CR34 Interpretation – loan protection insurance

by Case ReportsInterpretationTopics & Cases

CR34

Interpretation – loan protection insurance – retrenchment cover – interpretation of term “retrenched” and date of retrenchment – exclusion where person had knowledge of retrenchment prior to commencement date or retrenched within three months of retrenchment date.

This case required an interpretation of the term “retrenched” and a determination of the date of retrenchment, with reference to labour law.

The complainant had a housing loan protection policy which included retrenchment cover. The policy stated that “The insurer will regard the insured person as retrenched if termination of employment complies with the legal termination of the insured person’s employment by reason of retrenchment, provided for in the Basic Conditions of Employment Act and the Labour Relations Act”. No retrenchment benefit would be paid to “any person who had knowledge of retrenchment prior to the commencement date, or who is retrenched within three months of the commencement date”.

The policy commencement date was 29 April 2003. On 23 June 2003 the employer gave the complainant a letter headed “Notice to terminate employment”. The letter indicated that the company was under financial strain and that certain staff positions needed to be reduced. The complainant was invited to make representations about her position, and told that options short of retrenchment would be discussed and considered. It was stated that, should no suitable vacancy or other alternative exist, her last working day would be 31 July 2003.

As it turned out, no alternative was found and her last working day was indeed 31 July 2003. The insurer declined the complainant’s claim for the retrenchment benefit on the basis that her retrenchment date was 23 June 2003 (the date of the letter), which fell within the three month period from commencement of the policy.

Establishing the date of retrenchment is a matter of fact and law; the date must be determined with reference to the relevant provisions of the Labour Relations Act.

A retrenchment is a type of dismissal, known as a dismissal for operational requirements; for reasons related to the needs of the business, employees’ positions have become redundant. Section 190 of the LRA fixes the date of dismissal as being the earlier of the date on which the contract is terminated, or the date on which the employee left the service of the employer.

When termination is on notice, the contract ends on the last day of the notice period, since this is the date on which the parties’ obligations under the contract cease.

Section 187(3) of the Labour Relations Act requires an employer contemplating retrenchment to issue a written notice inviting the other party to consult and to disclose in writing all relevant information. The proper procedure would be to go through a process of consultation and then, once a decision has been made to retrench, to give notice of dismissal.

The notice given in this case to the complainant on 23 June 2003 does not constitute a retrenchment. It is an attempt to afford prior notice of retrenchment to the employee, while at the same time giving notice that, if alternatives fail, the contract of employment will terminate on 31 July 2003. The fact that these stages were collapsed into one here does not alter the fact that the date of dismissal for operational requirements (retrenchment) was, in terms of section 190(1), 31 July 2003, since this was the date on which, alternatives having failed, the contract terminated, and it was the date on which the employee left the service of the employer.

We advised the insurer that, since the complainant had no knowledge of the retrenchment prior to the commencement date of the policy, and since the date of retrenchment fell outside of the three month period stipulated, no exclusion applies and she qualifies for the retrenchment benefit in terms of the policy. The insurer settled the claim.

SM

CR58 Cession of insurance policy as security for a debt to a bank

by Case ReportsCessionTopics & Cases

CR58

Cession of insurance policy as security for a debt to a bank – bank redeemed debt – – insurer erroneously overpaid the bank as cessionary which credited the account of the insured with the excess payment – question whether insured was unjustly enriched at the expense of the insurer or the bank

Background

The complainant had ceded her life assurance policy to a bank in order to secure an existing debt. The bank surrendered the policy, as it was entitled to do, and requested payment from the insurer. The insurer erroneously paid to the bank the proceeds of the complainant’s policy together with the proceeds of another policy not belonging to her. The bank compounded the problem by deducting the amount required to cover the debt from the combined proceeds of the two policies and thereafter crediting the complainant with the balance being an amount of R14 150. When the insurer realised the error the insurer claimed from the complainant repayment of the overpaid amount alleging that the complainant had been unjustifiably enriched. The complainant alleged that when she discovered the amount with which she had been credited she had enquired from both the insurer and the bank whether the amount was correct and both had confirmed the correctness thereof. The complainant alleged that she had in the meantime spent the money. The insurer and the bank both denied that any of their employees had assured the complainant that the amount as paid into her bank account was a correct payment.

Discussion

An enrichment action would only lie against the actual recipient of the monies wrongly paid. Our office took the position that the insured had paid the bank, as cessionary of the policy, the proceeds of the policy on the bank’s instruction with the result that the bank was the real recipient of the payment. The fact that the bank had thereafter credited the complainant’s bank account with an incorrect amount was the fault of the bank and a matter between her and the bank. The insurer therefore had to reclaim any overpayment from the bank and not from the complainant. The insurer contended that the bank had received the amount paid by the insurer as agent for the complainant and that the complainant was therefore the recipient of the excess money paid by the insurer. For this proposition we could not find any authority. We made a provisional ruling that the insurer had no claim based on unjust enrichment against the complainant because she could not be regarded as the actual recipient of the money paid by the insurer to the bank as cessionary. We suggested that there was a possibility that once the insurer had successfully reclaimed payment from the bank the bank in turn would have a claim against the complainant.

Result

The insurer was initially not disposed to accept our ruling, but eventually, albeit reluctantly, it accepted our ruling, whereupon the bank ceded to the insurer its right of action against the complainant, to recover the overpayment.

MFBR
October 2005

CR380 Policy Exclusion: death due to participation in criminal act

by Case ReportsExceptions, Exclusions And Waiting PeriodsTopics & Cases

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.

CR381 Loss of income claim – Covid19 – is a TERS/UIF payment considered “income” in terms of the policy definition

by Case ReportsCOVID 19/TERSRetrenchmentTopics & Cases

CR381

Loss of income claim – Covid19 – is a TERS/UIF payment considered “income” in terms of the policy definition

Background:

1. The policy commenced on 27 November 2017, after the National Credit Act (NCA) Regulations of August 2017 were promulgated.

2. The Policy stated:

If you become Unemployed or if you are Unable to Earn an Income during the period of insurance, other than as a result of Disability, we will pay all your obligations under the Credit Agreement that become due and payable:

  • For a period of 12 months from the date you became Unemployed or Unable to Earn an income;
  • During the Remaining Repayment Period; or
  • Until you become employed or are able to earn an income, whichever is the shorter period.

3. “Unable to Earn an Income” was defined as:

Unable or Inability to Earn an Income means you are incapable of earning an income from any occupation, work, job or business for any reason other than Disability.

4. Relying on the definition above as read with the NCA Regulations, the insurer contended that there had to have been a 100% loss of income for a claim to succeed.

5. For the months of April 2020 and May 2020, the complainant did not receive her monthly salary from her employer due to the Covid-19 pandemic. As a result, she received a benefit from the Temporary Employee/Employer Relief Scheme (TERS) for the months of April 2020 and May 2020.

6. The insurer argued that the benefit payments received from the TERS for the months of April 2020 and May 2020 constituted income earned and the complainant therefore did not suffer a 100% loss of income as required by the policy for her claim to succeed.  

Discussion:

7. The question that arose was whether the payments which the complainant received in terms of TERS for the months of April 2020 and May 2020 constituted income earned ‘from any occupation, work, job or business for any reason other than disability’.

8. The matter was discussed at an adjudicators’ meeting.

9. The meeting noted that the policy did not define “income” or “income earned”.  The meeting therefore considered the ordinary meaning of “income earned” and/or “earned income”.

10. The Collins English Dictionary defines “earned income” as “income derived from paid employment and comprising mainly wages and salaries”. 

11. The Cambridge Dictionary defines “earned income” as “money that a person or company receives for work they have done, including wages, tips, commissions, and bonuses, but not income from investments”. [Emphasis added]

12. The meeting also considered the TERS Directive issued on 26 March 2020 by the Minister of Employment and Labour, the amendments thereto, as well as legal opinions that had been obtained by the insurer and this office.

13. When one interprets parts of a document, those parts cannot be read in isolation. As Wallis JA said in Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] 2 All SA 262 (SCA) at 271 and 273:

“The present state of the law can be expressed as follows.  Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence.  Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production.  Where more than one meaning is possible each possibility must be weighed in the light of all these factors.  The process is objective not subjective.  A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document.  Judges must be alert to, and guard against, the temptation to substitute what they regard as reasonable, sensible or businesslike for the words actually used.  To do so in regard to a statute or statutory instrument is to cross the divide between interpretation and legislation.  In a contractual context it is to make a contract for the parties other than the one they in fact made.  The “inevitable point of departure is the language of the provision itself”,read in context and having regard to the purpose of the provision and the background to the preparation and production of the document.”

Interpretation of the TERS Directives:

14. The preamble of the TERS Directive issued on 26 March 2020 (hereinafter referred to as “the March TERS Directive”) states:

“During this period of lockdown, companies will have to shut down and employees laid off temporarily.  This means that employees are compelled to take leave, which is not out of choice.  We therefore anticipate that employees may lose income.  Employers are encouraged to continue to pay employees, but where this is not economically possible; we have created a special benefit under the Unemployment Insurance Fund as per the Directive Covid-19 Temporary Employee / Employer Relief Scheme.” [Emphasis added]

The purpose of the March TERS Directive is stated as:

“2.1.1   To make provision for the –

  • Payment of benefits to the Contributors who have lost income due to Covid-19 pandemic;
  • …
  • …
  • Establish the Temporary Employee / Employer Relief Scheme and set out the application process for benefits of the Covid-19 pandemic and to alleviate economic impact of Covid-19;

2.1.2    To make provision for online applications for benefits in order to avoid contact during the national disaster period.” [Emphasis added]

Clause 5 of the March TERS Directive states:

“5.        Application Procedure

            …

            5.3       An employee who is being paid by the employer during this

 period is not entitled to this benefit.” [Emphasis added]

The March TERS Directive does not refer to income earned but instead makes reference to a “benefit” or “benefits” or “special benefit”.

This was significant.

15. Clause 5.3 of the March TERS Directive was then amended by the TERS Directive issued on 11 August 2020 (hereinafter referred to as “the August TERS Directive”) as follows:

“5.3      Subject to the amount of the benefit contemplated in clause 3.5, an employee may only receive Covid-19 benefits in terms of the Directive if the total of the benefit together with any remuneration paid by the employer for work performed by the employee in any period is not more than the remuneration that the employee would ordinarily have received for working during that period.” [Emphasis added]

The August TERS Directive also did not refer to income earned but instead made reference to a “benefit” and “remuneration”.

Significantly, the August TERS Directive distinguished between the TERS benefit and remuneration paid by the employer to the employee by defining “remuneration” to mean:

“ “remuneration” bears the same meaning as the definition of the term in the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997) read with section 35(5) of that Act and the Schedule to Government Notice 69, GG 24889 of 23 May 2003”

Therefore, the definition of “remuneration” in the August TERS Directive meant, as per the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997):

“… any payment in money or in kind, or both in money and in kind, made or owing to any person in return for that person working for any other person…” [Emphasis added]

It followed that the August TERS Directive construed the TERS ‘benefit’ separately from the employee’s ‘remuneration paid by the employer for work performed by the employee’.

SARS treatment of TERS:

16. Unlike income earned, TERS benefits are exempt from tax as directed by the South African Receiver of Revenue (SARS), in its memorandum to employers dated 11 September 2020 wherein it was stated:

Income code 3724: Employees must use this code to declare any payments received by their employees from a COVID-19 Disaster Relief Organisation. These payments do NOT include payments received from the Unemployment Insurance Fund (UIF) Temporary Employees Relief Scheme (TERS).

Payment from the UIF TERS are exempt from tax and must not be reflected on the IRP5/IT3(a) certificate issue by employers to their employees.

Sources of funds for TERS payments:

17. The source of funds for the TERS benefit is the National Disaster Benefit Fund and not the employer.  If an employer cannot pay his employees due to the pandemic, it makes application to the National Disaster Benefit via the UIF. The employer is merely a conduit for payment of the TERS benefit.  The payment of TERS by the employer, does not convert the TERS benefit, payable via the UIF, to income paid by the employer for services rendered.

Conclusion:

18. In summary:

  • the TERS benefit is a benefit created by statute and not income earned from any occupation, work, job or business and/or remuneration paid to an employee for services rendered;
  • the source of funds for the TERS benefit is the National Disaster Benefit Fund;
  • the source of funds for the TERS benefit is not the employer in terms of a contract of employment;
  • TERS is a benefit paid via the UIF from the funds of the National Disaster Benefit Fund, not from the employer’s coffers;
  • the employer’s role with regards to TERS is, at best, that of a payment agent;
  • the ordinary meaning of “earned income” and/or “income earned” in the context of income earned for services rendered / work done, cannot mean passive income from TERS.

19. In light of the above, the meeting agreed that the TERS benefit did not constitute income earned and therefore could not be considered in the assessment of the complainant’s claim.

20. The meeting was also of the unanimous view that the conclusion reached above was in accordance with the principles of fairness and equity as applied by the office.

Result:

21. The insurer accepted our view and paid the loss of income claim.

CR382 Mistake, lapsing, reliance, reinstatement

by Case ReportsReinstatement of Policies or BenefitsTopics & Cases

CR382

Mistake, lapsing, reliance, reinstatement

Lapsed policy – insurer informing policyholder that if arrears paid the policy would be reinstated, and mistakenly advising that this would be without underwriting if reinstatement took place before a mentioned date – policyholder paying arrears before mentioned date – insurer invoking its mistake – policyholder entitled to enforce contract on basis of reasonable reliance.

Background:

1. The policyholder had a “key person” policy on the life of an employee.  Premiums for October and November 2017 were paid late, after the thirty day grace period. 

2. On 25 November 2017 the insurer sent the policyholder a letter advising that “Your policy has lapsed (been cancelled)”.  The letter also advised that “you may be able to reinstate the policy within 6 months”.  It stated further:

“You may be able to reinstate your policy

If you decide to pay the arrear premiums, the policy may be reinstated depending on [the insurer’s] underwriting requirements at that time.

Please speak to your financial adviser or call us to discuss your options.  You will need to apply for reinstatement within 6 months of the date of this letter”.

3. The policyholder requested that the policy be reinstated.  On 29 November 2017 a letter was sent to the policyholder’s broker (agent for the policyholder) stating as follows:

“The total outstanding amount (December 2017 premium included) is R1 479.76 to reinstate the policy without formalities.  Should the policy be reinstated after the 28th February 2018, the reinstatement will be subject to underwriting assessment”.

4. A similar letter was sent on 8 December 2017.

5. The policyholder paid the outstanding amount of R1 479.76, which included the premium for December, on 20 December 2017. 

6. The insurer then stated that it made an error in offering to reinstate the policy without formalities.  It insisted that the life insured be underwritten again before it would reinstate the policy.  The policyholder complained to our office.

Discussion:

7. We noted that the policy is silent on the issue of reinstatement.  This means that there is no right to reinstatement flowing from the policy.  An agreement on reinstatement would thus have to be reached between the parties.  There would have to be an offer and an acceptance, to constitute a binding agreement (a contract).

8. The letter sent on 29 November 2017 (paragraph 3 above) appears to be a clear offer by the insurer to reinstate, without formalities, if the total outstanding amount is paid.  The time within which payment must be made for reinstatement without formalities is not made as clear, but the implication is that it should be before 28 February 2018.

9. The policyholder paid the total outstanding amount of R1 479.76, which included the premium for December, on 20 December 2017.  In doing so the policyholder indicated acceptance of the insurer’s offer.

10. The insurer then stated that it made a mistake in offering to reinstate the policy without formalities.

11. This mistake would be regarded as causal, since according to the insurer it intended to contract on different terms, ie on the basis that underwriting would be required.  The mistake is material (essential), since it led to dissensus between the parties on a material term of the contract.

12. An essential mistake in principle means that a contract is invalid (void ab initio), because of the lack of subjective agreement. 

13. Contractual invalidity in this situation may be seen as unfair to the other party, if he reasonably believed that there was a valid contract, and the reasonable reliance approach may then come into play.

14. In accordance with the reasonable reliance approach, it must be asked whether the policyholder (the non-mistaken party) reasonably believed that there was subjective consensus between the parties.  If so, he should be able to enforce the contract despite the insurer’s mistake.  In terms of the reasonable reliance theory, the contract will be valid if the mistaken party (the insurer) created the impression that it subjectively agreed to the contract; and there was reliance on this impression by the non-mistaken party; and the reliance was reasonable.

15. In this case the insurer created the impression that it would reinstate the policy without underwriting/formalities if the arrears were paid before 28 February 2018.  The policyholder relied on this impression, paid the arrears on 20 December 2017, and attempted to pay subsequent premiums.  In our view the policyholder’s reliance in this case was reasonable.  We stated our view that the insurer should be held to the contract.

Result:

16. The insurer reinstated the policy without underwriting.

CR383 Disability claim – mineworker – hearing loss

by Case ReportsDisabilityTopics & Cases

CR383

Disability claim – mineworker – hearing loss

Group scheme claim lodged in 2017 – insured passed fitness examinations and worked on mine for ten years before being declared unfit because of hearing loss – insurer declining claim on basis insured was already unfit for his position when first employed by mine in 2007 – whether insurer declining liability was fair.

Background:

1. The complainant was employed as a miner in 2007 and became a member of the employer group scheme with the insurer.  He passed  fitness examinations and was declared “Fit” to work by the occupational health practitioner every year from 2007 until 2017.  He in fact did work for those ten years. 

2. The complainant had been compensated in terms of the Compensation for Occupational Injuries and Diseases Act (COIDA) for some hearing loss in 2006, when he was working for another employer.  This compensation was based on a percentage disability (PD) of 11%, in turn based on a percentage hearing loss (PHL) of 17% and pure tone average of 27.5 dB (which became the baseline at his entry into the job in 2007).  His hearing remained relatively stable until 2016 when deterioration took place.  An audiology test dated 3 February 2017 confirmed a PHL at that stage of 27%.  At this point, after a 10% shift from baseline, the occupational health practitioner decided to declare him not fit to work, for his own protection against any further hearing loss.  He could not be accommodated in a less noisy setting and sought payment of a disability benefit. 

3. The insurer declined the disability claim.  The insurer stated that according to the minimum standards of fitness to work on a mine issued by the Department of Minerals and Energy, a person aged 40 and above (which the complainant was in 2007) should have a pure tone average of 25 dB or less on audiometric screening.  At 27.5 dB the complainant’s level was already over this limit, and he had even been compensated for hearing loss.  The insurer’s defence was therefore that, at the time when the complainant joined the scheme on employment in 2007, he was in fact already unfit to occupy the position as a miner. 

Discussion:

4. The disability definition in the policy read as follows:

A Member shall be regarded as Disabled and entitled to his Benefit as from the expiry of the Waiting Period if, in the reasonable opinion of Momentum, injury or illness has rendered him totally incapable of engaging in his Own Occupation during the first twenty-four months of disability.

5. A clause in the policy stated: 

For those medical conditions that both impact on the Member’s ability to perform his Own Occupation safely and are governed by the Mine Health and Safety Act of 1996 and the Occupational Health and Safety Act of 1993, the Date of Disablement will be the date that the occupational health practitioner determines the Member’s medical condition to be below the mandatory requirements applicable at that date. [my emphasis]

These conditions include and are limited to:

  • Loss of vision
  • Loss of hearing
  • Epilepsy
  • Cardiac function
  • Insulin dependent diabetes; and
  • Hypertension                  

6. We put it to the insurer that an employee may be compensated more than once in terms of the Compensation for Occupational Injuries and Diseases Act (COIDA), depending on the injury/disease, and the level thereof.  Having been compensated does not in itself mean that an employee is prohibited from working.  Furthermore having been compensated cannot be seen in itself as an indication that the complainant was disabled as defined by the Momentum policy – he clearly was not totally incapable of engaging in his Own Occupation of a miner at that stage, as he did engage in it full-time for the next ten years.

7. We noted that the insurer did not appear to have requested proof of insurability at the time when the complainant became a member, and the insurer accepted premiums in respect of his disability cover for ten years.

8. We suggested that it was not for the insurer to decide after the fact (ten years later) that the complainant’s medical condition had been below the mandatory requirements at the date he commenced employment.    In terms of the policy, it is the occupational health practitioner, not the insurer, who must make the determination as to the date on which the member’s medical condition is below the mandatory requirements.  In this case the occupational health practitioner in fact certified the complainant fit to work in 2007, and each year until 2017, when the occupational health practitioner for the first time determined his medical condition to be below the mandatory requirements.

9. We examined the minimum fitness standards referred to by the insurer.  While the Department of Minerals and Energy Guideline for the Compilation of a Mandatory Code of Practice (“the Guideline”) indicated at clause 8.3.5.2.1 an audiometric standard for a person age 40 and above as “pure tone average of 25 Db  or less”, the same document also indicated at clause 8.4.1 that a discretion was afforded to the occupational health practitioner when determining fitness for work, taking into account such factors as the period of further exposure, the experience of the employee, personal protective equipment, supervision at work, etc.  An example was given at 8.4.1.3: “Where serious, permanent disablement could result, further exposure is undesirable thus eg an employee with more than 60Db average pure tone hearing loss (0,5 kHz, 1,2 and 3 kHz) is not fit to work in a noise zone at a mine”.  We pointed out to the insurer that 60Db pure tone hearing loss was considerably more than that suffered by the complainant. 

10. It was also stated at clause 8.4.1.7 that: “The OMP may consider declaring a person fit to continue working subject to certain conditions such as closer supervision and monitoring which may include reduction in exposure and more frequent medical surveillance”.

11. It was a matter of record that the complainant had been closely monitored by the occupational health practitioner at the mine, regularly received hearing loss counselling, and was compliant with the use of protective devices. 

12. It was also stated in the Guideline at clause 8.3 that “an OMP may apply more or less stringent standards depending on circumstances or risk assessment, at a specific mine.  For specific fitness requirements for job placement consult Annex 1. (Annex 1 must be complied with.)”   We noted that Annexure 1 “Schematic Guideline for Job Placement Evaluation” did not in fact make it clear, in respect of hearing, that a person may not work if they have the pure tone average hearing loss for different ages listed in Annexure 1.  The word “exclude”, employed for other conditions in Annexure 1, was not used in respect of hearing loss.

13. The South African Society of Occupational Medicine Guideline “Audiometry in the Workplace” (2011 Revision) stated at clause 6.11 that “Workers should preferably be removed from the noise area when their PLH is more than 15%, but definitely at more than or equal to 30%”. [my emphasis]  This underlined the use of discretion by the occupational medicine practitioner. 

14. In the context where the occupational medical practitioner had exercised a discretion to declare someone fit to work although he had mild (and compensable) hearing loss in 2007, and to continue to declare him fit annually until his hearing loss deteriorated to such a degree that he no longer considered him fit to work in 2017, we argued that it was unfair for the insurer to deny liability once disability and a date of disability had been determined by the occupational health practitioner to be in 2017, on the basis that the degree of hearing loss fell below a certain standard in 2007.

15. It appeared that it was the insurer’s argument that the employer/ occupational health practitioner should not have allowed the complainant to work, because of the level of his mild hearing loss in 2007.  The implication was that his recourse would thus be against his employer.  We stated that if that was the argument, the result was inequitable.  The complainant would clearly not be in a position to sue his employer for having employed him for the last ten years, and it was fanciful to suppose that the employer would agree to pay him a salary for the next four years now that he was considered disabled, despite having insured itself against such an eventuality. Having rendered service for ten years, with premiums having been paid to cover him for disability, the complainant would in all likelihood, despite being disabled, be without an income for the four years until his retirement date.

16. We stated our view that, taking into account all the factual circumstances and evidence, as well as considerations of equity, the claim should be paid.

Result:

17. The insurer agreed to pay the claim.

CR384 Delay in payment; interest; in duplum rule

by Case ReportsDelayInterest on Late PaymentsTopics & Cases

CR384

Delay in payment; interest; in duplum rule

Background:

1. The policy commenced on 1 July 1995. It covered life, capital disability and a double accident (as defined) benefit each at R48 176.

2. The life insured Mr. V, a Police Officer, passed away as a result of a gunshot wound to the head on 27 January 2000.

3. The beneficiary, the deceased’s brother, also, Mr. V submitted a claim and was paid the life cover benefit of R56 892.32 on 12 April 2000.

4. The information at the disposal of the insurer indicated that the death was as a result of suicide and they declined the double accident benefit. However, new information was submitted later on 6 September 2018 and on 11 September 2018 the insurer paid the beneficiary the double accident benefit of R48 211.32, which included interest of R35.32.

5. One of the issues that had to be determined was the consideration of interest on the delayed payment of the accident benefit. The insurer was alerted in this regard to paragraph 23 of the revised practice note on the payment of interest as follows:

“The foundation of Rule 3.2.6 is equity. When the issue of interest arises as a result of late payment, considerations similar to unjustified enrichment could be indicative of where the equities lie. Where the insured/beneficiary has a claim that became due on a particular date, but payment of the claim is deferred, the effect is that the insurer enjoys the benefit of the use of the money due to the insured/beneficiary at the expense of the latter.”

6. The complainant was aggrieved about the interest of R35.32 citing that his brother had passed away in 2000 and the accident benefit was only paid in 2018, while the insurer’s argument was that they only became aware that the cause of death was an accident and thus that a double benefit was due, as opposed to suicide, in September 2018 after which they made payment within a week.

7. Our office did a provisional ruling dated 26 August 2019 finding that the insurer should pay interest on the accident benefit, with effect from 1 April 2000, when the claim for the life cover benefit was finalized, as the insurer had the use of the funds. The interest amounted to R104 297.06 according to a calculation submitted to our office by the insurer on 23 July 2019 but later retracted as not applicable in this matter. 

8. The insurer made further submissions in terms of the provisional determination, offering 50% of R104 000 and citing the in duplum rule, that, in their opinion applied, whereby the interest component should be capped to the (outstanding) capital amount. The offer was a settlement amount of R52 000to be paid on an ex-gratia basis.

9. The complainant declined the settlement offer.

10. The office decided to obtain an independent legal opinion on the application of the in duplum rule on interest on benefits, as opposed to interest on loans.

11. The legal opinion concluded that interest should be capped at the capital amount of the benefit.

12. The matter was submitted to an adjudicators’ meeting where it was decided as follows:

  • The ex-gratia offer of R52 000 made by the insurer was reasonable.
  • Our office agrees with the legal opinion provided to our office by an independent legal consultant that, with application of the in duplum rule, the offer exceeds the capital benefit, and that the interest due, whether in mora or not, had stopped accruing when it reached the capital amount.
  • As the amount offered is in excess of the capital amount, the dates from when the interest should run is deemed irrelevant.

13. The complainant expressed that he remained aggrieved that the interest did not run from date of death but accepted the office’s decision. He was paid R52 000 in interest and the file was closed.

CR18 Death claim rejected due to insurer’s reliance on pre-existing exclusion clause

by Case ReportsTopics & Cases

CR18

Background

The deceased’s credit life policy commenced on 6 June 2002. He died on 2 August 2002 as a result of cardiac arrest.


The insurer declined the claim due to its reliance on the pre-existing exclusion clause featuring in the policy terms and conditions. It stated that the deceased had suffered from diabetes mellitus prior to the commencement of the policy which contributed to the cause of death.


The office initially supported the insurer’s decision and the executor of the estate accepted the decision. The deceased’s son however did not accept our decision on the basis that he alleged that his father was never diagnosed with diabetes mellitus.


Assessment

In support of its decision, the insurer initially submitted a PMA report from the deceased’s doctor who confirmed at the outset that diabetes mellitus was diagnosed on 2 May 2002 and that diabetes mellitus contributed to the cause of death. Such a diagnosis was subsequently denied.


Further medical information revealed that, one month prior to his death, the deceased suffered from symptoms of high blood sugar and a fingertip test was done indicating a glucose reading of 12mmg/ml. A change in diet was recommended at this stage. A day before the death the glucose reading was 4mmg/ml.

Further information received at dale of death stated that the immediate cause of death was cardiac arrest with aorta aneurysm and arteriosclerosis as underling causes of death. The insurer advanced that diabetes is a known risk factor for Arteriosclerosis.


In view of the conflicting medical information and the medical nature of the complaint, the matter was referred to an independent specialist for an opinion. The specialist upheld that, on a balance of probabilities, diabetes mellitus was a contributory cause of death. He advanced that this decision firstly required a diagnosis of diabetes mellitus before the commencement of the policy. This was confirmed by the deceased’s doctor reporting that symptoms of high blood sugar were experienced a month before the commencement date. Secondly, he reported that diabetes mellitus is a known risk factor in coronary thrombosis as well as arterial disease elsewhere in the body.
The insurer’s decision was upheld.

AR