CR349
Dread disease / Equity
Claim for impairment and/or dread disease benefit on grounds of dysfunctional colon disease – claim not meeting policy criteria – claim settled for 50% of sum assured on basis of equity
Background
1. The complainant had a dysfunctional colon, and had several surgical procedures over about five years. A nerve stimulator was inserted and this led to improvement in her symptoms but left her with severe pain and discomfort. Her surgeons were reluctant to remove it because of the possibility of spinal cord injury. Eventually she had a colectomy and colostomy which severely limited her lifestyle. She also developed a hernia around the stoma. She had not worked for the last five years.
2. The complainant’s claim for an impairment benefit and/or a dread disease benefit was repudiated by the insurer, on the grounds that her condition did not fall within the ambit of any of the covered conditions on her policy. She lodged a complaint with our office.
Discussion
3. The impairment benefit was payable if the life assured was permanently impaired “as defined in one of the benefit categories” in the policy. The full sum assured for the impairment benefit was R2 million.
4. The condition under the Digestive System which was relevant was the “Lower Gastrointestinal Tract”. The definitions and criteria for this benefit included persistent fever, inappropriate fatigue, sustained weight loss and signs due to inflammation. 50% of the sum assured was payable for moderate to severe exacerbations with severe pain and being more than 15% below desirable body weight (BMI of 19), and 75% was payable for unremitting severe symptoms uncontrolled by medical treatment and being more than 20% below desirable body weight.
5. The complainant did not meet all the criteria necessary, in particular the criterion of being more than 15% below desirable weight; her weight had actually increased over recent years and she had a BMI of 31.
6. The dread disease benefit “provides cover for people who are concerned about the financial burden of an illness or injury”. The benefit was payable for certain stipulated conditions under the specified bodily systems. The full sum assured was R1 million. The contract made it clear that “it is essential that the condition diagnosed fully complies with the applicable definition”.
7. Under “Gastrointestinal System” the conditions covered were Crohn’s Disease, Ulcerative Colitis and Pancreatic Disorders. The complainant’s condition was not any of these. There was no other bodily system under which her condition fell.
8. The policy did, however, make provision for a “Catch-All” dread disease benefit category. This was payable if:
“The Life Assured is assessed as suffering from a serious physical condition that is considered to be of equivalent severity to a condition that would qualify for a 100% payout under another benefit category. The degree of impairment must result in a Whole Person Impairment of at least 35% and meets the Class 4 impairment criteria specified for the relevant system(s) in the AMA Guide, in order to qualify for a payment under this benefit category”.
9. The policy specifically referred to the Whole Person Impairment (WPI) concept, “as published from time to time in the American Medical Association’s (AMA) ‘Guidelines to the Evaluation of Permanent Impairment’”. This incorporates a complex scoring system for different conditions and allows for objective standards to be applied.
10. The insurer calculated the WPI as 23%, thus below the 35% required for a benefit.
11. We asked the insurer to provide us with the worked calculation, and then provided this to the complainant’s doctor. On his calculation, including the hernia problem, the WPI was 29%. The insurer stood by its decision, as this was still below the required 35%.
12. We accepted that the complainant’s condition did not meet the criteria under any of the impairment benefit or specified dread disease categories. However we requested that the insurer reconsider the case on equitable grounds.
13. We noted that one of the criteria for the dread disease Catch-All benefit was that the life assured be suffering from a serious physical condition considered to be of equivalent severity to a condition that would qualify for a 100% payout (R1 million in the complainant’s case) under another benefit category. We pointed out that 100% was payable for Crohn’s Disease or Ulcerative Colitis “requiring permanent colostomy or ileostomy”. While the complainant did not have these diseases, she had a permanent colostomy, and this was certainly a marker of severity of the burden of her illness. We noted further that the insurer had not disputed that the addition of the hernia would place the WPI at 29%, which was not far from the Catch-All requirement of a 35% WPI.
14. According to her doctors, the complainant had severe dysfunctional colon disease with an end stage colostomy. As she was unable to
work she had obviously suffered a financial burden from her illness, against which the policy was, according to its terms, designed to provide cover. We accepted that the Catch-All benefit did not provide for any graded levels of severity, but stated that in our view the criteria for this category indicated a degree of discretion/flexibility in the assessment. We asked the insurer to consider making an ex gratia payment, of all or part of the sum assured.
Result
15. The insurer responded that, while it still did not believe there was any claim as it did not meet the dread disease criteria stipulated in the policy, “in terms of equity” it was prepared to offer a concession payment of 50% of the sum assured to the complainant as a full and final settlement.
16. The complainant accepted the offer, and was paid R500 000.
SM
September 2014
