Posts in category: Equity

CR373
Late submission / Equity

Claim submitted late as complainant forgot she had covered the deceased; equity considered; decision in favour of the insurer

Background

1. The complainant forgot that she had covered her aunt on her employer’s group funeral scheme policy. She was reminded when a consultant visited her office with a printout of her policy document. Her aunt had died just over a year previously, on 4 February 2014. The time limit for lodging a claim was one year. She then lodged a claim on 23 March 2015, some six weeks late. The claim was declined and she lodged a complaint with our office.
2. The insurer had sent a benefit statement to the complainant in June 2013, showing all the persons she had covered, but she maintained that she had not received it. She also stated that she never received a policy. She did however receive a copy of the original application form which she completed in 2009 – this stated at the top “Claims must be fully submitted within 180 days of death”. She had added cover on her aunt’s life some time later, in about 2011 or 2012.

3. The insurer’s response to our office stated that they had changed the notification period from 6 to 12 months “to accommodate clients and to be fair in the dealings with them, however on the other hand insurance companies cannot be open-ended in this regard, it has a big effect on the business model as a whole from solvency calculations and reserves, to actuarial calculations of premiums and profitability”.

4. We asked the insurer what specific prejudice it would suffer if it were to pay this claim. The insurer could not provide information of specific prejudice, but maintained that equity jurisdiction should only come into play “where unique circumstances are present which explain the delay, other than forgetfulness, especially if the insurer allows for ample time for submissions of claims”.

Discussion

5. The matter was referred to a meeting of the adjudicative staff to consider whether, weighing up all the circumstances, we could invoke equity in the complainant’s favour.

6. The meeting considered that it would be the complainant’s responsibility, if she did not receive a copy of the policy, to make enquiries at that time, but it appeared that she did not do so. She did however receive a copy of the original application form, which indicated a six month (180 days) time limit for lodging a claim.

7. Although the complainant stated that she did not receive the benefit statement in June 2013, the meeting accepted the evidence that this was sent by the insurer, to the correct postal address. The insurer could not be held responsible if it did not reach her through the post.

8. The meeting noted the insurer’s explanation that it had changed the notification period from six to twelve months “to accommodate clients and to be fair in the dealings with them”.

9. A time limit for lodging claims must in principle be enforced by our office, the only exception being if the circumstances of the case are such that fairness to both parties requires that we exercise our equity jurisdiction in favour of the complainant.

10. In deciding whether to exercise our equity jurisdiction, relevant circumstances to be taken into account would include the degree of lateness, the reasons for the delay in lodging the claim, and whether the insurer would suffer prejudice by receiving the claim beyond the prescribed period.

11. In this case the degree of lateness, some six weeks, was not great. However the meeting took account of the fact that the time limit for lodging funeral claims was generous, having been extended from six months to one year.

12. The insurer could not point to any specific prejudice, but did state that open-ended time periods for lodging claims would have a significant effect on its business model.

13. The meeting considered that the reason for the delay, that the complainant had forgotten about the cover, was not a sufficiently compelling circumstance in this case.

14. The meeting also considered that it could be expected of the complainant to remember that she had applied for cover for her aunt, whose name, date of birth, etc. she would have provided to the insurer when she applied to cover her in 2011 or 2012.

15. The complainant had not mentioned whether she had paid for her aunt’s funeral, nor had she provided any proof of such payment. In the view of the meeting, if she had paid for her aunt’s funeral, this would in all likelihood have reminded her of the fact that she had funeral cover on the life of her aunt.

16. The meeting also took into account that the insurer had made an effort to inform and remind members of the cover they had by sending out benefit statements, including one to the complainant in June 2013, showing all the persons she had covered. Although she stated that she did not receive the benefit statement, we had to consider in the insurer’s favour that it made this effort.

Result

17. The meeting considered that there were not sufficiently compelling reasons in this case, such that we could require the insurer to pay the claim on grounds of equity. The complaint was dismissed.

18. We asked the insurer to ensure that premiums the complainant paid after the date of her aunt’s death be refunded to her.

SM
April 2016

CR352
Equity

Insurer relying on two year suicide exclusion clause on replacement policy; replaced policies in place with same insurer for 13-21 years; no interruption in cover

Background

1. The insured had had continuous life cover with the insurer over a period of 21 years, under three policies commencing in 1990, 1997 and 1998, respectively. The total sum assured was nearly R6 million.

2. On 28 March 2011 he applied for a replacement policy for these three policies, which were then terminated. The new policy commenced on 1 May 2011. The sum assured was R1 million. In the Replacement Policy Advice Record (RPAR) the insured gave his reason for the replacement: “By changing to a new generation product, the rates for cover are greatly reduced”.

3. Almost a year later the insured committed suicide, on 31 March 2012. His son instituted a death claim, which the insurer repudiated, relying on the standard two year suicide exclusion clause on the policy.

4. The son lodged a complaint with our office, arguing that the recalculation of a two year suicide limitation for a replacement policy from date of replacement was not based on reasonable risk assessment, and was not industry standard. He provided an example of a document from another insurer, indicating that that insurer would recognise the period of life cover under a replaced policy in applying the suicide clause, as long as the cover was uninterrupted. The insurer in this case however was not prepared to deviate from its decision.

Discussion

5. The matter was discussed at a meeting of adjudicative staff. The meeting decided that we should make enquiries with the industry body ASISA (Association for Savings and Investment South Africa) as to the general practice in the industry with regard to internal replacements.

6. The response from ASISA stated that it did not prescribe any rules or requirements in this regard. ASISA took up our enquiry by “engaging with a few of its members”, and indicated that most insurers did not apply a “rule of continuous risk”, so for these insurers all exclusions would apply on new/replacing policies. However some member insurers advised it that no general rule applies and they looked at the merits of each case individually.

7. We met with the insurer and pointed out that in this case the insured had had uninterrupted life cover for 21 years, and that the risk to the insurer was considerably reduced (from almost R6 million to R1 million) when he replaced his three earlier policies with one policy in May 2011. In these circumstances we recommended that the insurer pay the claim on grounds of equity.

Result

8. The insurer agreed to pay the claim on an ex gratia basis.

SM
September 2014

Equity CR305
Definition in relevant clause out of date – strict application of it unfair and wasteful – application of equity – insurer’s obligation to obtain necessary medical evidence.

Agtergrond
Vanweë pyn in haar borskas en palpitasies het Mev A haar dokter vanaf 12 Julie 2009 tot 9 November 2009 driemaal gekonsulteer. Hy het haar toe na ‘n kardioloog verwys. Volgens die kardioloog het sy met ‘n beeld van pulmonale embolieë presenteer, wat met ‘n diagnostiese pulmonale arteriogram bevestig word, met pulmonale hipertensie. ‘n Biogemiese merker vir veneuse trombose (D-dimer) was ook positief.

Haar polis het die volgende dekking aangebied;
“8. Asemhalingstelsel

’n Siekte of diagnose wat die longe betrek en wat lugwegdisfunksie en verminderde longfunksie veroorsaak. Die behandeling moet toepaslik en maksimaal vir die diagnose wees. ’n Pulmonoloog of spesialis-internis moet dit diagnoseer en objektiewe diagnostiese toetse insluitend eenvoudige en gevorderde longfunksietoetse moet dit, waar nodig, steun.

Eindstadium- respiratoriese longfunksietoets

Longfunksietoets meet hoe goed die longe lug inneem en uitasem en hoe doeltreffend dit suurstof in die bloed oordra. Spirometrie meet hoe goed die longe uitasem. Die inligting wat gedurende die toets ingesamel is, is nuttig by die diagnosering van sekere tipes longkwale, maar is mees nuttig wanneer evaluering vir obstruktiewe longsiektes (veral asma en chroniese obstruktiewe pulmonêre siekte, COPS) gedoen word.

Eindstadium– respiratoriese versaking

Eindstadium-respiratoriese versaking of ’n longoorplanting, soos bevestig deur ’n geregistreerde pulmonoloog met bewyse van FEVI-toetsuitslae wat konsekwent minder as 1 liter is, met 3 x PVL minstens een maand uit mekaar en een van die volgende:

• Vereis permanente aanvullende suurstofterapie vir hipoksemie
• Analises van arteriële bloedgas met gedeeltelike suurstofdruk van 55mgHg of minder (PaO2,55mmHg)
• Dispnee tydens rus

Uitbetalings presentasies

5%
• Fibroserende alveolitis
• Status asmatikus wat opname in ’n hospitaal en binneaarse behandeling vir minstens 36 uur verg

10%
• Pleurale effusie wat dreinering verg
• Amper-verdrinking wat ’n minimum van 24 uur ressusiteringsventilasie in ’n Intensiewesorgeenheid benodig

15%
• Pneumokoniose
• Brongiektase
• Enige chroniese longsiekte wat ’n pleurektomie of dekortikasie verg

25%
• Verwydering van een lob van ’n long
• Pulmonale embolisme na diepaar-trombose. ’n Ventilsie-perfusie-skandering (VQ-skandering) moet die diagnose bevestig
• Longabses
• Empleem met dreinering
• Brongoplurale fistel

100%
• Verwydering van ’n long
• Herhaalde pulmonale embolisme met inplasing van vena-kavale filter
• Pulmonale veneuse okklusiewe siekte
• Teenwoordigheid van onomkeerbare cor pulmonale
• Longoorplanting
• Chroniese onomkeerbare longsiekte met FEVI van minstens <50% (obstruktiewe) of voorspelde FVC van <50% (beperkende) OF ernstige onomkeerbare veranderings in longfunksietoetse met permanente DCO <50% (obstruktiewe en/of beperkende).” Mev A het vervolgens ‘n eis onder haar polis se gevreesde siekte voordeel ingestel, maar die versekeraar het betaling van die eis geweier. Hulle het soos volg verduidelik: “Die mediese verslae ontvang vanaf u behandelende kardioloog bevestig die diagnose van pulmonale embolieë. In sy verslag van 1 April 2010 bevestig hy ook dat u tydens ondersoek asimptomaties was en dat u geen letsels oorgehou het van u vorige pulmonale embolieë nie. Daar was ook geen tekens van pulmonale hipertensie teenwoordig nie. Ons bied ‘n betaling van 25% aan vir ‘pulmonale embolisme na diepaar-trombose. Hierdie vereiste word nie bevestig in die mediese verslae tot ons beskikking nie. … Ons sal ons beslissing enige tyd oorweeg met ontvangs van nuwe mediese inligting, indien u steeds nie met ons beslissing saamstem nie.” Bespreking Ons het die mediese verslae na ‘n onafhanklike mediese spesialis vir sy opinie verwys. Ons haal soos volg aan uit sy verslag van 10 Oktober 2010: “Die kardioloog se opvolgverslae bevestig die diagnose van pulmonale embolisme en ook dat pulmonale arteriële hipertensie teenwoordig was. Pulmonale hipertensie impliseer veelvuldige embolisme. Pulmonale embolisme geskied as gevolg van perifere of pelviese veneuse trombose gevolg deur migrasie van die tromus via vene na en deur die regter hartkamers tot impaksie in die pulmonale arteries. Tans is CT angiografie die ‘goudstandaard’ diagnostiese metode. Dikwels word geen kliniese en soms ook geen venografiese bevestiging van veneuse trombose gevind nie, omdat die thrombus in toto na die long(e) vervoer is. Hoewel die kardioloog nie die besonderhede van pulmonale angiografie en pulmonale arteriële druk meld nie, sou ek die gegewe informasie as bevestigend van pulmonale embolisme aanvaar. Indien die versekeraar nie sy diagnose aanvaar nie kan die ‘radiologiese verslag’ aanvaar word, maar om aan te dring op Ventilasie-perfusieskandering waar angiografie beskikbaar is, is onredelik, verkwistend en ouderwets. Verder is die implikasie dat diepaartrombose bevestig moet word voordat die diagnose van pulmonale embolisme aanvaar word totaal onredelik. Pulmonale embolisme kannie in die afwesigheid van diepaartrombose geskied nie, en soms is daar geen indikasie waar die trombose geskied het nie. Die analogie kan beskryf word as om te weier om te aanvaar dat ‘n trein jou stasie bereik het, tensy mens weet waarvandaan dit gekom het. My gevolgtrekking is dus dat, in terme van die kontrak, Mev A geregtig is op 25% uitbetaling van voordele.” Op die veronderstelling dat die versekeraar nie die bewyslas gedra het nie, sou dit tog raadsaam gewees het dat die versekeraar self die nodige mediese inligting bekom het, en dit nie aan ons kantoor oorlaat nie. Die onafhanklike doktersverslag het in elk geval getoon dat die betrokke term waarop gesteun is nie meer toepaslik was nie, en dat die versekeraar se benadering nie houdbaar was nie. Resultaat Die doktorsverslag is aan die versekeraar voorsien en hulle het ingestem om 25% van die voordeel aan Mev A te betaal. HE March 2011

Equity CR307

Group scheme – claim under group disability scheme repudiated on grounds of late submission – late submission policy provision in principle enforceable, unless considerations of equity demand otherwise – equity ruling not fair to insurer in the particular circumstances.

Background

1. The complainant, a general labourer, worked for a construction company. He was covered for disability as a member of a group disability scheme arranged by the employer. From 2005 his vision deteriorated, and he had eye surgery for glaucoma on 29 March 2007. He did not recover well, and a report from Medi Vision dated 11 June 2007 stated that he needed more surgery, but was “legally blind” and unfit to work, and that it would be dangerous for him to continue working. Three months later the employer asked him to complete some documentation for a disability claim, which he did. The employer had to complete other documentation, and the employer’s broker (which administered the disability scheme for the employer) only forwarded the claim documents to the insurer on 26 May 2008.

2. The policy required submission of a claim not more than 4 weeks after the waiting period. The waiting period was defined as “A period of absence from the employer’s service equal to 6 consecutive months calculated from the commencement of the member’s absence from work”. As the complainant’s absence from work had started on 29 March 2007 the claim was therefore submitted some seven months late, and the insurer declined it.

3. The complainant’s representative appeared to accept that this was contractually correct, but she asked that we find either the employer or the broker liable to pay the benefit, on the grounds of “dereliction of duty”.

Discussion
4. We pointed out that we did not have jurisdiction over the employer or the broker, only over the insurer. The claim was lodged outside the time stipulated by the policy, and such a stipulation must in principle be enforced by our office, the only exception being if the circumstances of the case were such that fairness to both parties required us to exercise our equity jurisdiction in favour of the complainant.

5. In considering the exercise of our equity jurisdiction, we had to take into account the circumstances relating to both parties. Thus for example we had to examine whether the insurer was prejudiced by receiving the claim beyond the prescribed period, as for example may happen when a delay makes it difficult for an insurer to properly examine the circumstances around a claim. Other factors to be considered would be the degree of lateness, the reasons for the lateness and whether the complainant/employer was to blame for the delay in lodging the claim.

6. Although we did not have jurisdiction over the employer, in deciding whether to exercise our equity jurisdiction vis-a-vis the complainant and the insurer we could obviously take into account any reasons given by the employer as to why the claim was lodged late. A letter from the employer indicated that the hospital had delayed in providing a specialist report after the 11 June 2007 report from Medi Vision. As the complainant’s representative herself pointed out, however, the employer knew of the seriousness of the complainant’s condition after receiving the June report. In her view the employer was grossly negligent in not sending in the claim as soon as the June report was received. We agreed that there did not appear to be any compelling reason for the employer’s delay.

7. In the absence of good reasons why the employer or the broker had lodged the claim late, we had to investigate the other relevant circumstances. We then wrote to the insurer, pointing out that the prospects for success on the merits appeared to be strong, and that the period of delay of seven months, while not merely a fraction late, was not considerable. We asked the insurer to provide us with a detailed submission as to how and why it considered that it would be prejudiced if we made a ruling based on equity that it should pay the claim.

8. The insurer advised that the employer had terminated the cover with it on 30 June 2007 (during the waiting period for the complainant’s claim), and transferred the scheme to another insurer. On termination the insurer had asked the employer to provide a list of potential disability claims, which arose while the insurer was still on risk. The complainant’s name was not on this list. The insurer’s legal obligations towards the employer (as the policyholder) were then terminated. At that stage the insurer had already had to pay out more for claims received than it had received by way of premiums. In general terms, the insurer argued, if employers did not suffer the consequences for not submitting claims within the contractually agreed time frames, they could be incentivised to delay their claims to get lower premiums if they switched insurance companies (as in this case), or negotiated new risk premiums, because the higher the historical claims rate, the higher the future premiums.

9. The insurer pointed out that the delay in this case was not due to its conduct, but to that of the employer (the policyholder). The complainant was not left without a remedy as he could institute a negligence claim against the employer with the assistance of the Legal Aid Board. The insurer’s view was that the employer was in a financially strong position, and could afford to make amends for its mistake. It would therefore be more appropriate for the employer to compensate the complainant, rather than the insurer having to be placed in an even greater loss position.

10. In the absence of good reasons for the late lodging, and in view of the insurer’s arguments as to the prejudice it would suffer if we were to make a ruling against it, we decided that in this instance it would not be fair to the insurer to make an equity ruling against it.

Result
11. We made a provisional ruling in favour of the insurer. We received no further submissions from the complainant, and the file was closed.

SM
March 2011

CR278
EQUITY
(Cross reference from “Group schemes”)

Failure to apply for paid-up policy upon retirement – insured unaware of the policy provision that he should make such application.

Background

A labour union had arranged for a group funeral scheme, and the policyholder later became a member of the scheme. The policy required that, if a member wished to remain covered after his retirement he should apply for a paid-up policy when taking retirement. The policyholder retired but did not make such an application. Upon his later death his son, the complainant, lodged a claim for the death benefit, which was declined because he had failed to apply for a paid-up benefit when he went on retirement.

The complainant contended that:

1. The policyholder had not been directly provided with the terms and conditions of the policy; and
2. He had been illiterate and could not have been expected to know the policy rules without being alerted thereto by the insurer.

In response the insurer contended that it had asked labour union shop stewards to advise members of the group scheme about policy provisions and requirements, including the need to apply for a paid-up policy on retirement. There was no certainty, however, that the information had in fact been relayed to the policyholder, and if it was that it was correctly conveyed to him.

Consideration

The office recognised that any change to such a policy term would affect the insurer’s fundamental assumptions on pricing as well as the solvency of its paid-up reserves, and considered that it was not feasible to interfere with the term whereby the paid-up benefits must be applied for on retirement.

Result

The matter nevertheless deserved an equitable approach. We engaged with the insurer, who undertook to pay this particular claim on an ex gratia basis. Furthermore, we reached an agreement with the insurer concerned that the issue of paid-up benefits on retirement be further discussed with the industry body, ASISA, in order to avoid similar occurrences in the future.

TS
12/10/2009

CR242

Equity

Exception in policy covering disability – clause excluding intentionally or self induced illness or injury – insured donated one of her kidneys to save life of her brother – role of equity

Background

The complainant had one of her kidneys transplanted to her brother in order to save his life. For this purpose she had been hospitalised and claimed for a sickness benefit under her policy. The insurer admitted that she had been the only suitable donor.

The insurer rejected her claim on the grounds of an exception in the policy which read:

“A Policyholder shall not be entitled to a sick pay benefit ….:
(c) if a Policyholder’s Sickness …is in the opinion of [the insurer] attributable to, continued by or aggravated by excessive indulgence in liquor or drugs, immorality or disorderly conduct, intentionally self-inflicted or intentionally self-induced illness.”

A “sickness” was in turn defined to include an injury.

Discussion

The central issue was the meaning of the words “intentionally self-inflicted or intentionally self-induced illness”. Should they be interpreted literally, which would result in the operation wounds having been intentionally inflicted, or should a more limited meaning be attached to them?

We recognised that a literal interpretation would in most sets of circumstances produce satisfactory results, but we suggested to the insurer that in exceptional circumstances a literal interpretation could produce disquieting results. We suggested a few examples. One postulated a doctor who is in charge of patients afflicted by a highly contagious disease. He appreciates the probability that he himself will contract the disease if he makes contact with the patients, but he undertakes the risk and eventually becomes sick. Another example postulates an insured who pays a visit to a bush area. He gets bitten by a snake he believes to be poisonous. In an effort to prevent complications he makes an incision in himself with his pocket knife. The wound gets infected and he lands in hospital.

Applying the exclusion literally in the above examples would result in a claim for the sickness benefit being excluded, but would that really be in accordance with the intention of the parties?

In Lehmbecker’s Earthmoving v IGI 1984 3 SA 513 (A) 520 I Miller JA remarked:
“It not infrequently happens that the parties use simple words, in themselves unambiguous, but which cannot readily or reasonably be applied in their literal sense to all the situations to which their agreement was directed. In such cases an element of ambiguity rises from the fact that ‘an absolutely literal interpretation’ may be wholly or substantially impracticable, or productive of startling results which could hardly have been intended. See MacGillivray and Parkington (ibid para 1040 at437-8).) ‘Therefore’, say the learned authors, ‘some gloss on the words becomes essential and their surface plainness is seen to be illusory.’ ”.

Our impression was that although the expression “intentionally self-inflicted or intentionally self-induced illness” appears on the face of it to be otherwise, it is in the final analysis ambiguous because a literal interpretation produces unsatisfactory results when applied in the above examples. We therefore thought that a corrective interpretation was called for.

In dealing with the problem of ambiguity the remarks of the SCA in SA Forestry CO Ltd v York Timbers, 2005 3 SA 323 (SCA) at 340 should be borne in mind:
“In the interpretation process, the notions of fairness and good faith that underlie the law of contract again have a role to play. While a court is not entitled to superimpose on the clearly expressed intention of the parties its notion of fairness, the position is different where a contract is ambiguous. In such a case, the principle that all contracts are governed by good faith is applied and the intention of the parties is determined on the basis that they negotiated with one another in good faith.”

The question was how the words concerned were to be interpreted to avoid an undesirable outcome?

It was noted by us that apart from the reference to “intentionally self-inflicted or intentionally self-induced illness” the exclusion listed some specific causes of sickness (as defined including injury) viz indulgence in liquor, indulgence in drugs, immoral conduct and disorderly conduct. These specific causes of sickness or injury constitute a category of deliberate conduct morally or socially reprehensible according to the convictions of society. Considering the eiusdem generis rule and more specifically its colleague the noscitur a sociis rule (according to which the meaning of a word or phrase used in a series is influenced by others in that series) it could be contended that the words “intentionally self-inflicted or intentionally self-induced illness” are likewise intended to refer only to deliberate conduct of an improper nature. On this basis intentional conduct not amounting to misconduct would not be within the parameters of the exception.

We accordingly suggested to the insurer that the provision might be ambiguous and that the words “intentionally self-inflicted or intentionally self-induced illness” might have to be interpreted to mean deliberate conduct which is improper according to the norms of society. This would bring the meaning of the words in question into line with the rest of the exclusion as well as with the dictates of good faith. The conduct of the complainant in casu was not capricious; on the contrary it was necessary for the preservation of life and therefore irreproachable. For this reason we suggested that her conduct, though deliberate, might not fall within the scope of the exclusion as interpreted.

We raised yet another concern about the clarity of the exclusion clause. We pointed out that only an intentionally self-inflicted or self-induced “illness” was excluded, but not a self-inflicted or self-induced “sickness” which, as defined in the policy, would include an injury. The word “illness” might therefore be said to bear its ordinary meaning, which as such does not embrace an injury. What the complainant suffered, as a result of her operation, was an injury and not an illness. Seen in this light the exclusion would not affect her.

The insurer remained unpersuaded.

Conclusion

In the final analysis, however, we recognised that the interpretation proposed above was not capable of easy solution. In terms of our Rule 1.2.4 the Ombudsman has the power, indeed and is required to ensure, that he accords due weight to considerations of equity which constitutes the equity jurisdiction of the Ombudsman.

While it is not possible or advisable to define equity, it will be required to be considered in all cases of perceived injustice, where the law does not provide a fair solution. Where the interpretation of a contract cannot be satisfactorily resolved by applying the law, the circumstances and consequences should be assessed with equitable considerations in mind.

While equity cannot be defined, it must at least be measured according to the convictions of the community. Would a reasonable person in the given case regard it as fair and just that the claim at issue be rejected?

We finally grounded our decision on the Ombudsman’s equity jurisdiction. On this basis we decided that the claim was not excluded by the clause. The insurer accepted our ruling and paid the benefit.