CR177

Delay – complainant instituting a claim against a policy after the surrender/lapse of the policy concerned

Background

More or less the same point surfaced in two recent cases.

In the first case the complainant’s policy offered life, accidental death and occupational disability cover. In June 2000 the complainant was shot and injured. In August 2001 he surrendered his policy. In June 2006 he lodged a disability claim with the insurer and, when it was declined, with the office, his explanation being that it was only then that he was in a position to prove that he was fully disabled as required in terms of the provisions of the policy. Had he submitted his claim before surrendering the policy he would not have qualified, so he contended, as being permanently disabled.

In the second case the complainant’s policy also offered occupational disability cover. In January 1998 the complainant was injured in a motor vehicle accident. The policy lapsed in December 1999. In February 2006 the complainant lodged a disability claim with the insurer.

Discussion

It was the view of our office that in each case there were two insurmountable obstacles to the complainants’ chances of success: first, the surrender or lapse of the policies, and secondly, the inordinate delay before the complainants lodged their claims both with the insurers and with us.

As to the first obstacle we postulated two scenarios: the complainants either had accrued claims before the surrender or lapse the policies or they had not.

If one accepts the first scenario, namely that the complainants had accrued claims in terms of their policies prior to the surrender/lapse thereof, the insurer would have been entitled to rely on our rule 2.2.3 since three years or more had lapsed from the date on which the complainants became aware or should reasonably have become aware that they had cause to complain to the office.

We took note of the reasons advanced by the complainants for not instituting their claims in time (e.g. that they were in no mental state to prove anything to anyone, that they were in a situation of extreme diminished capacity, and that they were suffering trauma). However sympathetic one may feel towards the complainants, we did not regard the reasons given to be sufficient explanations for the long delay, the better part of six years, before their complaints were lodged with the office.

Turning to the second scenario, the complainant, in the first case, argued that he only become permanently disabled (as contemplated by the policy) in June 2006 and that he could accordingly not prove permanent disability in terms of the policy.

In the second case the complainant argued that he only became aware of the permanence of his disability in March 2003 and hence could not have lodged a claim prior to that date. What both complainants were in effect saying was that they did not have accrued claims prior to the surrender/lapse of their respective policies and therefore could not have lodged claims with the insurer at the time.

We argued that if neither had an accrued claim prior to the surrender/lapse of their policies and their claims only conformed to the critical definitions therein after the surrender or lapse of the policies, it would follow that the insurers, because the policies had earlier come to an end, were no longer at risk when their claims finally accrued; consequently the insurers were not liable for the claims for disability benefits. The fact that the incidents that gave rise to the claims took place when the policies were still in force was not conclusive for determining liability on the insurer’s part. The complainants had to have had valid claims in terms of the policy definitions at a time when the insurers were still at risk for liability to ensue.

Result

Since the complainants did not have valid claims prior to the termination of their policies (as by their own admission, permanence of the disability could only be established thereafter), the insurers were justified in denying liability for the disability claims which only arose when the insurers were no longer at risk. Both complaints were accordingly dismissed.

AS
November 2006