Posts in category: Non-Disclosure

CR198

Non-disclosure – whether evidence supported insurer’s view that false information had been disclosed

Background

The insured applied for 2 policies during late 1999 through a broker for R1,5 million with inception date 1 November 1999 and 1 April 2000. In response to a question in the application form the insured answered that his occupation was “flying”. The insured was subsequently required to complete an Aviation questionnaire in which the insured indicated that he had a “commercial” pilot’s licence.

The insured died in an aeroplane accident on 2 April 2000. Claims were instituted for death benefits under both policies.

An investigation was launched which resulted in the insurer concluding that the insured did not hold a valid commercial pilot’s licence but only a private pilot’s licence. They repudiated liability.

The claimant’s representative argued that the Civil Aviation Authority’s (CAA) records were inaccurate and that the insured had in fact held a commercial pilot’s licence. As evidence he submitted that :

1. the CAA had more than once inspected the insured’s licence at his workplace where he had been employed as a commercial pilot and had not raised any questions about his licence.
2. the aeroplane operating certificate showed the insured as the named pilot.

Discussion

What complicated matters was the fact that no original licences were available. These had been confiscated by the Moçambiquen authorities where the accident had happened.

We took all of the above into account as wel as the 2000 Report of an Independent Review Panel into Fraudulent Air Transport Licence Examination Practices which stated:

“After the aircraft accident on 2 April 2000, two pilot’s licences were found in Delacovia’s bag. The Moçambique authorities took possession of these documents, and submitted faxed copies to the CAA. In addition, the pilot’s logbook was obtained from his family, and in the back of the logbook was a copy of the pilot’s licence printout that is usually handed to a pilot after he renewed his licence. On this copy the information reflected Delacovia as a holder of CPL and instrument rating issued by the CAA. The information in this licence print-out is not consistent with Delacovia’s pilot’s records held by the CAA. The Panel concludes that Delacovia did not hold a valid CPL with instrument rating.”

The report did reflect that the records of the CAA are not accurate.

In weighing up the evidence the probabilities were fairly evenly balanced but the abovementioned report weighted against the insured. In applying the test for the materiality of information one uses the reasonable insured test. The reasonable insured would never disclose false information. On the evidence our office found the evidence supported the insurer’s position that the insured had disclosed false information about his pilot’s licence. Consequently we could not find in favour of the complainant on the documents on file.

Result

We had been made aware of the fact that the insured’s wife could not afford to institute legal proceedings. A court might have been a more appropriate forum for dealing with the dispute of facts of this nature. At the representative’s request we, therefore, asked the insurer to consider an ex gratia payment. We were able to advise the widow that an offer of R250 000 had been made in full and final settlement which she accepted.

JP
November 2006

CR199

• Non-disclosure – whether the insured disclosed sufficient information to have complied with his duty of disclosure

Background

The insured, 57 years old at the time, was the life insured under two policies which the insurer purported to cancel, retaining all premiums paid, on the grounds of non-disclosure,.

The policies were initially taken out for purposes of business in 1998 and 1999 respectively. Both policies had back exclusions and were subsequently ceded to the insured.

The insured was diagnosed with Parkinson’s disease in 2000. He continued working in a reduced capacity until 2003 but because of his inability, due to the disease, to perform his occupation as a strategic planner in marketing, he instituted a claim for a disability benefit in 2004.

The insurer refused the claim and cancelled both policies. The stated reason was the non-disclosure of a visit the insured had recently made to a neurologist, after he experienced back and neck problems and tremors in his hand. The neurologist had sent the insured for scans and x-rays and also suggested urine and blood tests. He prescribed a course of physiotherapy which in the insured’s own view and that of the physiotherapist was successful. For that reason the insured had not returned to the neurologist and had also not arranged for the suggested urine and blood tests.

The neurologist at claim stage mentioned that he had suspected early Parkinson’s disease but had not advised the insured of this suspicion at the time. In this regard a note submitted by the neurologist after enquiries by our office stated that there had been “diminished arm swing on the right and tremor quite prominent with walking. The features suggest early Parkinson’s and to investigate fully with regard to onset of Parkinson’s at such a young age.”

On both application forms the insured had disclosed that he suffered from neck and back problems. He completed a back questionnaire on the first application. In it he disclosed that he had seen a physiotherapist and received treatment for the problem. But he omitted to mention the visit to the neurologist nor had he disclosed the tremors in his hand.

At the time of the second application the broker sent a letter to the chief underwriter of the insurer in which it is disclosed that the insured’s “stiff neck” might in fact be stress-related.

It was as a result of the disclosures about these problems that the back exclusions were imposed on the policies.

The insured submitted several affidavits from friends and business associates in support of his assertion that he was completely unaware at the time that he manifested the symptoms of early Parkinson’s disease. If he had been so aware, so he said, he would not have left his fixed employment in an advertising agency at a high level in order to start his own business in 1999.

Discussion

The pertinent issue was whether the non-disclosures of the visit to the neurologist and the tremors warranted the repudiation of the policies, having regard to the positive disclosures made by the insured.

After considerable debate in our office and after seeking an opinion from an outside medical expert, our office came to the conclusion that the insurer’s repudiation was justified. We were, however, of the opinion, contrary to the view expressed by our medical expert, that the insured had not been aware that he suffered from early Parkinson’s disease and that he had not fraudulently withheld information of his visit to the neurologist. The policies were taken out for business purposes and we accepted that this was not a case where the insured knowingly non-disclosed information in the hope of benefiting from it at a later stage. Even though we regarded the non-disclosure as non-fraudulent we could not find in his favour since fraud by the insured was not a legal prerequisite for the repudiation of a policy by the insurer.

This office has in the past held the view, as it did in this case, that where a visit to a specialist doctor is not disclosed it would normally be regarded as evidence of material non-disclosure. In this case there were also specific questions relating to insured’s visits to specialist doctors which the insured answered negatively since he regarded the disclosure of his back and neck problems and the visits to the physiotherapist as sufficient disclosures.

The insured, confronted with our conclusion that the insurer was entitled to repudiate liability under the policy notwithstanding his “innocence”, asked us to liaise with the insurer about a possible ex gratia payment.

Result

We did so and were gratified that the insurer was prepared to make an offer of settlement of a third of the benefit on each policy, plus a return of premiums, less costs incurred. This amounted to R280 683. The insured accepted the offer in full and final settlement and the case was closed.

JP
November 2006

CR169

Waiver – non-disclosure- special offer to members of a medical aid scheme – risk to be assessed on the basis of medical records -whether insurer waived its right to a full disclosure of material facts

BACKGROUND

The complainant was the spouse of the life insured who took out a policy with Company X. The insurer published details of a special introductory offer to members of a particular medical scheme (AB). The offer concerned their policy providing life, severe disease and capital disability cover.

In terms of the promotion material:

“An introductory offer makes accessible (no questions; no medicals) for those who have been part of AB for more than a year. Other AB members are also being offered access, but may be required to answer routine medical question.”

As far as AB clients were concerned, two sets of underwriting rules applied:

“1. AB clients who have belonged to AB for more than 12 months. These clients will not require additional medical questionnaires or information to be submitted with their application …Through AB it is possible for us to assess their risk category accurately and offer them the advantages of a unique dynamic underwriting model.”

“2. AB clients who have belonged to AB for less than 12 months. Although we have access to information about these clients, the clinical information available is insufficient. Therefore they will need to answer medical questions on the application form and—based on their answers those questions—medical questionnaires may be required. Refer to the intermediary’s underwriting aid supplied which will help you determine which questionnaire your client may need to complete.”

At the time in question the insured was a member of AB for less than 12 months, viz 4 months.

The insured’s broker, Mr P (who was employed by a bank) alleged that during October 2000 Mr E, whom he thought was an employee of Company X, gave him the name of the insured as one of the persons qualifying for Company X’s special offer. Mr E was actually employed by Company XY. XY was an independent company entrusted with the distribution of X’s products.

Before the insured submitted his application Miss F (also employed by XY) informed Mr P per fax that the insured qualified for R4 million cover. The fax read:

“Kwotasie vir mnr [complainant]. Hy kwalifiseer vir volle R4 000 000 dekking. Ek het sy kwotasie getrek soos dit reeds onderskryf is met die relevante keurings-risiko kode.

The insured’s broker alleged that their understanding was that the insured was accepted for purposes of the special offer in spite of the fact that the complainant strictly speaking did not qualify for it. They were in other words brought under the impression that underwriting had already been done on the basis of the limited information in AB’s records. Mr E confirmed that this was how he explained the position to Mr P.

The insured decided to take up the “offer” in full and he submitted an application form (entitled “Spesiale Aanbod”). The broker filled in this form, including section F dealing with medical questions, by copying information he got from the insured’s application for AB membership. According to the form, section F had to be filled in by all applicants. The answers were all correct except for one question that was left unanswered.

It transpired that it was X’s policy to extend a special offer of R4m cover only if an applicant had submitted an application form and answered all the medical questions in the negative.

The application for insurance was accepted by X without requiring the insured to complete any additional medical questions or to undergo a medical examination .

The insured apparently suffered a stroke and he lodged a claim under the severe illness benefit. X repudiated the claim mainly on the grounds that the insured failed to disclose material facts pertaining to his health.

ASSESSMENT

It was common cause that the insurer’s defence rested on non-disclosure of material facts and not any wrong answer to a question in the proposal form. We also accepted that the non-disclosed facts were of a serious nature and therefore material. We understood the main issue to be whether the insurer could be held to have waived its rights to full disclosure. In this context we noted that X in its promotional materials made it quite clear that its special or introductory offer “(no questions; no medicals)” was open only to persons who had been members of AB for more than a year and that other AB members had to answer additional medical questions. Hence X did not actually intend to dispense with full disclosure in respect to AB members with less than 12 month’s standing. This left us with the task to determine whether X had by its conduct created a reasonable impression in the mind of the insured that it had waived its right to full disclosure despite the fact that he did not actually qualify for the special offer. This would amount to ostensible rather than actual waiver.

In assessing this case we were to a certain extent guided by the decision AA Mutual Life Ass Association v Singh 1991 3 SA 514 (A).

The insurer’s contention was that there was no reasonable reliance on waiver. In deciding the question of waiver we identified two main issues. The first main issue was:

(a) whether the employees of XY by their representations (especially the fax in question) created the impression in the mind of the insured that he had been accepted for purposes of the special offer and that the risk had been assessed on the basis of the limited medical information contained in the records of AB;

(b) whether that impression was a reasonable one.

The second main issue was:

(i) whether the representations by XY had been authorised by X;

(ii) if the representations had not been so authorised, whether X was estopped from raising lack of authority on the part of XY.

X did not provide us with a satisfactory answer to the question why the fax had been sent to the broker and also why the offer of R4m was extended even before an application form had been submitted. In any event, X contended that the fax could not be interpreted to mean that the insurer intended to waive its rights to a full disclosure. We duly considered the background promotional material which proclaimed “no questions: no medicals” and also that underwriting would be done with reference to the applicant’s health record kept by AB. In our view a reasonable man would have believed that the fax was intended to convey that the insurer, in its zeal to canvass the insured’s business, limited its rights to a full disclosure and assessed the risk by relying on the medical records kept by AB in respect of the insured despite the fact that the insured did not in fact qualify. An important consideration is that the fax contained no warning that the assessment of the risk was merely provisional and subject to correction.

According to the broker and the complainant they actually interpreted the fax in accordance with this interpretation. Indeed the broker testified that he reverted to XY for clarity and he that was then assured that the insured’s risk profile had already been assessed. This allegation was not refuted.

The insurer on the other hand suggested that, because the insured answered the medical questions in section F of the application form, he must have realised that his application could not be treated on the basis of his AR’s medical records alone. It was pointed out to X that the application form required all applicants to fill in this section. No adverse inference could therefore be drawn from the fact that the insured answered the medical questions.

In the circumstances we suggested to the insurer that the insured’s conclusion was reasonable and that issues (a) and (b) should be decided in the insured’s favour. This made it necessary to obtain clarity on the second main issue.

According to Company X company XY was an independent company and therefore it was not responsible for their actions. However, XY — a company with a name rather similar to that of X— was entrusted with the distribution of X’s products. As such they clearly had authority to inform clients and their brokers about the nature and provisions of the products marketed. The fax and information supplied by their employees were prima facie within the parameters of their mandate.

We suggested that if the employees of XY had no actual authority to make the representations they made, the insurer nevertheless was estopped from denying their authority. These officials were permitted and enabled by X to conduct its business. The insured and his broker alleged that they genuinely believed that they spoke on behalf of X.

Company X countered by contending that the insured suffered no prejudice for purposes of estoppel. We suggested that the mere fact that the insured entered into the contract on the strength of these representations, was sufficient to constitute prejudice. We added that the insured refrained from disclosing material information precisely because of his impression that X had waived its rights in this regard. Had he disclosed the information he would possibly have been able to procure proper cover albeit at a higher premium, whether from X itself or from another insurer. That opportunity no longer existed. We accordingly believed that issue (ii) should also be decided in the insured’s favour.

Result

We arranged a round table conference with X during which it was decided that X was not entitled to cancel the contract on the grounds of misrepresentation but that it had to consider the severe disease claim on its merits.

MFBR
April 06

CR154

Non-disclosure of material information. Proposer’s mental status at the time non-disclosure featured is questioned.

Background

The policy, which provided life cover together with dread disease benefits and occupational disability cover, commenced in January 2002. As a result of the non payment of premiums the contract lapsed in January 2003 but was subsequently reinstated later that year following submission of medical evidence. Further medical evidence was presented in May 2005 in support of a disability claim. This revealed non-disclosure of material information at the time of revival in 2003 and as a consequence the contract was voided from the date of revival.

Assessment

The complaint was submitted by the life assured’s wife and stated that her husband suffered from dementia, either due to Alzheimer’s or Pick’s disease. The complainant’s case was that her husband’s mental faculties were already affected in 2003 and both non-payment of premium and non-disclosure were related to memory loss. This is possible but only conjecture. The clinical neurophysiologist’s report stated that when examined in August 2004, the life assured’s condition was relatively far advanced which could mean that an impaired mental state could have contributed to his memory lapse when completing the revival questionnaire in 2003. Whilst it was accepted that symptoms relating to dementia may have existed prior to the lapsing on the policy there is no hard evidence of actual symptoms prior to the date of revival. Had the insurer been aware of the of the medical history suggesting dementia prior to the revival date the contract would not in fact had been reinstated.

Result

We supported the insurer’s view that it was not liable and all premiums paid subsequent to the revival date were refunded.

DM
April 2006

CR155

Non-disclosure – whether evidence supported insurer’s view that false information had been disclosed

Facts

The insured applied for two policies during late 1999 for R1,5 million through a broker, with inception dates 1 November 1999 and 1 April 2000. In response to a question in the application form, the insured answered that his occupation was “flying”. The insured was subsequently required to complete an “aviation questionnaire” in which the insured indicated that he had a “commercial” pilot’s licence.

The insured was killed when the chartered aeroplane which he piloted crashed on 2 April 2000. Claims were instituted for death benefits under both policies.

An investigation was launched which resulted in the insurer concluding that the insured did not hold a valid commercial pilot’s licence but only a private pilot’s licence. This was clearly a …factor and the insurer repudiated liability.

The claimant’s representative submitted a complaint and argued that the Civil Aviation Authority’s (CAA) records were inaccurate and that the insured had in fact held a commercial pilot’s licence. As evidence he submitted that :

• the CAA had more than once inspected the insured’s licence at his workplace where he had been employed as a commercial pilot and had not raised any questions about his licence;

• the aeroplane operating certificate showed the insured as the named pilot.

Discussion

What complicated matters was the fact that no original licences were available. These had been confiscated by the Moçambiquen authorities where the accident had happened.

We took all of the above into account, as well as the 2000 Report of an Independent Review Panel into Fraudulent Air Transport Licence Examination Practices which stated:

“After the aircraft accident on 2 April 2000, two pilot’s licences were found in the insured’s bag. The Moçambique authorities took possession of these documents, and submitted faxed copies to the CAA. In addition, the pilot’s logbook was obtained from his family, and in the back of the logbook was a copy of the pilot’s licence printout that is usually handed to a pilot after he renewed his licence. On this copy the information reflected the insured as a holder of CPL and instrument rating issued by the CAA. The information in this licence print-out is not consistent with the pilot’s records held by the CAA. The Panel concluded that the insured did not hold a valid CPL with instrument rating.” (We substituted to words “the insured” for the name of the deceased.)

On the other hand, the report did reflect that the records of the CAA were not always accurate.

In weighing up the evidence the probabilities were fairly evenly balanced but the abovementioned report tipped the scale against the insured. In applying the test for the materiality of information one uses the reasonable person test. The reasonable person would not have disclosed false information. Our office found that the evidence on balance supported the insurer’s position that the insured had disclosed false information about his pilot’s licence. Consequently we could not, on the documents on file, find in favour of the complainant.

Result

We had been made aware of the fact that the insured’s wife could not afford to institute legal proceedings. A court might have been a more appropriate forum for dealing with a dispute of this nature. At the representative’s request we, approached the insurer to consider an ex gratia payment. It did so and we were able to advise the widow that an offer of R250 000 had been made in full and final settlement which she accepted. We expressed our appreciation to the insurers.
JP
April 2006

CR156

Rejection of death claim – non-disclosure of alcohol consumption

Background

The policyholder submitted a proposal for life assurance on 7 April 2003 with the inception date being 1 May 2003. In responding to certain specified questions which featured in the proposal form, the applicant indicated that he had not consulted any medical practitioner during the preceding twelve months for conditions which he had not previously mentioned, nor that he had an alcohol problem. In response to the questions relating to alcohol consumption he had indicated that he drank five pints / dumpies / cans of beer per week.
The policyholder died in a motor vehicle accident on 30 July 2004. His wife thereafter applied to the insurer for payment of the death benefits. The claim was rejected on the grounds of non-disclosure of material facts. The insurer had obtained a medical report from the deceased’s family doctor which referred to a visit by the policyholder on 25 January 2003. From this medical report it appeared that the policyholder had indicated to his doctor that he wished to stop drinking as he was drinking six to twelve beers daily. He requested the doctor to prescribe antebuse tablets (medication that makes the recipient ill when taken with alcohol, and it is a treatment which can only commence after a patient has abstained from consuming alcohol for 72 hours). Had the life assured wished to take advantage of the antebuse treatment he was to return at least 72 hours after the consultation on 25 January 2003 in order to obtain a prescription. He did not return for this purpose.

The surviving spouse of the life assured had instructed a firm of attorneys to act on her behalf in the claim against the insurer and following the rejection of the claim the attorneys referred the matter to the Ombudsman’s office.

Assessment

It is a basic principal that an insurance contract is one of utmost good faith. A life assurer, in order to assess the risk, has to rely almost exclusively on information provided by the proposer applying for the cover. Consequently the proposer is duty bound to voluntarily disclose all material information relevant to the risk that is to be underwritten. The case rested on details contained in the family doctor’s clinical notes relating to the consultation on 25 January 2003. The policyholder had signed the application form in April 2003, i.e. some three months following that consultation and failed to disclose details of the consultation.

Although the information regarding the alcohol history was somewhat limited it was our view that material information had not been disclosed and it was felt that had full disclosure been made by the policyholder, the insurer would have made further enquiries before making a final decision as whether the application should be accepted or not.

Result

The insurer’s decision to deny liability was supported and the complaint was not upheld.

DM
April 2006

CR157

Non-disclosure – exclusion – non-disclosure of suicide of other family members – passage of time – effect of.

Background

We recently had this request from a concerned policyholder:

“I wonder if you would be able to give me some advise? I read an article in the local paper about non-disclosure, and became a bit concerned.

Years ago (in a few cases more than 30 years ago) I took out life insurance policies. At the time both my elder brother and my father had committed suicide, and feeling embarrassed (since I knew the broker personally), I put a different cause for my father’s death.

Now in hindsight, I realise that this was foolish. Does this mean that my policies could be jeopardised? Should I attempt to establish which companies I had given incorrect information to (I don’t know which companies I did) in which case if I do notify then could I lose benefits that may have accrued over the years?”

Discussion

We responded as follows:

“I have taken the liberty of discussing your query with an experienced re-insurer.

The question is whether the non-disclosure of the suicide of your father and elder brother, notwithstanding a pertinent question by the insurer on the very topic, should be regarded as material to the assessment of the risk by the insurer at the time the policies were issued.

And the answer is: Yes. If the information had been disclosed at the time the insurer (having deemed the information to be important to it – for otherwise it could not have posed the question) would probably have followed it up with a further series of questions to determine whether you yourself was a special insurance risk i.e. whether there was a deficiency in your mental or emotional make-up which might render you more likely than others to commit suicide or injure yourself. Depending on the outcome of that line of enquiry the insurer might have decided that the usual waiting period of two years in respect of suicide would be adequate or it might have loaded the premiums or it might have imposed a permanent suicide exclusion or it might have refused to insure you at all.

If the non-disclosure happened fairly recently, it might well have jeopardised your policies. But it didn’t. It happened 30 odd years ago. During those 30 years you did not commit suicide and you did not suffer from any psychological imbalances that could give rise to a claim on the policies. It is therefore questionable that if the enquiry referred to above had been pursued at the time it would have elicited information that would have caused the insurer to decline to insure you. Our view is that on grounds of equity a claim should not be declined in these circumstances. The non-disclosure, after all, given its reason, namely, to avoid the social stigma of a suicide in the family, was not intended to be deceitful or designed to defraud the insurer.

All things considered the reinsurer’s advice, which seems to be eminently sensible, is not to stir things up. In view of the passage of time they suggest that you let matters rest where they are.”

PMN
April 2006

CR153

Non-disclosure – whether the insured disclosed sufficient information to have complied with his duty of disclosure

Facts

The insured, 57 years old, was the life insured under two policies. The insurer cancelled these policies due to non-disclosure, retaining all premiums, when the insured instituted a claim for a disability benefit.

The policies were taken out for business purposes. The first policy was taken out in June 1998 by the insured’s employer for R250 000. The policy had an exclusion in respect of back injuries. The second policy, taken out in December 1999 for R500 000 by the insured’s business partner, also had a back exclusion. Both policies had subsequently been ceded to the insured.

The insured instituted a claim for a disability benefit in January 2004 based on his inability to perform his occupation as a strategic planner in marketing, due to Parkinson’s disease. Although the insured had been diagnosed in October 2000 he had continued working until 2003 in a reduced capacity.

The insurer cancelled both policies and retained the premiums on the basis that the insured non-disclosed certain material medical information at application stage. The non-disclosed information on which the insurer relied was a visit to a neurologist, after the insured had experienced problems with his back and neck and had tremors in his hand. The neurologist had sent the insured for scans and x-rays and also suggested urine and blood tests. He prescribed physiotherapy for the insured who had gone for the physiotherapy on several occasions during this period. The physiotherapy had been successful in both his view and that of the physiotherapist. He had, therefore, not returned to the neurologist and had also not gone for the urine and blood tests, which had been suggested.

The neurologist, at claim stage, stated that he had suspected early Parkinson’s. The insured had not been advised of this suspicion if it had been held at the time. A note submitted by the neurologist after enquiries by our office, dated 4.6.1997, stated that there had been “Diminished arm swing on the right and tremor quite prominent with walking. The features suggest early Parkinson’s and to investigate fully with regard to onset of Parkinson’s at such a young age.”

The insured was suspicious about this note as the contents had according to him not been disclosed to him. The note was not addressed to anyone in particular and had surfaced only at the time of enquiry about the neurologist’s diagnosis at the time of the examination.

On both application forms the insured disclosed that he suffered from neck and back problems and he had in fact completed a back questionnaire on the first application. In the questionnaire he disclosed the fact that he had seen a physiotherapist and received treatment for the problem. He had, however, not disclosed the visit to the neurologist nor had he disclosed the fact that he had tremors in his hand.

At the time of the second application the broker sent a letter to the chief underwriter of the insurer in which it was disclosed that the insured’s “stiff neck” might in fact be stress related.

It was as a result of the disclosures about his problems that the back exclusions had been implemented on the policy.

The insured had submitted several affidavits from friends and business associates and submissions in which he made the point that he was unaware of the fact that he suffered from early Parkinson’s disease at the time of the applications. If he had been aware, he said, he would have been unlikely to have left his fixed employment in an advertising agency at a high level to start his own business in 1999.

Discussion

The question arose whether the non-disclosure of the visit to the neurologist and the non-disclosure of the tremors were sufficient to entitle the insurer to repudiate the policy in the light of the other disclosures that were made by the insured. After considerable debate in our office and after seeking an opinion from an outside medical expert our office concluded that the insurer’s repudiation was justified in the circumstances. Our office was, however, of the opinion, contrary to the view of our own medical expert, that the insured had innocently non-disclosed his medical condition. We were of the opinion that the insured had not been aware of the fact that he suffered from early Parkinson’s disease. Even though we regarded the non-disclosure as not being fraudulent, we could not find in favour of the complainant as fraud is not a prerequisite for the repudiation of a policy.

This office has held in the past, as it did in this case, that where a visit to specialist doctor is not disclosed it would normally be regarded as a material non-disclosure. There had been specific questions about the insured’s visits to specialist doctors which the insured answered without disclosing the visit to the neurologist. The insured maintains that his disclosure of his back and neck problems and the visits to the physiotherapist was a sufficient disclosure, but, we were unable to agree with his opinion on this issue.

It was also clear to us that because of the nature of the policies i.e. the business assurance angle, that this had not been a case where the insured knowingly non-disclosed information in the hope of benefiting at a later stage from the policies. At the time when the policies where taken out the parties who would have benefited from the policies had not been the insured.

Result

The complaint would not be upheld. But when the insured requested us to liaise with the insurer about an ex gratia payment we took the above into account and requested a reconsideration from the insurer, even though we upheld its entitlement to repudiate the policy. We were gratified – and commended the insurer – that it was willing to make an offer of a third of the benefit on each policy, plus a return of premiums less costs incurred. This amounted to R280 683. The insured the accepted the offer in full and final settlement and the file was closed.

JP
April 2006

CR111

All material facts not disclosed – advice accordingly not appropriate.

Background

During July 2002 the complainant approached two financial advisers employed by the insurer to obtain advice as to how to invest his retirement funds. Upon their advice he invested his funds in a living annuity in a monthly bonus fund with the insurer. One of the reasons he chose that portfolio was because of the declaration of bonuses. In February 2003 he was informed that the fund did not declare any bonuses for that year.

He then decided to switch his funds to another portfolio. However, the insurer informed him that he had to give four months’ notice of such switch if it had to be done against the book value. If he did not give four months’ notice and wanted the switch done immediately, it would have to be done at either book value or market value, whichever was the lowest. This would have resulted in a 14% loss to the complainant.

The insurer further stated that they sent a letter to all policyholders in December 2002, informing them of the four months notice period. According to the complainant he would not have invested in the monthly bonus fund if he was aware of the four month waiting period. In light of all the evidence it was accepted that he was not aware of this at application stage.

Discussion

The complainant sought professional advice from the insurer. This meant that the advice had to be appropriate. It was our opinion that the advice was not appropriate because a material aspect of the proposed investment was not disclosed to him, or at the least, not properly explained to him. Even though the application form has a clause which stated that the insurer would not be liable for any loss suffered by the policyholder due to “enige tydsberekeningstandaarde, praktyke en prosedures….”, the fact remained that the complainant was not informed of the waiting period and that this was not appropriate advice.

Result

The matter was settled after the parties met at our office for the purpose of discussing settlement of the matter and a substantial payment was made to the complainant.

AS
October 2005