Posts in category: Late Submission of Claims

CR329

Late submission of claims

Claim delayed by police taking possession of documents for criminal investigation.

A group scheme funeral policy, of which a funeral parlour was the beneficiary, stipulated that a claim would not be payable if not submitted within 6 months of death. The main member, her partner and her minor child were covered under the policy, and all three died in a fire in their home in June 2010. Their burial was interrupted by the police who, suspecting that the main member’s partner had been involved in criminal activities, therefore took possession of the bodies and all relevant documents including the death certificates. The police investigation took longer than 6 months thereafter. Because it would be late for the purposes of the policy the funeral parlour decided not to submit a claim, but instead to recoup the burial costs from the family of the main member.

The family of the main member submitted a complaint to the office, and after intervention we were advised by the insurer that the claim would be admitted in respect of all three insured persons. Payment followed in August 2011, fourteen months after the date of deaths.

Late submissions of claims are generally not accepted by insurers under group schemes and funeral policies, especially where the claim is submitted a substantial period of out of time. It can sometimes happen, however, that timeous submission is beyond the control of the claimant. In this matter the insurer, which frankly did not claim to have been prejudiced by the delay, agreed that the circumstances justified the relaxation of the 6 month restriction.

NvC
January 2012

CR285
Late submission of claims

Death and disability claims in terms of mortgage protection policies – individual policyholders, members of their employer’s housing scheme, having been granted mortgage bond by their employer, ceding their policies to their employer – can the insurer be held liable where the employer fails to notify it of the claims within the periods set out in the policies?

Summary of facts

Employees of a certain company to whom it granted housing loans in terms of the employer’s housing scheme, each had to take out a policy with the insurer which was thereupon ceded to the employer as security for the repayment of the mortgage debt in the event of the employees’ death or disability. Clause 14 of each policy provided that by ceding the policy to the employer the life insured’s rights and obligations arising from the policy would be made over to the employer, and that in the event of a valid claim the benefit would be paid to the employer. In the case of a death the insurer would pay the balance of the mortgage bond plus an amount not exceeding R10 000 for the costs incurred in connection with the discharge and cancellation of it, while in the case of a permanent disability the insurer would pay only the balance of the mortgage bond.

Each policy provided that a death claim was required to be submitted to the insurer within 6 months from the date of death, and a disability claim within 365 days from the date of the bodily injury.

The practice was that in the event of the death or disability of the life insured, his dependants would inform the employer’s housing department which in turn would assist her/him with the completion of the relevant claim form, and the employer would then submit the claim documents to the insurer. Having also taken over the insured’s obligations in each policy, the employer in any event had the obligation to submit the claims concerned.

In six cases the office received complaints from the dependants of the life insured or the life insured himself. One involved a disability claim and the others each a death claim. In all of the death claims the employer had been notified of the deaths concerned within 5 months from the date of death, yet the employer failed to submit the claims to the insurer either within the stipulated time or at all. With regard to the disability claim, the claim documents were submitted to the employer 8 months after the date of injury, but the claim was only submitted by the employer to the insurer 14 months after the expiry of the 365-days’ time limit. Relying on the time limitations referred to in the policies, the insurer repudiated liability for the claims.

The complainants subsequently approached the office for assistance.

Discussion

The office’s view was that the insurer had been justified in placing reliance on the relevant limitation clauses, so that its decision to repudiate the claims on contractual grounds could not be faulted. We requested the insurer, however, to indicate what prejudice if any it would suffer if the office were to exercise its equity jurisdiction in the complainants’ favour and call upon it to assess each claim on the merits despite the late notification.

The insurer responded as follows:

• The rights and obligations arising from each of the group scheme policies vest in the employer and the insurer as parties to the contract. (Correctly stated, however, the employer had not been a party to the policies, but it had nevertheless taken over all of the policyholders’ rights and obligations.)

• The employees are only the lives insured, and not parties to the contract. (Correctly stated, however, the employees had in fact been parties to their policies, but they had made over their rights and obligations to the employer.)

• The employer had breached its duty arising from the provisions of the contract to submit the claims within the prescribed time periods.

• There had been several instances of such breach in the past, which led to the insurer arranging a meeting with the employer during 2006, at which the employer admitted liability. In an effort to assist the dependants, an agreement was reached at the meeting whereby the insurer, although not in fact liable, would settle all the outstanding out-of-time cases that had already been notified to it at that point, which amounted to R1.39m; all cases that had not been notified to it at that point and did not appear on the list of late-reported claims would stand rejected; and the employer would write off the debt with regard to those.

• The employer had not paid any premiums towards the group policy since the beginning of November 2008 and the employer had in writing terminated the group scheme policy with the insurer.

• As there was no longer a business relationship between the insurer and the employer pertaining to the group scheme, it would be prejudicial to the insurer and contrary to sound business practice to require the insurer to honour the various outstanding claims that had not been part of the 2006 settlement agreement with the employer

• The complainants had a right of recourse against the employer.

It must be emphasised that none of the six matters being considered by the office had been brought to the insurer’s attention as at the date of the 2006 meeting between the employer and the insurer.

Conclusion

Although the office did not necessarily agree with all of the insurer’s submissions, it ruled that it could not exercise its equity jurisdiction in the complainants’ favour, and in doing so took account of the following:

(a) that it was the employer’s repeated breach of the policy conditions that had landed the complainants in their predicament.

(b) that the insurer had made reasonable efforts in the past to assist the dependants of the lives insured.

As the complainants’ right of recourse lay against the employer, the matter fell outside the ambit of the office’s jurisdiction and the office could not assist the complainants in that regard.

CNN
October 2009

CR284
Late submission of claims

Equity – unique circumstances.

Background

The life assured, who was murdered, held a policy which provided that:
The claim must be submitted within 12 months from the date of death.

The complainant, his wife, was the named beneficiary, and she lodged a death claim some 21 months after the murder. The insurer declined the claim on the basis of late submission.

The complainant contended that the reason for the delay was beyond her control. She and another had been formally accused of having murdered the life assured. She had been continuously detained from shortly after the life assured’s death and after a lengthy trial she was acquitted and released, while her co-accused was convicted of the murder.

She lodged the claim with the insurer promptly after the trial was concluded.

Consideration

In the light of the unique circumstances surrounding the delay in lodging the claim, as outlined above, we invited the insurer to reconsider its decision.

Result

In response thereto the insurer’s Claims Committee decided to waive the defence of late submission and assessed the claim on its merits. It met the claim in full.

TS
October 2009

CR225

Late submission

Background

The life insured died on 24 October 2005. The policy provided for a notification period of six months. A death claim was lodged on 3 March 2006, well within the submission period. The complainant submitted the required documentation with the claim. The only difficulty was that the copy of the death certificate, although clearly genuine, was so badly copied that it was illegible. The insurer, as it was entitled to do, requested an improved copy which was thereupon submitted in May 2006 (some weeks after the six month period had expired). The insurer then declined the claim on the basis that the legible certificate was submitted beyond the notification period.

The insurer was invited, but declined, to review its decision. Consequently, the matter was discussed in a meeting of adjudicators.

Discussion

The meeting considered the circumstances surrounding the claim as well as the insurer’s decision to decline it. The meeting was of the view that the insurer’s insistence that the corrected copy should also have been delivered within the prescribed period could not be supported. Not only did the contract contain no provision to that effect but the result was patently unfair.

The meeting expressed its displeasure at the manner in which the insurer handled the matter. It was difficult to escape the conclusion that it was a deliberate attempt to avoid paying out a legitimate claim.

Result

The meeting resolved that the claim should be paid. Furthermore, the meeting mandated the Ombudsman to address a letter to the Chief Executive Officer of the insurer concerned to convey its sentiments. A prompt and positive response was received thereafter, and the claim was paid.

TS
MAY 2007

CR226

Late submission of claim /Interpretation of contract

Background

The complainant approached our office when two separate claims under two separate policies were declined by the insurer due to late submission.

The policies commenced in October 2002 and August 2003 respectively and made provision for Permanent Total Disablement benefits due to accident. In November 2004 the complainant injured himself when he fell from a ladder. At the time his back felt a bit stiff and it deteriorated as the weeks passed.

In December 2004, he consulted his doctor who prescribed traction. He was also referred for an MRI scan in January 2005. Medical reports revealed degenerative discs in the lower back region.

The policies contained an accident plan providing that a benefit would be paid if the insured person “sustains injury which, solely and independently of any physical defect or infirmity existing prior to the accident, results within 12 months of the date of the accident in an insured event as stated in the Table of Benefits”.

It was only on 19 January 2006 that the complainant completed claim forms in which he alleged that there was an accident, and that he had sustained an injury which resulted in the occurrence of the insured event “Permanent Total Disablement”.

When the claims were declined due to late submission the matter was referred to us for consideration.

Discussion

The late submission clause, which was common to both policies provided:

“The claim form and all supporting documentation as may be requested will be supplied at Your own expense, and must be received by Us within 180 days of the Accident.”

In his initial letter the complainant explained that he informed the insurer that he delayed submitting his claim because his doctors told him that he had a 50-50 chance of recovery and he wanted to be sure of his disability before claiming payment for it.

Having reviewed the information at our disposal, we were of the view that there were two aspects to the complainant’s claim. Firstly, were the claims submitted late and secondly, and if not, did the complainant qualify in terms of the Permanent Total Disablement benefits?

In our view the claim was not submitted late. The contracts defined Permanent Total Disablement to mean:

“total and absolute disablement which entirely prevents an insured person from engaging in or giving attention to gainful occupation of any and every kind. The diagnosis and determination of the permanent total disablement must be made by a physician and must be continuous and permanent for at least 24 consecutive months from the onset of the disablement. Documented evidence of the incident that caused the permanent total disablement is required.

The degree of permanent total disablement will be determined immediately after it is established or as soon as it can reasonably be assumed that there will be no further improvement or worsening of the insured person’s condition in consequence of the accident, but not later than 24 months from the date of loss.”

We were of the opinion that the definition in this particular insured event could not be determined to have occurred until 24 months had passed, as the disablement must be continuous and permanent for at least 24 months from the onset before the requirements of the definition of the insured event “permanent total disablement” have been met.

This was at odds with the requirement of the clause that “the claim form and all supporting documentation as may be requested … must be received by us within 180 days of the accident”.

In other words, there was an inconsistency or ambiguity in the policy wording, which results in an absurdity: to comply with the 180 day clause a policyholder would have to submit a claim for an insured event which by definition cannot yet have occurred.

The contra proferentem rule, whereby a contractual provision is construed against the contracting party (the insurer) by which or on behalf of which it was formulated, would be the appropriate principle to apply to resolve the ambiguity. In this case this would mean interpreting the policy to mean that a claim for the insured event “permanent total disablement” would have to be lodged within 180 days of the alleged occurrence of the event as defined. On this interpretation of the policy the claim would not have been lodged late.

However, even if one assumed that the claims were lodged timeously, medical reports submitted by the complainant did not suggest that the requirements for liability by the insurer to pay the benefits were met. As his condition was degenerative it clearly was a physical defect or infirmity which existed prior to his accident. The fall was therefore not the sole and independent cause of the insured event. Even if the accident might have made his condition worse, the degenerative condition which preceded the fall also contributed to the alleged condition of permanent total disablement.

Result

We shared our view with both parties that there was no documented evidence of the incident that caused the permanent total disablement; that there was no evidence that the complainant’s disabling condition was so “total and absolute” that he was entirely prevented “from engaging in or giving attention to gainful occupation of any and every kind”. Furthermore, medical reports suggested that there were still treatment options envisaged and therefore a question mark over the permanence the complainant’s condition. Both parties were given an opportunity to respond, neither did so and we proceeded to close our file.

DCW
May 2007