• Rescission – partial – claim for disability benefit – non-disclosure of back problems – cancellation of entire policy – whether contract divisible.

Mr B obtained his policy in 1994. The policy provided universal life cover of R60 000 and disability cover in the amount of R30 000. Separate premiums for each benefit were charged. The insured failed to disclose pre-contractual consultations for back problems. In 2003 the insured submitted a claim under the capital disability benefit but the insurer rescinded the entire transaction and refused to pay the claim.

The misrepresentation clearly affected the disability benefit only although there was no such concession by the insurer.

The crisp issue was whether the insurer was entitled to rescind the contract in its entirety or whether it should only be entitled to ask for a reduction of the insured’s benefits. If the insurer could only ask for a reduction of the insured’s benefits, the continued existence of the contract would not be affected; life cover would therefore have continued.

The office negotiated with the insurer and the insurer eventually offered the insured, “in full and final settlement” and on an ex gratia basis “the surrender value of the policy” as at the date of rescission thereof. Mr B accepted the offer.

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