CR308 Exceptions, Exclusions and Waiting Periods

Exceptions, Exclusions and Waiting Periods CR308

Exclusion c lause –causation – clause requiring that the claim event must be “as a consequence of” the pre-existing condition – must therefore be the proximate cause – meaning of.

1. In this case the complaint arose out of a life policy also covering hospital expenses. The policy commenced on 1 May 2009, and it contained a pre-existing condition exclusion clause. The complainant stood on a rusty nail on 27 January 2010, the wound developed sepsis, and he was admitted to hospital on 30 January where on 11 February his right lower leg was amputated below the knee. His claim for the hospital expenses was rejected by the insurer on the basis of the exclusion clause.

2. The relevant portions of the clause provided that –
“Hospitalisation as a consequence of pre-existing conditions as defined herein … will not be covered. “

and for this purpose it defined “a pre-existing condition” as a –

“Sickness … contracted by an insured person … which existed prior to the initial commencement date of (the) policy”.

3. It was not in dispute that the complainant had been a diabetic for 16 years, and in relying on the exclusion clause the insurer’s contention was that for its purposes his diabetes as a pre-existing condition had been the cause of his hospitalisation.

4. Vital to the solution of the dispute was that the pre-existing condition exclusion clause did not for its application require that the condition must be “a direct or indirect” cause, as some such clauses are worded. On the contrary, its wording required only that the claim event must be “as a consequence” of the pre-existing condition for the exclusion to apply, which meant that the pre-existing condition would have had to be the main cause, sometimes called the dominant, or proximate, or actual or effective cause, and not simply a lesser contributory cause.

5. That much is clear from the following summary in the work Life Insurance In South Africa by Nienaber and Reynecke (at 13.15 to 13.16) –
“15. The determination of causation involves a two-step process. First, factual causation must be established by means of the process of elimination known as the “but-for” test (known to lawyers as the conditio sine qua non approach). A causal link is present, according to this test, if one fact (for example the injury) would not have ensued if another fact (for example the accident) had not preceded it. Eliminate the accident and the insured would not have been injured. Hence the accident is the cause of the injury.

16. Once factual causation has been established the second step is to determine whether there is in law a sufficiently close connection between the cause and its proven consequence. In the insurance context the so-called proximate cause approach to legal causation is considered to be in accordance with the intention of the parties. A fact is the proximate consequence of an alleged cause if it can be described as the dominant, direct, actual, effective, determining or operative cause of that consequence. If the connection is merely indirect and fortuitous it is not proximate. ”

6. See also the leading case of NAPIER v COLLETT AND ANOTHER 1995 (3) SA 140 (AD) where the following was said (at 143 F-H) –
“The theoretical consequences of an act stretch into infinity. Some means must be found to limit legal responsibility for such consequences in a reasonable, practical and just manner … The traditional view in insurance law is set out as follows in Incorporated General Insurance Ltd v Shooter t/a Shooter’s Fisheries 1987 (1) SA 842 (A) at 862C-D … (W)hen there are two or more possible causes … the proximate or actual or effective cause (it matters not which term is used) must be ascertained, and that is a factual issue … (A)n earlier event may be a dominant cause in producing the damage or loss; it may be the causa sine qua non but the issue is, is it the causa causans? … “

and (at 144 A -E) the following was added –
“ The justification for the proximate cause rule is that it reflects the presumed intention of the parties to an insurance contract …
The effect of these various authorities … is equally applicable to insurance law. Its application will of course be subject to the provisions of the particular insurance policy in question … The initial enquiry will normally be whether there is ‘factual causation’. …If this initial enquiry leads to the conclusion that the prior event was a causa sine qua non of the subsequent one, the further question arises, viz whether there is a sufficiently close relationship between the two events to constitute the former the legal cause of the latter.”

7. Finally, it was put as follows by the Appeal Tribunal in an appeal against one of the office’s determinations:
“Questions of causation usually arise where several factors, concurrently or successively, contribute to a single result and it is necessary to decide whether any particular one of them is to be regarded legally as a cause (see Concord Insurance Co Ltd v Oelofsen N.O. 1992(4) SA669(A) at 673 – 4). Generally, and subject to the terms of the policy, the insurer is only liable for losses proximately caused by the peril covered by the policy. In MacGillivray on Insurance Law (11th Ed, 19-001, page 513) it is said that

“A proximate cause is not the first, or the last or the sole cause of the loss: it is the dominant or effective or operative cause”.

A similar view was expressed in Incorporated General Insurances Ltd v Shooter 1987(1) SA842(A) at 862D:

“No difficulty arises when only one cause has to be considered. The difficulty arises when there are two or more possible causes. In such a case the proximate or actual or effective cause (it matters not which term is used) must be ascertained and that is a factual issue.”

Finally in this regard, it may be observed that in Aswanestaal CC v SA Eagle Insurance Co Ltd 1992(1) SA662(C) at 665 B – C it was said that the proximate cause of a result in an insurance policy is determined by

“the application of a common sense standard”, the question being what was the effective and predominant cause of the event.”

8. In the insurer’s email to our office it was stated that “the cause of hospitalisation was due to sepsis”, and that the complainant’s diabetes was a “contributing factor” to the sepsis. Both of these statements were of course correct, but the submission that followed was that his standing on a nail had not been the direct cause of his admission to hospital.

9. The office’s unanimous view was, however, that the diabetes had not been the proximate cause of the hospitalisation. In the Certificate of Medical Attendant that accompanied the claim, the doctor concerned said, in response to the question “Direct cause of hospitalisation?” that it was “Right foot sepsis after standing on a rusted nail”, and in answer to the further question “What are the contributing factors that led to hospitalisation?” he said that it was diabetes and hypertension. Those two answers alone made the matter clear – it was the sepsis (after standing on the nail) that was the direct cause of the hospitalisation, and the diabetes was only a contributing cause.

10. The main cause was therefore not the complainant’s diabetes. On the contrary, it is clear that had he not stood on the rusty nail, and had he not thereafter developed the sepsis he did, there would have been no question of hospitalisation.

11. In these circumstances the clause did not serve to exclude the insurer’s liability.

12. This was a preliminary determination which the insurer thereafter accepted.

March 2011