CR347
Non-disclosure

Complainant failing to disclose relevant medical condition – cover granted on standard terms – complainant subsequently disclosing diagnosis in servicing alteration application – was the underwriting agent’s failure to notice the “change of health” disclosure inadequate underwriting?

Background

The complainant had at application stage failed to disclose that two months before applying for cover he had been diagnosed with BMD (bipolar mood disorder), and cover was granted on standard terms. Five months after inception of cover he applied for an increase in the cover amount (as his occupation and salary had changed) and for this purpose completed a servicing alteration form. In that form, in response to a question whether he had experienced a change of health since policy commencement, he purported to disclose the previously undisclosed medical condition. Two different underwriting agents in the insurer dealt with the application. The first had noted the change in occupation and the “change in health” but had only asked the complainant to complete an occupational questionnaire. Somehow its second underwriting agent only concentrated on the occupational questionnaire and overlooked the “disclosure” of the BMD. Increased cover was granted without any underwriting and on standard terms.

It was about three months later, when the complainant submitted a claim, that the insurer became aware of the non-disclosure and its subsequent error of having granted increased cover without any underwriting despite the purported disclosure on the servicing alteration form. The claim was repudiated and the policy reconstructed. The complainant insisted that as he had “rectified” his earlier non-disclosure by making the disclosure via the servicing alteration form, the insurer should meet his claim in the increased cover amount. He further argued that he had reasonably relied on the insurer’s “decision” to grant an increase of his cover without underwriting, and had believed that the earlier non-disclosure had thereby been rectified.

Discussion

We accepted the insurer’s explanation that, since the servicing alteration had not been dealt with by only one underwriting agent and the first one had noted the change in health and in occupation and had requested the complainant to complete an occupational questionnaire, the second underwriting agent was not negligent in only noting the occupational changes and reviewing their impact on the risk. We further held that if a long period of time had passed between the date of commencement of cover and the date on which increased cover was applied for, the underwriters would have been expected to exercise greater caution and to be on guard in dealing with the application.

Decision

We upheld the insurer on the basis that had there been no non-disclosure at application stage, the insurer’s subsequent error at servicing alteration stage would probably not have occurred. We further found that the purpose of completing the servicing alteration form was in fact to apply for increased cover rather than to cure the initial non-disclosure.

We, however, expressed displeasure at the inconvenience caused to the complainant by making a compensatory award against the insurer in the amount of R30 000, because on the insurer’s mistake the complainant had cancelled a policy he had with another insurer which he had taken out before the BMD diagnosis and which had offered him better income continuation cover than the reconstructed policy.

Result

The insurer paid the compensatory award.

CNN
February 2013

CR347
Underwriting

Complainant failing to disclose relevant medical condition – cover granted on standard terms – complainant subsequently disclosing diagnosis in servicing alteration application – was the underwriting agent’s failure to notice the “change of health” disclosure inadequate underwriting?

Background

The complainant had at application stage failed to disclose that two months before applying for cover he had been diagnosed with BMD (bipolar mood disorder), and cover was granted on standard terms. Five months after inception of cover he applied for an increase in the cover amount (as his occupation and salary had changed) and for this purpose completed a servicing alteration form. In that form, in response to a question whether he had experienced a change of health since policy commencement, he purported to disclose the previously undisclosed medical condition. Two different underwriting agents in the insurer dealt with the application. The first had noted the change in occupation and the “change in health” but had only asked the complainant to complete an occupational questionnaire. Somehow its second underwriting agent only concentrated on the occupational questionnaire and overlooked the “disclosure” of the BMD. Increased cover was granted without any underwriting and on standard terms.

It was about three months later, when the complainant submitted a claim, that the insurer became aware of the non-disclosure and its subsequent error of having granted increased cover without any underwriting despite the purported disclosure on the servicing alteration form. The claim was repudiated and the policy reconstructed. The complainant insisted that as he had “rectified” his earlier non-disclosure by making the disclosure via the servicing alteration form, the insurer should meet his claim in the increased cover amount. He further argued that he had reasonably relied on the insurer’s “decision” to grant an increase of his cover without underwriting, and had believed that the earlier non-disclosure had thereby been rectified.

Discussion

We accepted the insurer’s explanation that, since the servicing alteration had not been dealt with by only one underwriting agent and the first one had noted the change in health and in occupation and had requested the complainant to complete an occupational questionnaire, the second underwriting agent was not negligent in only noting the occupational changes and reviewing their impact on the risk. We further held that if a long period of time had passed between the date of commencement of cover and the date on which increased cover was applied for, the underwriters would have been expected to exercise greater caution and to be on guard in dealing with the application.

Decision

We upheld the insurer on the basis that had there been no non-disclosure at application stage, the insurer’s subsequent error at servicing alteration stage would probably not have occurred. We further found that the purpose of completing the servicing alteration form was in fact to apply for increased cover rather than to cure the initial non-disclosure.

We, however, expressed displeasure at the inconvenience caused to the complainant by making a compensatory award against the insurer in the amount of R30 000, because on the insurer’s mistake the complainant had cancelled a policy he had with another insurer which he had taken out before the BMD diagnosis and which had offered him better income continuation cover than the reconstructed policy.

Result

The insurer paid the compensatory award.

CNN
February 2013