Life Ombud : Case Reports

The following are some Case reports provided by The Ombudsman for Long Term Insurance.

Case 1

The complainant was the life insured under a policy which his wife had taken out in 1993. They were subsequently divorced and she maintained the policy. At some later stage she ceded it outright to the intermediary who had originally sold the policy to her, and who appears to be related to her.

When he became aware of it the complainant complained to us about a third party owning a policy on his life. He also complained about the insurer’s refusal to provide him with any information about the policy. What he wanted was that the policy be cancelled, saying “In this day and age when contracts are being taken out on individuals I feel very uneasy”.

We ruled that, because he was not the policyholder, he had no right either to be furnished with information about the policy or to cancel it.

When applying for the policy his wife had had an insurable interest in his life, which is the only stage at which an insurable interest has to be established. The law does not require that a third party who subsequently takes cession must also have an insurable interest.

Although we had sympathy for his dilemma we ruled that we could not assist him.

BG

10 April 2008

Case 2

In a rather unusual case we made a provisional determination based on equity in favour of the complainant. The complainant was covered by a policy which provided for sick pay benefits. She was hospitalised and off work for a month on account of surgery whereby a kidney was removed for donation to her brother. He was in end stage renal failure and the average five year life expectancy of a patient in his condition was about 25%. She had approached the insurer before the surgery, and the insurer indicated that it would not pay her the benefit because the contract excluded liability if the sickness concerned is attributable to “………excessive indulgence in liquor or drugs, immorality or disorderly conduct, intentionally self-inflicted or intentionally self-induced illness.” The insurer considered that the “illness” after the donation of her kidney would be “intentionally self-inflicted or intentionally self-induced”.

The complainant, who was the only suitable donor available, nevertheless underwent the surgery, and in time claimed the benefit for the month concerned. The crucial question was what meaning had to be attributed to the words “intentionally self-inflicted or intentionally self-induced illness”. We pointed out to the insurer that exceptional circumstances could arise where a literal interpretation would have unsatisfactory results. Although the interpretation was debated at length it did not lend itself to a resolution of the complaint.

We then asked the insurer whether it would consider making an ex gratia payment. It declined to do so, saying that its position would thereby be compromised in the event of similar future claims.

After considering the case at an adjudicators’ meeting our unanimous decision was that the insurer should pay the benefit. We considered that this was a clear case where equity should prevail over the normal rules of the law which would otherwise not provide a satisfactory solution. Equity is not a well defined concept, but it must nevertheless take account of the convictions of the community and what a reasonable person would regard as fair and just. We therefore made a provisional ruling in favour of the complainant. The insurer accepted the ruling and paid the claim.

BG

10 April 2008

Case 3

The complainant took out a policy which provided cover for death and disability. In May 2004 he became totally and permanently disabled due to a bipolar disorder and a neurological and epileptic disorder. He therefore made a claim against the policy, but the insurer denied liability, relying on a clause in the policy contract which excluded pre-existing conditions in the following terms:

“The insurer shall not be obliged to make any payment in respect of any condition or event arising directly or indirectly from or traceable to any physical defect, medical condition or illness, of which the life insured was aware and which had its origin prior to the issue of this policy. “

The facts relevant to this clause were not in dispute. It was some months after the policy was issued in December 2003 that the two disorders were diagnosed for the first time, so that the complainant had not been aware thereof. The essential symptoms of each such disorder had already existed, however, at the time of the issue of the policy, and the complainant had been well aware of those symptoms. For its applicability the exclusion clause did not require that a diagnosis be made. Because of the fact that all of the essential symptoms showing objectively that the disorders had in fact existed despite not yet having been diagnosed, and that the complainant had been well aware of the symptoms, we concluded that the matter fell within the ambit of the exclusion clause, and we had to rule that the exclusion clause applied.

BG

10/4/08

Case 4

The Ombudsman receives complaints about claims both big and small. There is no monetary limit on our jurisdiction.

In 2007 we resolved a complaint involving R8,2 million, the biggest settlement amount in an individual complaint to our office.

The complaint revolved around the amount of a death claim under a group life scheme. The deceased member had been insured for a sum equal to 3 times his annual salary plus a spouse’s pension and a child’s pension. Like most employer sponsored schemes there was “free cover” provided under the scheme, being cover granted without any medical evidence. There had been a dispute about the amount of the benefit as the insurer contended that the deceased had not provided sufficient medical evidence to entitle him to the full amount of his benefit, and that he therefore only qualified for the “free cover limit” of R2,5 million which had been paid to the beneficiaries.

By way of a conciliation meeting arranged by us the parties came to a settlement, and the additional lump sum of R8,2 million, which included the capitalized value of the spouse’s and child’s pension, was paid.

The majority of our complaints involve, however, much smaller claims, arising for example from funeral policies where the cover amount is R10 000 or less.

An example of such a complaint was one lodged by a son in respect of a funeral policy on his mother’s life. When his mother died the insurer had declined to pay the claim because, so the insurer stated, the death had occurred during the 9 month waiting period which applied from the time the policy had commenced. In this regard the insurer’s contention was that the 9 month period only commences from the date on which the first premium is received. There was some ambiguity in the policy wording and in the circumstances we put it to the insurer that the complainant should be given the benefit of the doubt. The insurer agreed to settle the claim and paid the R5 000 claim plus interest.

BG

10 April 2008

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