Disability CR304

Disability claim under credit life policy – complainant also member of pension fund – not disabled as defined in credit life policy, but disabled for purposes of pension fund.

Background
Mr K became a member of a pension fund by virtue of his contract of employment. In 2009 he lodged a claim with the fund for a total and permanent disability benefit and his claim was admitted and paid out by the fund. The fund deducted an amount of R220 831.21, however, in respect of an outstanding home loan balance in terms of the provisions of the Pension Funds Act 24 of 1956.

Mr K was aggrieved by the aforesaid deduction because he also had a credit life policy in respect of his housing loan. His claim under the credit life policy was declined by the insurer, however, on the basis that he was not “totally and permanently disabled” as defined in the credit life policy document.

The position was therefore that the pension fund had accepted that he was totally and permanently disabled, but the insurer under the credit life policy considered that he was not. Mr K accordingly complained to our office.

Discussion
The insurer’s decision was supported by the medical report compiled by an OT who concluded that although Mr K was unable to perform in his own occupation as a sales representative he had the necessary cognitive and vocational skills to fulfil the position of a telesales consultant if his condition was managed better. The insurer submitted that the fact that Mr K’s claim had been admitted by the fund did not necessarily mean that his claim must be admitted by the insurer.

The definition of total and permanent disability quoted above had a second part, however, which stated as follows:
“Notwithstanding the above, the insurer agrees to follow the underwriting decision taken by the principal underwriter in terms of the risk benefit policy to the rules governing the pension or provident fund of the Client.”

By the provision the insurer had agreed to be bound by the decision of the pension fund, and we pointed out that the insurer had overlooked it. Our view was that the insurer should have admitted Mr K’s claim given the fact they had contractually agreed to follow the decision taken by the pension fund in terms of its rules.

Result
The insurer agreed with our view and settled the claim accordingly.

NS
March 2011