C70

Disability – notification claim – contractual limitation of period within which insurer must be notified of “…any event which may give rise to a claim – circumstances under which it may not be reasonable for an insurer to rely on such a limitation.

Background

The claimant was covered in terms of a group income insurance scheme which provided disability benefits.

The contract contains a clause which reads “(Insurer) must be notified in writing of any event which may give rise to a claim, within 3 (three) months of the happening of the event. (Insurer) will not be liable to pay a benefit in terms of this policy until such notice had been received. Failure to notify (insurer) within the stated period may, at (insurer)’s discretion, invalidate the claim”.

The complainant consulted his general practitioner on 4 October 2001 with symptoms described as work stress with panic attacks. He was referred to a clinical psychologist and was given a medical certificate which stated that he was unfit to work from 4/10/2001 to 01/11/2001. Tranquilisers and sleeping tablets were prescribed. The clinical psychologist reported on 19/11/2001 that the claimant should continue with his medication and should receive psychoterapy on a regular basis. His condition would be monitored and reconsidered at the end of November 2001. The general practitioner provided a further medical certificate in which he confirmed that the complainant was disabled to work but would be able to resume duty on 1/12/2001. The clinical psychologist confirmed that his condition improved on medication but he suffered a setback during the Christmas season and consulted the clinical psychologist again on 14/01/2002. In the light of the observations made at that stage, the clinical psychologist expressed the opinion that he was at that stage unable to resume work and that his prognosis on a short and medium term was not good. He advised sick leave for an undetermined period. The claimant was then referred to a psychiatrist who certified on 4 June 2002 that “I feel that he has a poor prognosis and he should be considered to be medically disabled”.

The insurer confirmed that they were notified of the claim in May 2001 but only received the medical specialist statement in support of the claimant’s medical condition in August 2002. The insurer refused to consider the claim as they contend that it was “well outside the three month notification period”. According to the insurer, the three month period is to be calculated from “last date of active service”. This is, however, not based on a provision in the contract.

Assessment

The specific wording of the clause quoted above is relevant with regard to the rights and obligations in issue.
The obligation imposed on a claimant is that the insurer is to be notified of – “any event which may give rise to a claim”. It was our opinion that it would not be equitable to interpret this obligation to apply to the occurance of an event if the person on whom the obligation is imposed was not or could not reasonably have been aware at the time of the occurance that it may give rise to a claim. It would, therefore, be appropriate to determine when the person who was obliged to notify the insurer was aware of or ought reasonably have been aware that a specific event may give rise to a claim.

Although the claimant was absent from work due to medical reasons and in accordance with medical certificates by his general practitioner from 4 October 2001 such information does not indicate the probability of total disability at that stage. The medical practitioner indicated on his certificate that his patient would be able to resume work within a reasonable time. The symptoms experienced and conditions diagnosed were not so that it implied knowledge that it may give rise to a claim. We informed the insurer that it is our perception that the consultation with the clinical psychologist on 14 January 2002 and the referral to a psychiatrist would on equitable grounds, be deemed to be the date on which it may reasonably have been expected that the claimant knew or ought to have known that his condition may give rise to a claim.

The insurer responded that an important motivation for the inclusion of the time limitation clause in the contract was that the insurer should be informed at the earliest possible opportunity in order to be able to evaluate and probably suggest alternative methods of treatment. Whilst there are merits in this argument, it remained or perception that in this particular instance the claimant could not at an earlier stage, reasonably have expected that his symptoms would culminate in a permanent condition.

Result

The insurer offered to pay an ex gratia amount in full and final settlement of all issues in respect of the particular contract. The offer was accepted.

EdeB
October 2005