CR374 Disability

by Case ReportsDisabilityTopics & Cases

CR374
Disability

Insurer ignoring relevant considerations concerning job description and physical nature of occupation; selectively relying on certain medical evidence while ignoring contradicting medical evidence

Background

1. The complainant, a farm manager, injured his right leg, knee and ankle in a tractor accident in 2012 (the tractor drove over his leg). After surgery and rehabilitation he still had pain, stiffness, swelling and impairment of range of motion, especially in his ankle, and walked with a crutch. He lodged a complaint with our office after his claim for an accidental injury benefit was declined, because the insurer maintained that he did not have the requisite “50% loss of lower limb function”. After extensive investigation, our office upheld the insurer’s decision on this claim.

2. The complainant had all along stated that he was struggling to work because of his injury, and he pointed out that: “The nature of my work is extremely physical and involves a significant degree of mobility, getting around the farm supervising employees in the orchard and fields”. We noticed that there was also disability for regular occupation cover on the policy, and asked the insurer to assess a claim for this.

3. The policy requirement for this benefit was that the insured be “totally, permanently and continuously unable to fulfil the occupational demands of the occupation engaged in for income immediately before the disability”.

4. The complainant’s treating orthopaedic surgeon stated in a report dated 25 September 2014 that “it is my professional opinion that [the complainant] cannot perform the work as manager of the farm as he cannot walk over uneven ground to check the farm workers. Even if an arthrodesis operation of the right ankle is performed, he will still not be able to walk on uneven ground, because of the stiffness of his ankle”.

5. A foot specialist (who did a paper review but did not see the complainant) stated that the symptoms appeared to be out of proportion to the x-ray changes, and that the impairment of the lower limb was 16%.

6. Although the insurer had mentioned that an occupational therapist report, employer declaration and job description would be needed to assess the disability claim, it apparently made a decision without this information, relying only on the medical evidence available, after obtaining an additional orthopaedic surgeon report.

7. The decision was to decline the claim. The insurer stated that the new orthopaedic surgeon opinion had indicated a stable right ankle with slight impairment in range of movement and only slight degenerative changes. The insurer was of the view that the claimant could not be regarded as totally, permanently and continuously unable to fulfil the demands of his occupation as a farm manager “which involves administrative work and supervising the activities of the farm workers”.

8. The complainant was not happy with the insurer’s decision, and we pursued his complaint.

Discussion

9. We firstly requested a copy of the new orthopaedic surgeon report from the insurer. This was provided, and we noted that the doctor had in fact concluded his report with the words:”Dit sal nie aangedui wees om lang afstande te loop veral oor ongelyke terrein soos op ‘n plaas oppervlakte nie, maar kantoorwerk kan sekerlik uitgevoer word”.

10. At this stage we requested to see any claim documentation taken into account by the insurer, including the employer claim form, job description and occupational therapist report.

11. The insurer provided a copy of an OT report (which it had commissioned). The OT stated, inter alia, that the complainant’s occupation was of a physical nature, and that he was required to walk most of the day to supervise farm workers, over uneven surfaces. After an extensive physical and functional assessment (testing posture, mobility and gait, balance, range of motion, functional muscle strength, sensation, endurance, pain, etc), she noted impaired range of motion in the back, hip, knee, ankle and foot, and limited movement and poor muscle strength in the right ankle and foot. She concluded that chronic ankle pain, inability to walk far, difficulty with climbing steps, weight bearing or standing for long periods, etc, “supports that the client is unable to perform his duties as a farm manager. Due to the longdurity of the client’s pain and the degenerative nature of his injury, his prognosis is poor. It is highly unlikely that the client will ever be able to perform an occupation of a physical nature even if an arthrodesis is performed”.

12. The OT report had not been mentioned by the insurer in the reasons given for its decision to decline the claim. When we challenged this, the insurer stated that the range of motion noted by the OT was impaired due to pain, which was “out of proportion to the pathology noted by the various specialists”.

13. We then asked the insurer again for the documentation detailing the complainant’s specific duties/job description, and the employer claim form, as this still had not been provided. The insurer then informed us that it had not received this information from the complainant, and had made its decision without this information.

14. We followed up with the complainant and obtained the job description and completed employer claim form, which we sent to the insurer. The employer indicated in the form (signed on 8 September 2015) that the complainant had last actively performed his work on 27 August 2012 (the date of the accident), and while his employment had not been terminated he had had extensive periods of sick leave, and his work status was marked “sick leave”. The job description indicated that, inter alia, a required competency was “good health and physical ability”, and that the farm manager was responsible for co-ordinating and controlling farming activities on the research farm, managing orchards, maintaining farm infrastructure, training trainees and emerging farmers, being responsible for harvesting and marketing of farm produce, etc.

15. We asked the insurer to re-evaluate the claim, now that it had complete information. The insurer responded that “it has been confirmed that the Declaration by Employer and sick leave records do not influence the decision to decline the claim”.

16. We pointed out to the insurer that this was an inadequate response, and that we required a detailed response, setting out the definition and illustrating how it had been applied in evaluating the claim, in relation to the medical evidence, the job description, employer’s declaration, sick leave records and the information provided by the complainant in his claim form as well as his correspondence with our office. We stated that each medical/OT report should be separately canvassed, and if there were any contradictory findings these should be extensively dealt with.

17. In response we received a determination from the insurer’s internal arbitrator, dismissing the complaint. From the reasons given it was apparent that the job description and physical nature of the complainant’s work had not been taken into account at all. Much reliance was placed on the fact that the complainant had not been officially discharged from service, which was taken as an indication that he was still able to perform his occupation. It was stated that “the current functional loss … is not permanent and would to a large extent improve”.

18. At this stage we decided to telephone the insurer, and again point out some of the problems with its approach. An undertaking was given by the insurer to obtain a further opinion from a doctor well versed in insurance claims.

19. This doctor promptly provided an opinion, in which he canvassed all the medical reports and other evidence, concluding that there was no dispute that the bulk (60-70%) of the complainant’s duties entailed physical work. He stated: “He is covered for regular occupation, which means that he needs to be assessed for his ability to do a physical work. Adapting his job output to a more sedentary type of work is not a policy requirement.” As he was unable to fulfil 60-70% of his duties, it was “fair to assume that he is totally disabled”.

20. The doctor pointed to the objective evidence of sequelae of the initial injury: “A CT-scan and bone scan demonstrated active arthritis with degenerative changes of the tibiotalar and subtalar joints to the extent that a subtalar fusion has been proposed. This is confirmed by constant pain and reduced range of motion of the ankle joint. Treatment options have almost been exhausted. The only remaining option is an arthrodesis. The success of this operation can unfortunately not be guaranteed, and it has inherent risks; therefore such surgery cannot be enforced as a treatment option. Therefore for practical reasons the condition should be regarded as having reached maximal medical improvement (MMI), implicating that it is permanent”.

21. The doctor was also of the view that the weight of the medical evidence (two orthopaedic surgeons and the OT) supported disability. Only one doctor found the symptoms incongruous with the pathology. The doctor stated: “However, with the added objective proof of active arthritis on CT-scans, and the proposal by the treating doctors to do an ankle fusion, one has to conclude that the client is disabled as defined”.

Result

22. The insurer then paid the claim. Interest was also paid in respect of the long delay in reaching the decision to admit the claim.

SM
April 2016

CR359 Dread Disease

by Case ReportsDread DiseaseTopics & Cases

CR359
Dread Disease
When did Dread Disease claim arise?
The insured suffered from sinus and swelling in his neck and consulted a doctor. He was treated with antibiotics. About one month later the insured turned 65 and the policy’s cover for the benefit expired. The swelling in the neck did not dissipate and the insured again consulted a doctor, who referred him for a biopsy. The pathology report revealed that the insured had mandibular lymph nodes, indicating metastatic carcinoma.
The insured submitted a claim to the insurer under the cancer benefit. The claim was declined on the grounds that the cover had expired about six weeks previously when he had turned 65. The policy states:
“Expiry Date
(The name of the product) will expire on the anniversary of the Commencement Date immediately preceding the Life Assured’s 65th birthday or when contributions cease to be payable, should that be earlier.”
The insured submitted a complaint to our office and the matter was investigated. The insured’s medical attendant confirmed that the nodes in the neck , which had been present at the first consultation, subsequently turned out to be squamous carcinoma.
The insurer’s response was that the policy requires the histological diagnosis of cancer to be evident prior to the expiry of the cover. Cancer is defined as follows in the policy:
“The manifestation of malignant tumour, including leukaemia and Hodgkin’s disease, supported by a histological diagnosis.”
The policy describes three categories into which the various conditions could fall. Under “Benefit”, the policy states that a claim will be admitted if satisfactory proof is submitted to the insurer that the life assured (1) has suffered major burns, a coma etc, (2) or undergone coronary artery disease surgery etc or (3) “is suffering from cancer”, paraplegia etc.

It was the office’s view that the histological proof was not required prior to the expiry of the benefit, provided the condition had manifested itself prior to expiry and was subsequently medically confirmed. The insured, therefore, had to show that he was suffering from cancer from a date prior to expiry. The condition had manifested itself prior to the expiry date and the nodes were proven to contain malignant tumours when tested a few weeks after the cover had expired. These nodes did not appear over night when he was referred for a biopsy and they were probably present before cover had expired.

The insurer was asked to re-consider the claim, which was subsequently admitted.
NvC
September 2014

CR375 Constitution / discrimination / equality Allegation of marital status discrimination

by Case ReportsDispute of FactsTopics & Cases

Constitution / discrimination / equality CR375

Allegation of marital status discrimination

Background – the facts and argument

1. The complainant and his wife were members of a health plan (a medical scheme) associated with the insurer, and they each also had a life policy with the insurer.

2. For such persons the insurer offered a health integrator plan. In addition to normal annual premium increases on the policy, premiums might increase or decrease by an additional percentage, depending on claims submitted against the health plan, determined with reference to a personal health matrix. The health integrator also allowed for the possibility of refunding a portion of life policy premiums every five years, also depending on claims made against the health plan, and determined with reference to a personal refund matrix.

3. These matrices have seven levels of annual aggregated health claims in rands (eg R0 to R1 050, R1 051 to R2 200, etc) on the vertical axis, and four levels for status on the insurer’s programme awarding points for various wellness factors such as gym attendance, healthy eating, etc, on the horizontal axis. The lower the claims level, and the higher the status, the higher will be the percentage of premiums paid back after a 5-year cycle, and the lower will be the premium increase, with the converse obviously also applying.

4. The complainant was unhappy with the computation of his premium refund benefit and his annual premium increases, to the extent that medical claims and expenses of his spouse had been included in the computation, which he alleged was unlawful and/or unenforceable as being contrary to public policy.

5. The relevant clause in the contract reads as follows:

“The claims taken into account on your Health plan include:

• Medical expenses accumulating towards the threshold and the Above Threshold Benefit attributable to you and your spouse on your Health plan, with the exception of the following
– optometry claims
– dentistry claims, and
– childbirth claims without complications

• Chronic medication and in-hospital benefits attributable to the principal life, spouse and children insured under the Life Plan. In the case of the Priority Plan, the claims taken into account include the amount of the hospital deductibles payable by the member.” [my emphasis]

6. The complainant asserted that this provision, stipulating that the spouse’s expenses are taken into account as well as those of the policyholder, was unlawful and thus unenforceable, as it offended against the constitutional right to equality. He referred to Section 9(3) of the Constitution, which states that no person may discriminate directly or indirectly against anyone on prohibited grounds, including marital status. Such discrimination is presumed to be unfair unless proven otherwise.

7. The complainant maintained that it was discrimination against him on grounds of marital status to include his spouse’s expenses, when this would not be done in the case of a single person. Such discrimination was, he alleged, unfair, and a limitation of his right to equality, a limitation not reasonable and justifiable (as contemplated by Section 36 of the Constitution). His argument was that the purpose of the limitation (indicated by the insurer) “was originally to compensate for unreliable data resulting in claims for one spouse often not being allocated correctly, or at all”, that the insurer had indicated that the reliability of the health systems had improved over time, and that the current purpose appeared to be “that it saves [the insurer] certain expenses and effort associated with a perceived necessity to ‘redesign’ its product”. In his view such a purpose could not render the limitation of his right to equality reasonable and justifiable. He asserted that his and his wife’s claims experiences should be assessed independently, and that there should be no double counting of health claims, in the calculation of the respective pay-backs and premium increase determinations on his and his wife’s policies.

8. In response the insurer furnished an opinion from counsel. The opinion argued that what the complainant described as “double counting” was more aptly described as “aggregating and averaging”; the insurer “partially attributes each spouse’s claims to the other”. (The insurer’s more detailed explanation of its methodology is set out below, at paragraphs 15 to 21.)

9. The opinion set out the relevant legal principles: discrimination on grounds of marital status is one of the specified prohibited grounds of unfair discrimination in terms of Section 9(3) of the Constitution. If differentiation between categories of people is based on a specified ground it is presumed to be unfair, but the presumption is rebuttable.

10. Counsel for the insurer then sought to rebut the presumption that the discrimination on grounds of marital status on the facts of this case was unfair. He addressed factors which must be taken into account in examining the impact of the discrimination on the victim (Harksen v Lane 1997 BCLR 1489 CC). He summarised these factors as follows:

“- The position of the complainant in society and whether he or she has suffered discrimination in the past. If the complainant is part of a group that has suffered discrimination in the past then it is more likely that the discrimination will be unfair;

– The nature of the provision and the purpose sought to be achieved by it. If its purpose is manifestly not directed at impairing the complainant but is aimed at achieving a worthy and important societal goal, such as furthering the equality of all, this may have an important bearing on whether the complainant has suffered the impairment in question.

– The extent to which the discrimination has affected the rights or interests of complainants and whether it has led to an impairment of their fundamental dignity or constitutes an impairment of a comparably serious nature.”

11. The opinion argued that spouses (the group of married persons in society) were not a vulnerable group, and had not suffered from past patterns of discrimination.

12. The general nature of the provision and its purpose was, according to the opinion, to offer members better premiums based on a more accurate assessment of risk, and to influence and encourage people to look after their health. Regarding the purpose of the discrimination, it was stated: “The purpose is manifestly not to impair [the complainant’s] dignity. The aggregating and averaging effect means that one spouse stands to benefit by the low claims history of the other spouse. Therefore within a marriage the one spouse benefits and the other experiences a marginal disadvantage. This is not designed to impair the dignity of the fortunate healthy spouse… In the relevant period the complainant has received a slightly lower payback than he would have received if he was not married or if his wife had not suffered illness. There is clearly no fundamental impairment of his dignity or other impairment of a comparably serious nature”.

13. Counsel for the insurer argued that in entering into the contract with this provision, the complainant had exercised his freedom to contract, even to his own detriment. He argued that freedom to contract was a fundamental aspect of the right to dignity, and the complainant’s “agreement to be treated differently is the decisive factor that leads to the conclusion that the potentially discriminatory or differentiating outcome is not unfair”.

14. The complainant responded to the insurer’s submission (the opinion), maintaining his position that there was double counting, and pointing out (quite correctly) that the “aggregation and averaging” was not explained in the opinion. He maintained that both he and his wife were being discriminated against, in the same way. He referred to the insurer’s stated rationale for combining spouses’ health claims, being the difficulty of separating out-of-hospital claims for each member from health plan records which were composite for a family, and he stated his view that because the insurer had indicated that this unreliability of data was less of a problem than previously, the only remaining rationale was not to inconvenience itself by having to re-design its product. He considered that the opinion confused the overall purpose of the payback and discount system with the purpose of the discrimination “ie not to inconvenience [the insurer]”.

The insurer’s explanations about its methodology

15. At this stage the insurer provided our office with a document entitled “Overview of Integration”, and we provided the complainant with a copy. This document explained the insurer’s model and methodology of integrating data from the health scheme with life cover, to devise incentives that result in clients managing their health better, allowing a more accurate and tailored assessment of risk for its policyholders. A section in this document, under “Common queries” is entitled “Why are spouse claims taken into consideration?” I quote it in full:

“The reason why spouses’ health claims are included is that at the point of the product’s development it has been difficult to separate the out-of-hospital claims for the Principal and Spouse on the health plan as pharmacists for example would often put the claims through under the incorrect spouse.

While the recording has improved over time the practice still exists and more importantly the product was priced taking the combined health claims into account. Within the health claim bands of the PayBack matrices we take into account that we consider both the Principal and Spouse’s out-of-hospital claims (claims that accumulate towards and above the above-threshold-benefit). If we did not do this then the bands in the matrices would be lower to ensure clients remain in the same position. Hence while health claims recording has improved over time, we have maintained this practice as we would otherwise have to retrospectively adjust the benefits of our clients which we do not think is in their best interest.” [our emphasis]

16. We clarified with the insurer that the purposefully wide bands on the matrix were part of the product design from the outset, and that the same matrix was, and had always been, applicable to both married and single policyholders. It appeared that the bands were determined with some consideration of the likely average claims volume of two people, aggregated, in setting the bands wide, so as to diminish any prejudice to married policyholders.

17. The insurer has explained the averaging effect thus:

“This meant that on average clients would not be negatively affected by the inclusion of the spouse’s health claims in the matrix because the health claim bands are wider than if spouse claims were not included in the product design.

Obviously, as with any calculation methodology that uses ‘averaging’, there will be years where individual policyholders will fall into a lower [ie worse, or less advantageous in terms of percentage premium refund or premium increase] health claim band in the matrix as a result of their spouse having high health claims (as is the case with the Complainant) however there will be many policyholders where the opposite is true and they fall into a better health claim band as a result of the methodology. Even the Complainant may find that in future years, he will benefit from this methodology if his spouse has years with lower than average health claims”.

18. It is worth setting out parts of the insurer’s further explanation at some length:

“Insurance pricing is based on pooling of risk and the ability to accurately assess the risk for a pool of lives… Traditionally the insurance industry prices insurance dividing the population into smaller risk pools by using rating factors such as age, gender, smoking status etc (the traditional rating factors) which are known to have a quantifiable impact on mortality and morbidity risk. [We however are] in the unique position of having access to an enormous amount of health and wellness data on an ongoing basis… This data allows us to subdivide these risk pools by two additional rating factors – …[wellness status and level of health scheme claims]. The general insurance principle here is that the more rating factors you can use … the smaller the risk pools can become and the lower the level of cross subsidy that will exist in each risk pool. This allows a more accurate assessment of risk which ultimately results in a better value proposition for clients”.

19. In response to our question as to how a married policyholder would ever fall into a better health claim band as a result of the methodology, the insurer explained that what was meant was that if a policyholder’s spouse had lower than average claims relative to what would have been the case if the methodology of wider bands had not been used, the policyholder could find himself in a lower health claim band than would have been the case if the insurer had not used this methodology.

20. The insurer provided a worked example illustrating this. Thus, assuming the first health claims band would have been R0 to R2 000 without the inclusion of spouse claims, a member with R2 500 in claims and spouse claims of only R200 (or no spouse claims) would have fallen into the second health claim band. However with the inflation of the first band to R0 to R3 000, with spouse claims combined, he will fall into the first (better) health claim band, with its greater rewards.

21. The insurer stated:

“Obviously claimants whose spouses had years with higher than average claims may end up being pushed into a higher band as a result of this methodology and likewise claimants where the spouse has lower than average claims may end up being in a lower health claim band than they would have been had we not used this methodology, but on average, this should even out throughout the lifetime of the policy duration and over a large number of policyholders and hence work well as a methodology for defining health claims and subdividing the book into smaller segments of homogenous risk pools”.

Discussion

27. The question we had to consider was whether the schema and the clause (set out in paragraph 5 above) offended against the constitutional right to equality and was therefore unlawful and unenforceable, as alleged by the complainant.

28. The insurer had explained that the reason or purpose for the discrimination, ie taking the health claims of single policyholders on their own while aggregating spouses’s claims on a joint health plan, was the practical difficulty of readily separating spouse claims on the health plan. This was a rational purpose, but the question must still be asked whether it was unfair, given that the discrimination was on the basis of marital status, a specified ground, and therefore presumed to be unfair unless shown otherwise.

29. The insurer was cognisant from the outset, in designing the discount system, of the possible disadvantage to some married policyholders (only those who were on the same health plan), sometimes, of aggregating spouses’ health claims. It accordingly widened the bands in the matrix of “rewards” for all policyholders, as explained above, to reduce any such effect. The effect of averaging also operated to remove any prejudicial effect over the longer term. It must be remembered that the marital status of policyholders may change over the years, from single to married, or from married to single again. Similarly, a spouse who is healthy for a period of time, with low health claims, may for a whole host of reasons, including accidental injury for example, later have a period of higher claims and vice versa. For this reason, the same matrix, with widened bands, is used for everyone. The product is designed to be a practical, if not perfect, device which has the dual benefit of giving the insurer more accurate risk information, allowing for more accurate pricing for risk, while also affording the possibility of offering discounts to its policyholders, this being the overall purpose of the methodology.

30. The discrimination was clearly not designed with the purpose of impairing the complainant’s dignity as a married person. We agreed with the statement of the insurer’s counsel that “There is clearly no fundamental impairment of his dignity or other impairment of a comparably serious nature”.

31. We accepted the insurer’s argument that the product had been priced in accordance with the methodology outlined above (the matrices, which are disclosed in the contract), and that changing the product now in such a way that spouse claims were not included would mean the reduction/narrowing of the health claim bands for all clients. The insurer argued that this would not be treating its customers fairly, “as the clients have taken out the product with the expectation that spouse claims are included and that health claim bands will increase roughly in line with medical inflation each year”. Clients would not expect that the bands could be narrowed at a later date.

32. In our view any occasional disadvantage suffered by a married policyholder (which would effectively only be applicable in years when claims of both spouses were higher than average, given the widened bands) was of such a trivial nature that the discrimination, considered in the context of the overall design, could not be considered unfair. Any disadvantages to an individual married person as compared to a single person are reduced over time by the effect of averaging and are outweighed by the advantages of the system as a whole to all policyholders.

33. In our view the presumption of unfairness had been successfully rebutted by the insurer in this case.

Result

34. We made a provisional determination to this effect. The complainant thanked us for the comprehensive determination. He stated that he accepted the findings, and the case was closed.

SM
October 2017

CR360 Suicide Clause

by Case ReportsSuicideTopics & Cases

CR360
Suicide Clause

Insurer not liable for any delay in issuing of policy or provision of incorrect commencement date to insured.

The insured, a farmer, applied for a policy through his broker, requesting a commencement date of 1 December 2009. Upon receipt of the application on 30 November 2009, the insurer requested a short medical report and blood test results. The insured’s doctor was on leave in December 2009 and only completed the requested medical information on 8 January 2010. On 14 January 2010 the underwriters requested further medical information which was furnished to the insurer on 19 January 2010, on which date the insurer also accepted the application. The annual premium was paid to the insurer on 20 January 2010 and the insurer issued the policy at standard rates with the commencement date of 1 February 2010.

The insured ceded the policy to an agricultural co-op that had provided a loan to him. The insurer dispatched the policy documents to the cessionary, with the consent of the insured. A copy of the policy was submitted to the broker.

The insured experienced dire financial constraints on the farm and was apparently being pressurised by the co-op to pay some of the debt owed to it, or lose the farm, it appears, from the information supplied to the office. The insured did not have a copy of the policy and he made two telephone calls to his broker on 19 January 2012 in order to ascertain the commencement date, whereupon he was (incorrectly) advised it was 1 December 2009. Based on this date, which is the date that was originally requested per the quotation, the two year suicide exclusion period would have expired on 2 December 2011. In fact, after all formalities had been complied with the commencement or start date was 1 February 2010 and the two year period would have expired on 2 February 2012. On 20 January 2012 the insured committed suicide. His wife submitted a claim to the insurer which was declined by relying on the following provision in the policy:

“No benefits will be payable if the life assured dies by his or her own act within two years of the issue date or date of any revival”.

The widow submitted a complaint to this office, arguing that the quotation clearly states that the commencement date was 1 December 2009 and the broker had confirmed that the date provided to the insured when he called the broker’s offices on 19 January 2012. If 1 December 2009 had been the commencement date, the suicide had occurred outside of the two year period. The complainant argued that the insured had timed his suicide based on the information about the commencement date. It was also her view that the insurer had delayed the issuing of the policy from the date it received the application (30 November 2009) to the date of commencement (1 February 2010).

The office considered the complaint and came to the following conclusion:

• The policy does not refer to the quotation as forming part of it.

• Even if one considers the quotation as an offer, in the case of a discrepancy, the policy will prevail.

• The offer is in any event subject to the conditions set out in the schedule.

• The policy provides that the policy summary must be read with it.

• The policy summary defines the “issue date” as 30 January 2010 and the “start date” as 1 February 2010.

• The insurer did not unduly delay the matter. It had acted promptly and reasonably in assessing the application. The insurer advised that the start date is the first day of the new month following the acceptance of the application. The delay was unfortunately largely attributable to the fact that the medical information had only been furnished after the return of the insured’s doctor from leave in December /January 2010.

• The insurer was within its rights to decline the claim in view of the suicide falling within the two year waiting period.

NvC
September 2014

CR376 Probabilities of Accidental Death for payment of Accidental Death Benefit

by AccidentCase ReportsTopics & Cases

CR376

Probabilities of Accidental Death for payment of Accidental Death Benefit

Accidental Death Benefit – insurer accepting death as accidental on probabilities – requiring actual proof that accidental to pay benefit

Background

1. The policy was a funeral policy which provided a funeral benefit of R5000 with an additional R5000 if the death was accidental.

2. The policy commenced on 1 July 2014.

3. The deceased passed away on 25 July 2014.

4. The death certificate noted the cause of death as “Under Investigation”

5. The preliminary post-mortem report noted “AWAITING RESULTS”. The results required, were the toxicology results.

6. The insurer obtained a report from a medical consultant who suggested that the cause of death was natural. He stated:

“Found dead in bed together with partner who woke up fine…Suggest: Natural causes…myocardial infarction…”

7. Based on this report the insurer declined the claim as the death was within the 6 month waiting period for death due to natural causes.

8. As the complainant had stated in the original complaint: “…the following day the two women, the other one my aunt both were found dead”, the office directed further enquiries to the investigating police officer.

9. The investigating officer confirmed that the photographs on the case file recorded the following: two women were found on the floor; both were deceased; one had signs of vomit from her mouth; the other did not; bowls next to the bodies showing what the deceased persons had eaten the night before.

Discussion:

10. We wrote to the insurer and stated that whilst it was possible that both of the deceased persons could have died as a result of natural causes on their own, given the circumstances under which the bodies were discovered, it was not probable that both people had passed away at the same place at the same time due to natural causes. On a balance of probabilities, it was more likely that the deaths were unnatural / accidental.

11. The insurer agreed to pay the funeral benefit as it accepted our view that the death, on a balance of probabilities, was accidental. It, however, wanted actual proof that the death was accidental before it would pay the accidental death benefit.

12. The insurer was advised that accepting, on a balance of probabilities, that the cause of death was accidental for payment of the funeral benefit was sufficient for payment of the accidental death benefit and that actual proof was not required.

Result:

13. The insurer paid the accidental death benefit.

GB
October 2017

CR361 Dread disease /Exclusion Clause

by Case ReportsDread DiseaseTopics & Cases

CR361
Dread disease /Exclusion Clause

Claim for dread disease benefit on grounds of cancer – claim not meeting policy criteria – claim settled

Background

1. The policyholder initially consulted her general practitioner who referred her to a Specialist Physician as she was suffering from a chest infection. She was later hospitalised and treated for pneumonia. Thereafter on 30/04/2014 she was re-admitted with a swollen leg and found to have a large pleural effusion. On 12/05/2014 she was diagnosed with Stage 4 pancreatic cancer and subsequently passed away on 16/05/2014.

2. The complainant’s claim for a dread disease benefit was declined by the insurer on the ground that the deceased did not survive the 28 day waiting period after diagnosis.

3. The relevant clauses are as follows:

Cancer

“Cancer shall mean a malignant tumour positively diagnosed with histological confirmation and characterised by the uncontrollable growth of malignant cells and invasion of tissue. The term malignant tumour includes leukaemia, lymphoma and sarcoma.”

Survival Period

“Survival period shall mean the twenty-eight day period commencing at Date of Occurrence.”

Payment of Benefits

“Upon the admission of a dread disease claim before the earlier of the Termination Age and the first day of the month following a Member’s sixty-fifth birthday, the insurer shall pay the Dread Disease Benefit to the Policyholder or as the Policyholder may direct, provided the Member is alive at the expiry of the Survival Period.’’

Date of Occurrence

“Shall mean the date upon which the dread disease event first manifested itself, as determined by the insurer on the basis of objective evidence obtained in Southern Africa.”

Dread Disease Event

‘’Shall mean the onset or diagnosis of any one or more of the events listed in clause 4.’’

Discussion

4. The dread disease benefit is payable if the life assured survives the 28 day waiting period after diagnosis or onset as per the policy terms. The full sum assured for the dread disease benefit is R162 000.00. The life assured did not meet the requirement of surviving for at least 28 days after diagnosis.

5. The complainant submitted that the life assured survived 28 days after the onset of the condition. The life assured’s general practitioner confirmed that it is likely that the cancer was present even though it was not detected and that the other illnesses that she was suffering from could have emanated from the cancer. The specialist physician further confirmed that the medication that the life assured used, would have improved the cancer infiltration.

6. We forwarded the complainant’s arguments to the insurer regarding the survival period and they did not change their stance. We then asked an independent medical specialist for an opinion and he outlined that the deceased was suffering from cancer prior to the existence of the policy. The independent medical specialist confirmed that the results of the life assured’s CT scan “showed pancreatic abnormalities considered to be the site of the primary malignancy”. He noted that there was no evidence to indicate that the life assured or her doctors were aware of the malignant cells until they received the results of the CT scan . He further confirmed that the life assured’s clinical presentation were manifestations of an initially ‘’hidden’’pancreatic cancer.

Result

7. The insurer considered the report from the independent medical specialist and admitted the claim.
JP
April 2016

CR362 Waiting period / Disability / Equity

by Case ReportsDisabilityTopics & Cases

CR362
Waiting period / Disability / Equity

Unusual 24 month waiting period for permanent disability; equity invoked

Background

1. The life insured had an accidental death and permanent total disablement policy. He was involved in a motor vehicle accident in March 2015 and suffered head injuries and a consequent stroke. The medical evidence indicated that he was totally and permanently disabled (see below).

2. A claim was submitted in June 2015. The insured’s claim for permanent disablement was declined.

3. In explaining its decision, two policy clauses were cited by the insurer:

“Permanent Total Disablement means total and absolute disablement that entirely prevents an Insured Person from engaging in a gainful occupation of any kind. The diagnosis and determination will be made by a Medical Practitioner. The permanent total disablement must be continuous and permanent for at least 24 (twenty-four) consecutive months from the onset of the disablement.”

and

“CONDITIONS IN RESPECT OF CLAIMS
…
• We will not pay or be liable for any claim:
○ after 24 (twenty-four) months have elapsed from the date of the event that gave rise to a claim”.

4. The insurer then gave its reason for declining the claim:

“The policy provides for a 24 month waiting period for permanent total disablement as defined above. [The insured’s] motor vehicle accident occurred on 4 March 2015. When applying the waiting period, [his] disablement must be continuous and permanent for 24 months from the onset of disablement. The claim cannot be finalised unless [his] permanent total disablement has lasted for 24 months”.

5. The insurer also stated that it was “too soon to make a decision as to whether his injury is deemed permanent total disability”.

Discussion

6. We pointed out to the insurer that there was another relevant clause in the policy:

“We will not pay you:
• For Permanent Total Disablement, unless you submit proof that the disablement will in all probability continue for the remainder of your life”.

7. We also mentioned that the aspect of the definition requiring that permanent total disablement “must be continuous and permanent for at least 24 (twenty-four) months”, effectively a waiting period, was an unusual clause in a policy of this nature. We questioned whether this unusual clause had specifically been brought to the insured’s attention when he took out the insurance.

8. The other clause cited by the insurer (see paragraph 3 above), to the effect that the insurer would not pay any claim after 24 months had elapsed from the date of the event giving rise to a claim, appeared to afford a time period for lodging a claim, and was not relevant at all to this case.

9. We then canvassed the claim forms and medical evidence. The treating doctor had stated on the claim form that the stroke symptoms from which the life insured was suffering (two months after the accident) were left-sided weakness, inco-ordination, reduced reflexes, sensory loss, behavioural disturbance, forgetfulness, mood fluctuations and reduced vision. Asked to provide clinical details indicating severity and permanence, he replied “Continued symptoms as above. Unable to drive, care for himself”. Under “Current major complaints”, he indicated “Urinary frequency, severe lower back pain, falling daily due to imbalance, mood swings”.

10. Under the section on “Disability details”, the doctor indicated that the life insured had not previously followed any occupation other than that of an electrician. The question was then posed: “Is the life insured in your opinion, totally and permanently disabled and unable to follow his/her occupation?” The doctor replied “Yes”. The form continued “If Yes – state reasons and date you advised insured to cease work”. The doctor stated “Danger to himself and others”. The form asked the question “Is the life insured in your opinion, able to follow any other occupation?” The doctor answered “No”. A further question asked “What part of the duties of the life insured’s normal occupation is he/she capable of carrying out?” The doctor responded “Nothing”. A further question asked “Will the life insured at any stage in future be able to follow his/her occupation or a similar occupation?” The doctor replied “No”.

11. Under “Prognosis”, the form asked “What are the chances of recovery (good/fair/poor/nil)?” The doctor underlined the word “poor” and also stated the word “Poor”. Asked whether any residual problems were likely he stated “Yes. Continued weakness; inco-ordination, imbalance”. Under “Function abilities”, the doctor indicated that the life insured effectively could not perform any of the listed activities as he was a “Danger to self or others”, and that this state of affairs would remain constant.

12. In a Medical Certificate signed and dated 19 May 2005, when asked the question on the form “Is permanent disability expected?”, the doctor replied “Yes”, reiterating that the life insured was unable to drive, work, or take care of himself. Asked the direct question “Are you prepared to certify that the patient is TOTALLY DISABLED from attending to any portion of his/her business or occupation?”, the doctor replied “Yes”.

13. From this documentation it appeared that a diagnosis and determination of permanent total disablement (see the definition in paragraph 3 above) had been made by a Medical Practitioner.

14. There was also a rehabilitation discharge report dated 9 April 2015 stating “It is not recommended that [the life insured] returns to working as an electrician at this stage due to his impaired cognition, and that he will “be unable to work effectively as an electrician at this stage” [our emphasis]. The same phrase “at this stage” was used in an August 2015 report from an occupational therapist and physiotherapist (not medical practitioners). We pointed out however that none of these parties was pertinently asked to provide a prognosis. Their reports merely described the current situation, which was why the phrase “at this stage” was used. In our view there was no indication in these reports that the cognitive deficits and other problems would improve to the extent that the life insured would ever be able to return to work. Certainly this was not the view of his medical practitioner.

15. The life insured’s wife had outlined the financial hardship she and her family were suffering because of her husband’s disability and inability to earn an income, and would continue to suffer if they were obliged to wait 24 months before a disability claim could be assessed.

16. We asked the insurer to reconsider whether the claim could not be paid on an equitable basis, taking into account all the circumstances, including the perspective of Treating Customers Fairly.

Result

17. The insurer agreed to pay the claim.

SM
April 2016

CR363 Disability claim Reasonableness of alternative occupation

by Case ReportsDisabilityTopics & Cases

CR363
Disability claim
Reasonableness of alternative occupation

The applicable definition of “Occupationally Disabled” read thus:

“The Life Covered is Occupationally Disabled if he or she is unable, due to illness or injury, to perform the duties of any occupation which the Life Covered could reasonably be expected to follow, taking into account his or her education, training, experience and employment history.”

It was common cause that at all relevant times the complainant was employed as a so-called “paramedic”; that, as a result of being injured, the complainant was permanently and totally unable to perform the duties of a paramedic, and that he was
employed as an administrative clerk by the same employer for which he worked as a paramedic.

The question which had to be answered in this complaint was whether, having regard to the said definition and the facts, it was reasonable to expect the complainant to work as an administrative clerk?

For the reasons which follow a meeting of Adjudicators in the office answered the said question in the negative:

• The complainant enjoyed his work as a paramedic and that work had a measure of glamour and prestige to it. The complainant was suitably trained as a paramedic and met all the requirements for that position which he held for nearly 20 years. The complainant’s work as a paramedic involved a small component of administrative work and he did not receive any training to work as an administrative clerk. The complainant enjoyed the status which comes with his registration as a paramedic with the Health Professions Council of South Africa. As a result of his injury the complainant terminated this registration.
• The complainant did not function in the way in which a normal, healthy administrative clerk would work. The insurer submitted that the complainant had been “reasonably accommodated”, but in the report of an Occupational Therapist, it was said that the complainant “will require to work alternating between sitting and standing positions or be permitted to take frequent posture breaks”.
• The evidence established that the complainant was a fit, healthy paramedic who performed an exciting job, but now worked as an administrative clerk for whom adaptations had to be made in his workplace and who had to be “accommodated”. The complainant said that as a result of his inability to sit for any extended period he has to avoid getting caught in the traffic when he drives to work. This meant that he has to leave home at an inordinately early hour to avoid the rush hour traffic.
• The complainant’s employer wanted to retrench him, but he was not prepared to accept that. An agreement was reached in terms of which the complainant was “accommodated” as an administrative clerk at the same salary which he was earning at the time. It did not appear to the meeting that the insurer grasped the full import of the change in the complainant’s occupation, which involved the following adverse consequences:

o The complainant suffered a substantial reduction in his “take home pay”. This was so because he no longer received overtime remuneration and so-called “danger pay”.

o As a result of the fact that he was appointed as an administrative clerk at the same salary which he received as a paramedic, it was unlikely that the complainant would ever enjoy any real salary advancement in his current position.

o The complainant lost the opportunity to receive salary increases which he would have received as a paramedic.

o Significantly, the complainant lost the career advancement opportunities which would have been open to him as a paramedic. The complainant said that there was a demand for South African trained paramedics in Australia and New Zealand and that he had been “accepted” in New Zealand.

The complainant said the following about the effect of his injury:

• “Would you employ someone like me with no formal qualification in administration or computer literacy and has to work under the influence of narcotic medication and has to have a special standing desk and can’t drive a manual transmission for more than 20 minutes?”
• “Will I be able to obtain employment in the field that I have been practising for the past 20 years should I leave my current employer. Please keep in mind because of my injury that I will be trapped in my current post till the day I can no longer work.”
• “You should also consider my disability and the chances of migration into the real job market with me not having any formal qualifications and experience in administration. This challenges the phrase in the contract with regards to fair or reasonable alternative employment. The job status (registered with the Health Professionals Council of South Africa) and salary of a Paramedic (Paramedic salary goes up to R 375000.00 in 2014) is way higher than an administrative clerk (administrative clerks salary starts at R92000 in 2015).”
• “It is also very clear when you look at these two professions, (the insurer) is not making a fair interpretation as there is a massive salary discrepancy between these two occupations….”
• “No person that does administrative work could ever do what a paramedic does.”
• That he explained that he may undergo an operation which may alleviate his pain. This treatment depends on the availability of funding. If the operation is successful it would only help for his pain and not for his disability.

The insurer relied on the policy provision “that (it) is entitled to require that the life covered undergo a reasonable amount of re-skilling before we assess a claim”. In this regard the meeting concluded as follows:

• At no time did the insurer request any “re-skilling”.
• It was pointless to refer to the “re-skilling” requirement in vacuo.
• The insurer had not suggested any work which the complainant “could reasonably be expected to follow” taking into account the factors stated in the said definition, other than the administrative position which the complainant held.
• That the meeting could not think of any “reasonable alternative position” for which the complainant could be trained.

On a conspectus of all the relevant facts the meeting was quite satisfied that the complainant had established, by a comfortable balance of probability, that the present position which he holds is clearly not one which he “could reasonably be expected to follow, taking into account his … education, training, experience and employment history”.

It was pertinently pointed out that the conclusion reached by the meeting did not remotely imply that any onus rests on the complainant to prove what he succeeded in proving. The stance of the office with regard to the onus in a case such as this is clear – see CR132 on our website (ombud.co.za) and Life Insurance in South Africa by Nienaber and Reinecke page 359.

After the provisional ruling had been made settlement negotiations ensued between the parties, which culminated in a meeting at our offices at which the insurer agreed to pay the insured benefit to the complainant.

RM
April 2016

CR364 Payment and non-payment Payment to wrong party

by Case ReportsPayment and Non PaymentTopics & Cases

CR364
Payment and non-payment

Payment to wrong party – insurer has to pay again – compensation for inconvenience

Persistence does sometimes pay off.

The complainant wrote to us after the insurer concerned repeatedly advised that they had no records any longer of the policy in question.

A policy belonging to the complainant’s father, who had also been the life insured under the policy had been taken out in 1976. The father died in England in 2002 and the insurer was advised of this in 2003. No response was received from the insurer and due to a family dispute probate only took place in 2012. When the complainant wrote to the insurer in 2013, the insurer advised that as the policy had been “off books” for more than 5 years no information was available. On further investigations by our office the insurer produced “screen dumps” reflecting a surrender of the policy. After some further digging the insurer was able to determine that a cheque had been issued and the cheque had been cashed. The complainant denied that there had been the receipt of any surrender amount. What caused further difficulty was the fact that the complainant was overseas, the policy had been issued in British Pound by an overseas branch of the insurer which no longer operated, and the bank that handled the cheque was in the United Kingdom. The insurer however persisted in its statement that the cheque had been sent to the deceased’s United Kingdom address.

The complainant did some digging of his own and found a contact person at the United Kingdom bank. Despite this it took a considerable amount of effort on the part of the complainant and the insurer to trace through another United Kingdom bank that acted as a processing agent for a Canadian Bank, that the money had been paid to an account in Montreal. The bank in Montreal could then confirm that the money had been paid to a client with the same surname but a different first name as the complainant’s father.

The insurer then realised that they had paid the money to the wrong policyholder. This was after almost a year during which time the complainant had sent numerous emails to all possible potential sources of information. The insurer conceded that it had to pay the death benefit (R321 437) to the estate of the deceased policyholder and also offered compensation to the complainant for the inconvenience caused by the error.

After some further negotiation a compensatory amount of R19 300 was paid to the complainant as he had gone to great lengths to obtain information about the incorrect payment and had not been willing to give up.

JP
April 2016

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