both these policies covering, inter alia, permanent disability.
2. The complainant was diagnosed with gout and arthritis a few weeks prior to the commencement of the two policies, and he became permanently disabled to perform his duties as a panel beater and a motor vehicle mechanic, some months after the commencement of the policies.
3. He submitted claims to the insurer under both the policies, which were declined on the basis of the exclusion of the pre-existing conditions, namely gout and arthritis.
4. The exclusion relied on was set out in the following provision in the policies (the wording of these policies were almost identical):
“X insurer will not pay any claim in the first 12 months after the start (or reinstatement) of cover because of any pre-existing condition you had when cover started. Pre-existing conditions are:
a. Any form of any of the following medical conditions (except for minor sickness, for example common cold or flu) that I(sic) have seen a medical doctor about or been treated for:

• heart disease or heart attack…;
• cancer;
• stroke;
• kidney disease;
• depression, epilepsy or fit;
• pneumonia, asthma, TB…
• disability; and
• diabetes.

b. The usage of any form of chronic (long-term) medication continuously for at least six months;
c. Having had any special test (like a scan or X-ray) that was reported as abnormal and required medical treatment;
d. Any treatment during the past 12 months for any form of back-illness, hip, knee or shoulder problem;”.
Discussion:
5. The policies define “pre-existing conditions” clearly stating, “pre-existing conditions are” (own emphasis) in four categories. Only paragraph c of the definition of “pre-existing conditions” is relevant in this matter. With reference to the clause above, the view of the office was:
5.1 Gout and arthritis are not listed as pre-existing conditions – the clause specifically narrows down the conditions setting out…”pre-existing conditions are…any of the following…” and there is no reference to gout or arthritis or similar condition.
5.2 There was no proof of the complainant having used chronic medication.
5.3 The complainant had a blood test at Lancet Laboratories prior to the inception of the policies and the results showed that he had gout and rheumatoid arthritis. If one combines the requirement of causation in paragraph 4 above, with paragraph c of the definition, the test would look as follows:

“X insurer will not pay any claim in the first 12 months which is caused by a condition for which you had a special test done and the result of which was reported as abnormal and which required medical treatment.”

Paragraph c requires more than a diagnosis in that not only must the result be abnormal, it goes further by adding “and required medical treatment”.

For purposes of considering this paragraph, it could be accepted that:
• The tests done at the Lancet Laboratories were “special tests”.
• The result of gout and arthritis were “abnormal”.
• The next question would be if the complainant required medical treatment. There was no proof submitted that the complainant’s doctor prescribed any form of treatment or that the conditions were so severe that he should have been medically treated. In fact, the information at hand was that the complainant’s doctor did not even discuss the test results with him. The insurer, that had the onus to prove that a pre-existing condition prevailed, was unable to show that the provisions of paragraph c were met.

5.4 The complaint’s condition also did not fall within paragraph d of the definition because there was no indication of him having suffered from “any form of back-illness, hip, knee or shoulder problem”.

6. In terms of medical evidence submitted, the complainant fell within the requirements of permanently disabled. The insurer was requested to consider the claims against both policies.
7. The insurer made further enquiries with the complainant’s doctor to ascertain if he required medical treatment for his gout and arthritis after the tests were done. The doctor subsequently submitted a note stating that after the positive diagnosis had been made, the patient did not return for treatment. The insurer was further of the view that if the complainant had returned for treatment, the cause of his disability some months later, may have been avoided.
8. The office obtained an independent medical opinion on the treatment of gout and arthritis and was advised that medical treatment is not always required after a positive diagnosis as some people prefer lifestyle changes, such a dietary and exercise options, instead of medication, and if the condition is not chronic, there may be a tendency to defer medical treatment until the condition becomes chronic.

Result:
9. The insurer responded by admitting the claims against both policies and paid the outstanding balances in terms of the policies’ provisions in the case of permanent disablement.
NvC
April 2016

CR366 Funeral benefit Claim declined on the basis that the parties were divorced prior to the conclusion of the contract.

by Case ReportsFuneral InsuranceTopics & Cases

CR366
Funeral benefit

Claim declined on the basis that the parties were divorced prior to the conclusion of the contract.

Background

1. The complainant took out a funeral plan covering her husband, two children and two extended family members. The policy commenced in July 1999.

2. The deceased passed away on 16 March 2015 as a result of unnatural causes. When the complainant instituted a claim for the payment of the death benefit, the insurer declined to pay the benefit on the basis that the parties were divorced prior to the commencement of the policy.

3. In doing so, the insurer relied on a final order of divorce issued by the then Supreme Court of Bophuthatswana on 24 April 1997 and an affidavit deposed to by the deceased on 11 October 2006 confirming that the parties were indeed divorced. The complainant disputed that they were divorced and submitted a letter from the National Prosecuting Authority of South Africa (“NPA”) dated 14 March 2005 dealing with a fraud case that was lodged against the deceased before he died. The aforesaid letter reads as follows:

“We read your representation and the relevant police docket. The following was observed.

(a) The divorce document appears to be falsified.

(b) The accused alleges that he had instituted divorce proceedings and was given the divorce document by his attorney who has since passed away.

(c) Further investigation by the police confirmed that the accused’s divorce file at the deceased attorney was destroyed.”

4. The NPA concluded that there was proof that the decree of divorce was invalid, meaning that the marriage between the deceased and the complainant still subsisted. However, they declined to prosecute because they did not have evidence to prove that the deceased did not obtain the divorce order from his attorney. Despite this information, the insurer maintained that it was not legally obliged to accept liability to pay the claim.

5. The complainant also submitted a divorce order that was issued by the same court in the same year containing the same case number, but with different dates and different parties.

Discussion

6. On receipt of the second court order, we pointed out to the insurer that it clearly showed that something was amiss because we have never heard two separate cases from the same court, bearing the same case number, but reflecting different parties. We requested the insurer to clarify from the court whether the court order relevant in this matter was valid or not.

Result

7. The insurer came back indicating that they were prepared to pay the complainant’s claim on a without prejudice basis and the benefit was paid accordingly. Our file was closed.

NS

March 2016

CR367 Conclusion of contract Policy correctly issued?

by Case ReportsConclusion of ContractTopics & Cases

CR367
Conclusion of contract

Policy correctly issued?

Surrender of policy – did applicant for surrender have authority to act?

A complainant wrote to us complaining about the fact that her insurance adviser had partially cashed in her policy. She stated that the adviser had owed her money and to redeem his debt he paid the premiums on the policy he sold her. The insurer countered the complainant by stating that the complainant was merely the insured life and the adviser was the owner of the policy. The application form indicated that the adviser was the complainant’s brother and premium payer. The insurer had a practice of making the premium payer the policyholder even though this is not clearly indicated on the application form. (The insurer had changed this practice subsequent to the issue of this policy).

The insurer suggested that the complaint was a private family matter between the parties and that they should settle it between themselves. The insurer did not comment on the complainant’s allegation that she had received all the notifications, updates etc, during the eleven year term of the policy which correspondence had reinforced her belief that she was the owner.

The insurer subsequently, after we raised certain questions, interviewed the adviser who conceded that the complainant was his half-sister, not his sister. He also said that the complainant had signed the encashment form together with him. The complainant denied both these allegations and stated that her signature was a forgery done by means of a “cut and paste” process and that the adviser was not related to her.

We contacted the insurer and pointed out that there was a factual dispute in the case. We suggested a hearing and predicted that whoever was not telling the truth would probably not be willing to attend. The adviser “blinked first”, he refused to attend and after some pressure from the insurer agreed to repay half the surrender value. The complainant refused to accept the offer. The adviser then offered the full amount which was accepted by the complainant.

The adviser then reneged on his promise and said he could only pay in instalments as he was short of cash. The insurer paid the complainant and recouped the money from the adviser who was also investigated by the insurer’s compliance department.

JP
April 2016

CR368 Disability

by Case ReportsDisabilityTopics & Cases

CR368
Disability
Introduction
This case concerns the termination of the payment of a monthly disability income benefit which had been in payment for just over a year, after the insurer had discovered, through the use of electronic surveillance by forensic investigators, that the life insured was actively involved in the running of two businesses: a tavern and a construction business. Based on the information gathered during the video recording, the insurer had decided that the life insured was capable of performing a suitable alternative occupation.
The complainant objected to the use of the evidence that was obtained through the video recording, contending that the recording was made in violation of his right to privacy and that there is no guarantee that it had not been tampered with as it had been obtained by a company which was acting on the insurer’s instructions.
Discussion
Our office may, in its discretion, admit or refuse to admit evidence that was gathered by means of video recording.
Our procedure is to refer all such matters to a joint meeting of the office’s adjudicators for discussion, with a view to deciding, firstly, whether the recording is admissible or not, and secondly, if the meeting finds that it is admissible, decide what weight should be attached to the evidence that was gathered through its use.
The first step in that process is to enquire from the complainant if s/he consents to the adjudicators viewing the video recording. If the complainant consents, all the adjudicators will view the video recording and then decide on the admissibility of the recording and the weight to be attached to the evidence that was gathered through its use. In deciding on those two issues, the overriding consideration is fairness to both parties, having regard to all the facts of the case, the submissions by the parties and any other relevant consideration, which may include those set out on page 44 of our 2005 Annual Report as follows:
“Fairness may sometimes require us to have regard to relevant and reliable evidence. Like a court, we have a discretion to accept and consider such evidence, taking into account how it was obtained; whether it could have been obtained lawfully; the reasons why proper means were not used; the reliability of the evidence; whether the acceptance of such evidence would be so improper as to transgress constitutionality; the materiality of the evidence; whether such evidence was necessary to have a balanced view of the dispute; and the nature and degree of impropriety of obtaining the evidence”.
The giving of consent for the adjudicators to view the video recording is not construed as any concession on the complainant’s part that the recording is authentic, or that the recording is admissible and of evidentiary value.

If the complainant does not consent to the adjudicators viewing the recording, it does not mean that the recording will automatically, that is, for that reason only, be excluded as evidential material. It only means that the meeting must then decide, in its discretion, whether or not to view the recording without his/her consent. One of the factors which we will consider in this regard is the reasons why the complainant refuses to grant his/her consent. The complainant is, in that event given an opportunity to advance reasons for his/refusal.
If the meeting decides to view the recording despite the absence of consent, it will thereafter decide the two issues referred to in the paragraphs above after affording the parties an opportunity to make submissions of the nature referred to in the paragraph extracted from page 44 of our 2005 Annual Report.
Result
Having considered the submissions received from both parties, the meeting decided that the video recording should be viewed. However, after viewing the recording, the meeting concluded that even without considering the admissibility or otherwise of the video surveillance material, it would be more appropriate for the matter to be heard by a court of law. The reason for the conclusion was that there were serious disputes of fact in the evidence presented by the parties which could only be resolved by holding a hearing, and also material documentary evidence (some of it privileged) that the office would require access to and to refer to in determining the main issue in dispute. Furthermore, it was probable that the complainant would need to call witnesses who would invariably have to be subjected to cross-examination as is done during a trial: our office has neither the capacity, nor the authority to conduct a trial.
The parties accepted the ruling.

CNN
April 2016

CR369 Impairment Benefit Physical impairment benefit

by Case ReportsImpairmentTopics & Cases

CR369
Impairment Benefit
Physical impairment benefit; claim for permanent loss of use of ankle admitted but claim for permanent loss of use of leg declined; combination of loss of use of limbs
Background:
1. The complainant developed peripheral neuropathy, a condition that damages the nerves, in his right foot. The condition is said to be extremely painful and restricted the use of the affected foot. The complainant became unable to drive his car and he could no longer perform his occupation as a travelling salesman.
2. The policy did not provide for occupational disability but the insurer admitted the claim for the loss of the use of the foot below the ankle and paid the complainant 25% of the physical impairment benefit in accordance with the policy provisions.
3. The complainant argued that even though the medical evidence showed that the condition was present in his right foot only, he was not only inhibited from using his foot but his whole leg. He claimed that he was entitled to the percentage allocated for the loss of the use of the full leg, being a further 25%,as provided in the policy as follows:

“Claim events for Physical Impairment Benefit
Permanent impairment Maximum per insured life %
One foot (ankle and below) 25%
Both feet 50%
One leg below the knee 50%
Both legs (above the knee, including the knee and below) 100%
…
4. Furthermore, the complainant was of the view that the policy wording provided for his entitlement to 100% of the benefit, due to the combined loss of the use of his foot and leg. The complainant relied on the following provisions in the policy:

“Total and permanent loss of use and/or loss of:
Combination of any two of the following: 100%
Hand
Foot
Leg
Arm”
Discussion:
5. The office agreed that the loss of the use of the foot below the ankle also rendered the rest of the leg of no use and that the complainant was entitled to 50% of the benefit for the loss of the use of one leg below the knee.
6. However, the complainant’s view, as set out in paragraph 4, above, that because he had no use of a combination of a foot and a leg, he was entitled to his full 100% benefit, required consideration. The office’s stance was that the provision in paragraph 4 cannot be interpreted to justify a benefit of 100%, as the provision must be interpreted in such a manner as not to conflict with the provisions of the policy set out in paragraph 3, above.
7. To give proper meaning to the provision set out in paragraph 4, above, it must be interpreted in such a manner that entitles the insured to 100% if, for instance, he loses the use of a leg and a hand or if he loses the use of an arm and a foot. It was decided that the provision set out in paragraph 4, above, did not apply to the insured and that a benefit of 50% for the loss of his leg below the knee was warranted. A further consideration was that, on this interpretation 50% of the benefit would be preserved for future claims for the impairment benefit.
Result:
8. The insurer agreed to pay the complainant a further 25% of the benefit, having paid an initial 25%. However, the insurer later decided to pay the complainant the balance, bringing the total benefit to 100%, with an acknowledgment that the wording of the policy in regard to the combined loss of limbs, required clarity and that this type of policy would no longer be marketed.
NvC
April 2016

CR370 Accidental Death Policy covered “accidental death”

by AccidentCase ReportsTopics & Cases

CR370
Accidental Death

Policy covered “accidental death”; was the deceased’s death accidental?

The policy covered ‘accidental death’ which was defined in the policy as a “traumatic death caused solely by external, violent, unforeseeable and visible means, occurring independent of any other causes and within 14 days of such trauma proved to the satisfaction of the insurer.”

Two weeks after giving birth, the deceased was re-admitted to hospital with internal bleeding. She was discharged five days later. Four days after that she was admitted to hospital again and subsequently died.

According to the autopsy report, the cause of death was ‘perforated peptic ulcer’ and ‘deep vein thrombosis with complications thereof’. The medical practitioner’s report submitted with the claim form indicated that the cause of death was ‘pulmonary embolism’ and ‘patient developed DVT post c/section’.

The abridged death certificate stated that the cause of death was ‘under investigation’.

The insurer repudiated the claim on the basis that the evidence did not show that the deceased’s death was an ‘accidental death’ as contemplated by the policy.

The complainant, the deceased’s mother, then lodged a complaint with our office contending that the death was not due to natural causes but due to the hospital’s negligence and that the insurer had therefore erred in repudiating the claim.

It was explained to the complainant that as the claimant she bore the onus to prove that the death was an ‘accidental death’ as defined.

We pointed out that the complainant’s own speculation or opinion as to the cause of death did not assist her and furthermore that it did not follow from the fact that the autopsy report revealed ‘sepsis’ as being the cause of death that there was negligence on the part of the hospital concerned or otherwise that the death constituted an ‘accidental death’.

The complainant had also failed to provide the basis for her contention that the deceased was ‘not correctly monitored in the correct manner’ and that this was the cause of death.

Therefore based on the available evidence, it could not be said that the death was caused by external or unforeseeable means. As such the complainant had failed to discharge the onus of proof and we were therefore unable to uphold her complaint.

LS
April 2016

CR371 Accident Claim for accidental benefit due to bodily injury

by AccidentCase ReportsTopics & Cases

CR371
Accident
Claim for accidental benefit due to bodily injury
Background:
1. The complainant had a laminectomy and fusion of vertebrae. The operation was deemed successful but in time she suffered chronic back pain and was declared permanently disabled for her own occupation by her employer. Some time after she had been boarded, she experienced severe pain in her back. X-rays revealed that some of the steel rods inserted in her back during the operation, about three years previously, had broken. She submitted a claim in terms of the Accidental Protection Plan held with the insurer, but it was declined on the basis that she did not fulfil the following definition of “accident”:

“Accident means a sudden and fortuitous event occasioned by visible, violent and external means.”

2. The insurer stated that the complainant had also failed to show that a “Bodily Injury” defined as follows had occurred as the breaking of the rods had occurred through a degenerative process:

“Bodily Injury means traumatic destruction of any part of the body, excluding mental or psychological impairment other that incurable insanity caused by Bodily Injury. Bodily Injury does not include sickness or disease or their consequences (except bacterial infections consequent upon Traumatic Bodily Injury), nor Bodily Injury due to a gradual operating cause or naturally occurring or degenerative process or to pregnancy or its consequences. Bodily Injury is deemed to include the direct results of exposure to the elements.”

3. The insurer was also of the view that the claim did not fall within the “Scope of Insurance” as the event had not occurred solely and independently as set out below:

“We will pay the Benefit shown in the Table of Benefits if during the Period of Insurance an Insured Person sustains Bodily Injury which results solely and independently of any other cause within 12 months of the date of Accident in Death or Permanent Disability.”

4. Apart from having to show that the claim fell within the definitions of “Accident” and “Bodily Injury” and within the “Scope of Insurance”, to qualify for the accident benefit the complainant also had to show that she was permanently and totally disabled as a result of the bodily injury, set out in the Table of Benefits.

Discussion:
5. The complainant argued that the breaking of the rods was sudden, unexpected, visible on the x-rays, forceful and caused by external means and
not through a degenerative process or a natural wear and tear process. She was of the view that the surgery was not the cause of the breakage. She obtained a medical opinion which stated that the operation had been extremely successful; that the type of steel rods inserted do not erode or degenerate through a natural process and that such breakage was an event which was unrelated to and independent from the operation. An orthopaedic specialist stated that the cause of the breakage of these rods may be ascribed to the fusion not solidifying, and that this occurred in about 5 % of cases. His conclusion was also that the breakage was an independent incident from her original pathology.
6. The insurer persisted that if the complainant had not undergone the fusion operation to her back, she would not have had the rods inserted and therefore the breakage of these rods was not an independent incident, but directly related to the surgery which had proven not to be successful after a number of years.
Result:
7. After due consideration of the matter, this office found in favour of the insurer as the complainant had not met the criteria of the definition of “Accident”. She was unable to state when exactly the requisite sudden fortuitous event had occurred and although the breakage may have been a violent event and visible on x-rays the definition requirement of “external” would also have been problematic for her to prove because the forces were all generated within the body.
8. It appeared that the pain in her back gradually escalated and therefore she had also failed to show that the event occurred within the period stipulated at “Scope of Insurance”. The definition of “Bodily Injury” does not include a degenerative process and more weight was given to medical evidence that the breakage of the rods was not an uncommon occurence after a fusion operation. Medical opinion submitted indicated that the breakage was caused by the non-adherence of the fusion and the instability of the spinal structures, placing abnormal stress on the screws and rods.
9. Apart from having regard to the specific definitions, the office also considered if the event occurred solely and independently from any other cause. This is usually understood to transpire when the chain of causation is operative until there is an intervening cause. Had she not had the fusion operation whereby rods were inserted in her back, there would not have been breakage of the rods, which caused her excessive pain and consequent inability to work and the reason she applied for the benefit. From this it follows that the breakage was not an intervening cause, but was dependent on the fusion operation some years previously.
10. The complainant sought leave to appeal the office’s final determination in favour of the insurer, which was granted to her. The appeal was dismissed, the appeal tribunal stating:

“My finding that the breaking of the rods was not an ‘accident’ or a ‘bodily injury’ as defined in the policy is decisive of the appeal. It renders unnecessary any discussion of other contentious matters raised at earlier stages such as causative importance of the operation, whether the breaking of the rods as distinct from the underlying pathology resulted in the state of total disability, and whether ‘solely and independently of any other cause’ can and should be interpreted against the insurer as was found to be so in relation to the policy considered in *Concord Insurance Co Ltd v Oelofsen NO 1992 (4) SA 669(A).”
(*In this case it was decided by the court that the words, “independent of any other cause” do not refer to a pre-existing condition that had merely contributed to the permanent disability and thus excluded the insured’s pre-existing health condition.)
NvC
April 2016