Posts in category: Exceptions, Exclusions And Waiting Periods

CR380

Policy Exclusion: death due to participation in criminal act

Accident – Deceased hit by a train while allegedly walking on a railway line – Reliance by insurer on exclusion for death as a result of active participation in criminal act – Reference to Section 12(i)(h) of Schedule 1 of the Legal Succession to the South African Transport Services Act 9/89.

Background:

1. The deceased person was killed when he was struck by a train (“the incident”).

2. At the time of incident at approximately 05h15am:

• The deceased was a pedestrian
• A Metrorail train was en route to Umhlali

3. The incident occurred at a place at or near or along the railway line which, in the statement of the witness was only described as “126/391” and which, according to that statement, was the “precise place” where the incident occurred.

4. In the statement, the witness said this referring to the deceased: “To my knowledge the person had no authority to be present at the mentioned place and in my opinion, there was nothing that I or my employer could do to avoid the incident”.

5. There is no other relevant information about the incident, save for the following statement by the investigating officer of the South African Police: “The deceased was walking along the railway tracks at Shaka’s kraal when he was knocked down by a train travelling in his direction.”

6. The insurer justified its repudiation of the claim for the funeral policy benefit as follows:

• “It is confirmed that the direct cause of death of the deceased was due to illegal railway line crossing.
• The illegal crossing of a railway line is criminalised in terms of the following provision from the Legal Succession to the South African Transport Services Act 9 of 1989:

A “person who crossed a railway line without the authority of the Company of the Corporation, as the case may be, at a place where a level crossing or pedestrian crossing has not been constructed; shall be guilty of an offence and on conviction any competent court may impose, in its discretion, a fine or imprisonment, or a fine and imprisonment, or any other suitable punishment within its jurisdiction.”

• It is confirmed by the investigating officer that the deceased was hit by a train whilst walking on the railway line.

Discussion

The matter was discussed at a meeting of the adjudicators. The meeting noted the following:

7. The insurer bore the onus of proof of the criminal act on which it relied for its repudiation of liability in terms of the policy.

8. According to the insurer, the deceased committed the offence set out in the second paragraph quoted in paragraph 6 above.

9. The following were the factual errors in the insurer’s letter, quoted in paragraph 6 above:

• There was no evidence that, at the time of the incident, the deceased was in the act of an “illegal railway line crossing”.
• The investigating officer did not say that the deceased was hit whilst walking on the railway line.
• There is no evidence of the fact that the deceased’s death arose while illegally crossing a railway line.

10. The offence in question can only be committed by a person

• Who crosses a railway line and
• At a place where there is no level crossing or pedestrian crossing

11. There was no evidence:

• that the incident occurred while the deceased was crossing a railway line or
• that the incident occurred at a place where there was no level crossing or pedestrian crossing.

12. The witness’s evidence and that of the investigating officer did not prove the commission by the deceased of the alleged criminal act.

13. It was a unanimous finding of the said meeting that the insurer did not discharge the said onus and that it was liable for the payment of the said benefit.

14. The insurer accordingly paid the claim.

CR321

Exceptions and exclusions

Retrenchment benefit – cover not applicable to independent or fixed term contractors – complainant employed on a temporary basis.

1. The complainant, who was employed on a temporary basis, was retrenched and lodged a claim for a retrenchment benefit with the insurer.

2. The clause applicable to the retrenchment benefit provided:

“Exclusions on Retrenchment Benefit
No benefits will be payable where:
…
(ii) the Life Insured is an independent or fixed term contractor …”

and because the complainant had been employed on a temporary basis only, the insurer repudiated the claim.

3. It was common cause that the complainant was not an independent contractor. The remaining question was therefore whether the complainant had been a ‘fixed term contractor’.

4. A fixed term contract is one which has a definite start and end date, or terminates automatically when a particular task is completed or after a specific event other than retirement or dismissal.

5. It was pointed out to the insurer that whilst the complainant’s contract of employment had a definite start date, it did not have a definite end date. It also did not terminate automatically when a particular task was completed or after a specific event other than retirement or dismissal. It therefore did not follow that, because the complainant was employed on a temporary basis, he was a fixed term contractor.

6. It would have been otherwise had the clause provided that no retrenchment benefit would be payable where the life insured had been employed on a temporary basis, or that a retrenchment benefit would only be payable if the life insured had been employed on a permanent basis.

7. The office was therefore of the view that the complainant’s claim was not excluded by the clause.

8. The insurer accepted this and paid the claim accordingly.

LS
January 2012

Exceptions, Exclusions and Waiting Periods CR308

Exclusion c lause –causation – clause requiring that the claim event must be “as a consequence of” the pre-existing condition – must therefore be the proximate cause – meaning of.

1. In this case the complaint arose out of a life policy also covering hospital expenses. The policy commenced on 1 May 2009, and it contained a pre-existing condition exclusion clause. The complainant stood on a rusty nail on 27 January 2010, the wound developed sepsis, and he was admitted to hospital on 30 January where on 11 February his right lower leg was amputated below the knee. His claim for the hospital expenses was rejected by the insurer on the basis of the exclusion clause.

2. The relevant portions of the clause provided that –
“Hospitalisation as a consequence of pre-existing conditions as defined herein … will not be covered. “

and for this purpose it defined “a pre-existing condition” as a –

“Sickness … contracted by an insured person … which existed prior to the initial commencement date of (the) policy”.

3. It was not in dispute that the complainant had been a diabetic for 16 years, and in relying on the exclusion clause the insurer’s contention was that for its purposes his diabetes as a pre-existing condition had been the cause of his hospitalisation.

4. Vital to the solution of the dispute was that the pre-existing condition exclusion clause did not for its application require that the condition must be “a direct or indirect” cause, as some such clauses are worded. On the contrary, its wording required only that the claim event must be “as a consequence” of the pre-existing condition for the exclusion to apply, which meant that the pre-existing condition would have had to be the main cause, sometimes called the dominant, or proximate, or actual or effective cause, and not simply a lesser contributory cause.

5. That much is clear from the following summary in the work Life Insurance In South Africa by Nienaber and Reynecke (at 13.15 to 13.16) –
“15. The determination of causation involves a two-step process. First, factual causation must be established by means of the process of elimination known as the “but-for” test (known to lawyers as the conditio sine qua non approach). A causal link is present, according to this test, if one fact (for example the injury) would not have ensued if another fact (for example the accident) had not preceded it. Eliminate the accident and the insured would not have been injured. Hence the accident is the cause of the injury.

16. Once factual causation has been established the second step is to determine whether there is in law a sufficiently close connection between the cause and its proven consequence. In the insurance context the so-called proximate cause approach to legal causation is considered to be in accordance with the intention of the parties. A fact is the proximate consequence of an alleged cause if it can be described as the dominant, direct, actual, effective, determining or operative cause of that consequence. If the connection is merely indirect and fortuitous it is not proximate. ”

6. See also the leading case of NAPIER v COLLETT AND ANOTHER 1995 (3) SA 140 (AD) where the following was said (at 143 F-H) –
“The theoretical consequences of an act stretch into infinity. Some means must be found to limit legal responsibility for such consequences in a reasonable, practical and just manner … The traditional view in insurance law is set out as follows in Incorporated General Insurance Ltd v Shooter t/a Shooter’s Fisheries 1987 (1) SA 842 (A) at 862C-D … (W)hen there are two or more possible causes … the proximate or actual or effective cause (it matters not which term is used) must be ascertained, and that is a factual issue … (A)n earlier event may be a dominant cause in producing the damage or loss; it may be the causa sine qua non but the issue is, is it the causa causans? … “

and (at 144 A -E) the following was added –
“ The justification for the proximate cause rule is that it reflects the presumed intention of the parties to an insurance contract …
The effect of these various authorities … is equally applicable to insurance law. Its application will of course be subject to the provisions of the particular insurance policy in question … The initial enquiry will normally be whether there is ‘factual causation’. …If this initial enquiry leads to the conclusion that the prior event was a causa sine qua non of the subsequent one, the further question arises, viz whether there is a sufficiently close relationship between the two events to constitute the former the legal cause of the latter.”

7. Finally, it was put as follows by the Appeal Tribunal in an appeal against one of the office’s determinations:
“Questions of causation usually arise where several factors, concurrently or successively, contribute to a single result and it is necessary to decide whether any particular one of them is to be regarded legally as a cause (see Concord Insurance Co Ltd v Oelofsen N.O. 1992(4) SA669(A) at 673 – 4). Generally, and subject to the terms of the policy, the insurer is only liable for losses proximately caused by the peril covered by the policy. In MacGillivray on Insurance Law (11th Ed, 19-001, page 513) it is said that

“A proximate cause is not the first, or the last or the sole cause of the loss: it is the dominant or effective or operative cause”.

A similar view was expressed in Incorporated General Insurances Ltd v Shooter 1987(1) SA842(A) at 862D:

“No difficulty arises when only one cause has to be considered. The difficulty arises when there are two or more possible causes. In such a case the proximate or actual or effective cause (it matters not which term is used) must be ascertained and that is a factual issue.”

Finally in this regard, it may be observed that in Aswanestaal CC v SA Eagle Insurance Co Ltd 1992(1) SA662(C) at 665 B – C it was said that the proximate cause of a result in an insurance policy is determined by

“the application of a common sense standard”, the question being what was the effective and predominant cause of the event.”

8. In the insurer’s email to our office it was stated that “the cause of hospitalisation was due to sepsis”, and that the complainant’s diabetes was a “contributing factor” to the sepsis. Both of these statements were of course correct, but the submission that followed was that his standing on a nail had not been the direct cause of his admission to hospital.

9. The office’s unanimous view was, however, that the diabetes had not been the proximate cause of the hospitalisation. In the Certificate of Medical Attendant that accompanied the claim, the doctor concerned said, in response to the question “Direct cause of hospitalisation?” that it was “Right foot sepsis after standing on a rusted nail”, and in answer to the further question “What are the contributing factors that led to hospitalisation?” he said that it was diabetes and hypertension. Those two answers alone made the matter clear – it was the sepsis (after standing on the nail) that was the direct cause of the hospitalisation, and the diabetes was only a contributing cause.

10. The main cause was therefore not the complainant’s diabetes. On the contrary, it is clear that had he not stood on the rusty nail, and had he not thereafter developed the sepsis he did, there would have been no question of hospitalisation.

11. In these circumstances the clause did not serve to exclude the insurer’s liability.

12. This was a preliminary determination which the insurer thereafter accepted.

DSM
March 2011

Exceptions, Exclusions and Waiting Periods CR299

Exclusion clause – causation.

BACKGROUND

The deceased, a 34-year old male, was granted cover under a policy the inception date of which was 4 September 2006. The policy was at the same time ceded to a financial institution to cover his housing loan. He died on 8 August 2007 as a result of natural causes.

Upon a claim being lodged with the insurer, it was established that the deceased had been admitted to a hospital from 20/6/2007 to 20/7/2007 with disseminated carcinoma of unknown origin, that various investigations including scans, biopsies and endoscopies failed to trace the primary cancer, and that the cause of death was indicated as spinal and liver metastases from unknown primary.

What was also established was that he had been diagnosed as HIV positive in February 2006 and treated for disseminated TB in March 2006, that he had commenced HAART (highly active antiretroviral treatment) in June 2006, and that the treatment was successful and completed in January 2007.

In denying liability the insurer relied on an exclusion clause in the policy that excused liability for any claim that should arise directly or indirectly from a condition that existed at the commencement of the policy. In this regard it sought support from a certificate completed by the deceased’s medical attendant which was provided to the insurer at the time that the claim was lodged. Therein the doctor answered “Yes” to the question whether there was any reason to believe that the deceased’s death was in any way due to or arose directly or indirectly, entirely or partially from AIDS or HIV infection. The doctor also noted that the deceased was “found to be HIV infected however no evidence that this was opportunistic cancer.”

The insurer contended that “based on the fact that HIV, which is a condition that led or contributed directly or indirectly to the cause of death and was diagnosed and treated prior to policy inception” it was entitled to rely on the abovesaid pre-existing condition exclusion clause.

DISCUSSION
We referred the case to an independent medical practitioner for an opinion and he reported:

“It is therefore indisputable that the insured was HIV positive prior to the inception date of the policy … The question that remains to be answered is whether HIV/Aids can directly or indirectly cause a cancer of unknown origin.

I have done a renewed literature search on the relationship between HIV/Aids and cancer, and have attached two relevant articles:
Annexure A: “HIV Infection and Cancer Risk”, published by the US National Institus of Health’s National Cancer Institute.
Annexure B: “Cancer in the HIV population”, an overview article by Jennifer Newcomb-Fernandez.

Both these articles agree on the following associations between HIV and certain types of cancer:
1. Aids defining cancers
These are cancers which, when diagnosed in an HIV positive individual, indicates that the patient is in clinical Aids Stage IV. They are Kaposi sarcoma (800 times the risk of an HIV negative person), Non-Hodgkins lymphoma (7x increased risk) and cervical cancer (3x risk).
2. HIV causes an increased risk of contracting the following cancers:
Anal cancer (9x risk), Hodgkins lymphoma (10x), liver carcinoma (3x), lung cancer (4x) and testicular cancer (1-8x).

3. HIV poses no increased risk in the following cancers: breast cancer, colorectal cancer, prostate cancer, and other common cancers.

This case is complicated by the fact that the primary cause of the cancer is unknown. It is therefore impossible to speculate whether the positive HIV status increased the likelihood of contracting the cancer, which would have been possible had we known the origin of cancer.

However, it is relevant to note that, according to the hospital records of the ABC Hospital, the following investigations were done in attempt to find the primary:
• MR scan spine
• CT scans chest, abdomen and spine
• Biopsies of the liver metasteses, stomach and bone marrow
• VQ scan of the lungs
• Colonoscopy
• Gastroscopy
These tests would have identified the primary cause if it had been Kaposi sarcoma, Hodgkins- or non-Hodgkins lymphoma, anal cancer, liver cancer and lung cancer.

This means that all the cancers listed in categories 1 and 2 above, have effectively been rules out as primary cancers, in which case the likelihood that the primary cancer was unrelated to HIV/Aids, is increased significantly.

I will therefore conclude that, on the balance of probability, chances are in favour of the fact that the primary cancer was not related to HIV/Aids in this case. On the basis of these facts I would advise the insurer to consider the claim.”

CONCLUSION
We provided a copy of the report to the insurer, who settled the claim.

HE
March 2011

Exceptions, Exclusions and Waiting Periods CR300

Exclusion clause – causation.

BACKGROUND

The deceased, a 30-year old male, was granted cover under a policy the inception date of which was 14 July 2008. At the same time the policy was ceded to a financial institution to cover his credit agreement with them. He died on 26 February 2009 as a result of natural causes.

A claim was submitted to the insurer, who established that the deceased had died of severe gastro-duodenal bleeding due to peptic ulcer disease, and that he had been HIV/AIDS infected, in fact in an already severely immuno-compromised state at inception of the policy.

In declining the claim the insurer relied on an exclusion clause which read as follows:
“The insurer shall not be obliged to make payment in respect to any condition or event arising directly or indirectly from or traceable to:
…
d) any condition, physical defect, illness, bodily injury or disability which the insured was aware of and received medical advice or treatment for in the twelve months prior to becoming a life insured under this policy, or from 12 months of the reinstatement of any policy.”

The insurer contended that diseases of the gastro-intestinal tract are common among those who are HIV/AIDS infected, and that their reliance on the exclusion clause was therefore justified.
DISCUSSION
We referred the case to a medical practitioner for an opinion and quote as follows from his report:
“The following facts seem undisputed:
• The deceased was HIV positive prior to inception date of the policy.
• The deceased was aware of this diagnosis.
• With a CD-count of 134 one week prior to inception date, it is fair to conclude that the deceased was in stage IV clinical AIDS.
• The cause of death was haematemesis (severe gastro-deodenal bleeding) due to peptic ulcer disease.

The problematic part is the causal link between Aids and peptic ulcer disease. The typical gastro-intestinal problems suffered by Aids patients, are esophageal- and colonic infections, with chronic diarrhoea. I am not aware that Aids patients have an increased incidence or more severe forms of peptic ulcer disease.

In order to come to an evidence-based decision, I have done a comprehensive literature research on this topic.

I have attached copies of the two most relevant studies for your information, the most important parts of which I have underlined. Both studies concur that there is no increased prevalence of peptic ulcer disease in Aids patients. In fact, Helicobacter pylori ulcers, which are by far the commonest cause of peptic ulcers, have a lower prevalence in Aids patients than in healthy patients.

I therefore have to conclude that one cannot prove a direct or indirect causal effect between the pre-existing Aids, and the cause of death, i.e. peptic ulcer disease with haematemesis.

We also do not have evidence of other significant co-morbidities like opportunistic infections which may have been present at the time of death.

Therefore, with the evidence as presented, I would advise that the insurer reconsiders its decision to repudiate the claim. ”

CONCLUSION
When we provided a copy of the report to the insurer, it settled the claim together with interest.

HE
March 2011

CR243

Exceptions and exclusions

Pre-existing medical condition, lung cancer – whether later liver cancer could be termed as pre-existing.

Background

The issue concerned a benefit which provided cover for parents of a life insured. An extract from the policy wording read as follows:-

“….. The automatic cover for each parent is provided free of medical underwriting, but excludes pre-existing medical conditions that the parent knew about or sought medical attention for in the past…”

The claim arose from the illness of the life assured’s father, who had suffered from lung cancer and underwent a pulmonary lobectomy in February 2006. The policy came into force on 1 October 2006. A few months later liver cancer was diagnosed which prompted the claim. The insurance company denied liability on the grounds of a pre-existing medical condition, namely the lung cancer.

Discussion
Having sought the opinion of a specialist physician, a member of the medical panel who advises the Ombudsman’s office from time to time, we took the view that the liver cancer was a secondary condition, with histochemical markers which, although not specific, strongly favoured a pancreatic, gastric or intestinal malignancy, and not a pulmonary site, as having been the initial cancer. Arising out of this the Ombudsman came to the conclusion that, on a balance of probabilities, the liver cancer was not related to the lung cancer. The cancer giving rise to the claim was therefore not a cancer of which the claimant would have been aware at the inception of the insurance. Our decision was that the claim should be admitted.
The insurance company contended that the word ‘condition’ which featured in the policy wording, when applied in the generic sense, enabled the insurer to consider all cancers to be covered by the exclusion. We disagreed, stating that the wording the insurance company had adopted did not warrant the exclusion of unrelated cancers. If it had been the insurer’s intention to cover all cancers then the contract should have been specifically worded to cater for it.
Result

The claim was settled in the complainant’s favour.

CR244

Exceptions

Exclusions – where death results from heart disease – whether heart attack necessarily results from heart disease.

Background

The policy featured an initial two year waiting period in which claims would not be paid in the event of death as a result inter alia of heart disease. The policyholder died within the two year period. The only information presented in support of the claim was a death certificate which described death as due to natural causes, and a form which stated that the cause of death was heart failure. On the basis thereof the insurer denied liability. The issue was whether heart failure was the result of heart disease.

Discussion

The Ombudsman took the view that heart failure is a clinical concept consisting of phenomena caused by inadequate cardiac function, the important point being that one can suffer from heart failure without the underlying cause being heart disease. The way the contract was framed placed the onus on the insurer to produce satisfactory medical evidence in support of its contention that death had resulted from heart disease.

Result

As the insurer could produce no such medical evidence it admitted liability.

CR245

Exceptions and Exclusions

Benefits excluded for hospitalisation – mental disease or disorder – an interpretation of the policy wording

Complaint

In denying liability the insurance company relied upon an exclusion in the policy for mental diseases or disorders. The policyholder denied mental illness.

Background

The policy provided cash benefits relating to periods spent in hospital. The policyholder was admitted to a general medical ward for a period of 4 days suffering from acute tubulo-intestital nephritis/pyelonephritis. She was subsequently transferred to a general psychiatric ward for a further period of 5 days with a new diagnosis – severe depressive episode without psychotic symptoms. A psychiatrist subsequently diagnosed major depression.

The claim for the period spent in the general medical ward was admitted and payment made in accordance with the general terms and conditions of the policy. Because the policy excluded “….hospital confinement consequent upon, or contributed to by, mental disease or disorder”, the claim for the period spent in the psychiatric ward was declined.

Discussion
The issue was whether depression is a mental disease or disorder.The great majority of depressed people do not have a ‘mental disease or disorder’. In this case the office accepted that depression is not a mental disease, but took the view that when a non-psychotic patient is sufficiently depressed to warrant treatment as an inpatient in a psychiatric ward, ‘disorder’ would be an appropriate descriptive term; it indicated a disturbance of orderly function.

The insertion of a ‘disorder’ in the exclusion clause, in addition to ‘disease’, would indicate that a condition different to a disease was intended, and the contract therefore intended to exclude a condition such as that for which the complainant was treated in the psychiatric ward.

Result

We supported the insurance company’s claim for the period spent in the psychiatric ward.

CR249

Exclusion clause – is the insurer entitled to rely on the exclusion clause?

Background

Mr N had two policies with the insurer. They were ceded to the bank to provide cover for his housing loan. On 14 January 2007 he died in a motor vehicle accident. The insurer declined both claims, relying on the alcohol exclusion clauses in the contracts.

Their reasoning was set out as follows in their letter to our office:

“In this specific instance the deceased died in a motor vehicle accident. During the time of his death it was determined that the deceased was under the influence of alcohol.

In support of our claims decision we received confirmation from the forensic lab that the blood alcohol tested, which correspond with the Post Mortem Report, was at the time of death 0.16, which is above the limit in terms of the exclusion clause.

Our policy exclusion reads as follows:

‘F POLICY EXCLUSION
No claim will be admitted which has arisen, or has been accelerated directly or indirectly as a result of

3. The Life Assured being under the influence of alcohol where the blood alcohol level exceeds 0.05, …’ “

According to an affidavit by the Assistant Forensic Analyst who performed the blood alcohol test, the laboratory received the blood sample in “an unsealed polystyrene container (seal not closed properly)” from the Forensic Pathology Service.

Discussion

We took the matter up with the insurer and asked them to advise us on what basis they sought to rely on a compromised sample. They replied by sending us a copy of their previous letter. We repeated the question and they informed us that if the sample was contaminated in any way, the beneficiaries should obtain written confirmation from the pathologists to this effect. On receipt of such confirmation they would be prepared to review the matter.

The matter was discussed at an adjudicators’ meeting and we took the view that the insurer could not impose the exclusion, as the blood alcohol sample was compromised. The onus to prove that the exclusion is applicable rested on the insurer, not on the beneficiaries.

The decision of the meeting was that, in the absence of any countervailing evidence, the claims in respect of both policies be paid, together with interest as set out in the LOA guidelines.

The meeting also decided that the insurer was to pay a solatium amounting to the sum of at least R5000.00 to the complainant to compensate her for inconvenience and distress experienced in delaying payment of the claim.

Result

The insurer settled both claims and paid the solatium to the complainant.

HE
May 2008