CR290
Non-disclosure

Pre-existing conditions – whether insured had failed to disclose relevant information.

BACKGROUND

In June 2006 the complainant’s wife (“the deceased”) applied for and was issued with a R2 million life policy. She passed away in November 2006 as a result of SLE (lupus), an auto immune disease. In the period preceding the application for the policy she had consulted a specialist surgeon and a specialist physician, and tests had been done by a pathologist. After a series of consultations when the deceased had complained about hypertension, the specialist physician had suspected SLE in December 2005, and the pathologist’s tests, conducted earlier in 2006, indicated signs of polmyositis and SLE. While no definite diagnosis had yet been made, these features showed at least that SLE was suspected. When applying for the policy in June 2006, however, the deceased did not disclose either that the specialist physician had suspected SLE, or the results of the tests that had been done by the pathologist. All she disclosed was her hypertension.

The insurer repudiated the death claim, relying on the abovementioned information and on a letter from the deceased’s doctor furnished at the time of her death. In the letter the doctor stated that the deceased’s symptoms in August 2006 “had been evolving over the previous six months”, which of course confirmed that the deceased would have had these symptoms prior to the inception of the policy. The insurer stated that had it known about the possibility of an SLE diagnosis, it would have deferred the deceased’s policy application until a definitive medical conclusion was reached. The complainant claimed, however, that the doctors she consulted before taking out the policy had never informed the deceased of the suspected SLE.

DISCUSSION

An insurer has the right to cancel a policy in the case of a mis- or non-disclosure by a proposer, if it is material. As to the question of materiality the office relied on section 59(1)(b) of the Long-term Insurance Act, 52 of 1998, which states that:

“The representation or non-disclosure shall be regarded as material if a reasonable, prudent person would consider that the particular information should have been correctly disclosed to the insurer so that the insurer could form its own view as to the effect of such information on the assessment of the relevant risk”.

A provisional ruling was made that a reasonable, prudent person in the position of the deceased would have considered it necessary to disclose:
• that the specialist physician had expressed the opinion that she may have SLE even if no final diagnosis had been made;
• that the specialist physician and the pathologist had made it known to her that positive markers of SLE were found in her blood;
• that she had consulted a specialist surgeon;
and that these non-disclosures had therefore been material.

The complainant was not satisfied with the ruling. He questioned the specialist physician’s statement that she had informed the deceased of the suspected SLE diagnosis. He in any event argued that the nature of SLE is such that the diagnosis is a very complex process – the symptoms mimic other illnesses and a diagnosis would require a careful review of the patient’s entire medical history together with an analysis of results obtained in routine laboratory tests; he complained that the specialist physician had not done this but had simply based her suspicion of an SLE diagnosis on the blood tests.

CONCLUSION

A final determination was made by the office which confirmed the provisional ruling. We found that on the probabilities the deceased would have been informed by the specialists of their views. We explained to the complainant that a definitive diagnosis of SLE was of itself not decisive. What we stressed was the deceased’s failure instead to disclose such information as she had received from the specialist physician, which would have alerted the insurer at least to the possibility that she may have SLE. The application form had in any event posed the specific question:
“Is there predisposition to any complaint or are there any circumstances not disclosed above, however trifling, connected with your past or present state of health which may affect future state of health or susceptibility to injury?”

and we underlined the fact that the deceased’s negative answer was incorrect, and that a reasonable person would have disclosed the abovementioned information as being relevant to the assessment of risk.

The complainant was not satisfied, and applied for leave to appeal against the decision. The Ombudsman was of the opinion, however, that there was no prospect of success in an appeal and declined the application.

JP/BG
October 2009