Life Ombud: Complainant’s contention upheld

In 1997 the complainant had taken out an Income Protector Policy with Liberty Life, one that would pay a monthly benefit in the event of his becoming totally and continuously incapacitated and as such unable to follow his nominated occupation or any other for which he was qualified.

In August 2010 he was diagnosed with a severe degenerative disease and he lodged a claim with Liberty Life.

Liberty Life accepted that he qualified for the monthly benefits, but the issue that arose turned on the amount thereof. The policy provided for an automatic premium increase of 10% annually and a concomitant automatic benefit increase of 7.5% annually, but what was at stake was a further policy term, the relevant portion which provided that –

“The monthly Disability Income Benefit is R 10 000 plus any Automatic Benefit Increases …

together with the return of contributions then applicable for one month’s cover”.

Relying on the fact that the complainant had not selected a so-called “Claim Escalation Benefit” when he took out the policy, Liberty Life’s contention was that, on a proper construction of the above quoted term, the monthly amount of the Disability Income Benefit payable to the complainant was to be pegged at the amount as at the date of the claim. This would mean that while the insured was in claim (meaning during the period when he was receiving payment of the benefit) the amount would remain level, although the automatic annual premium increase would continue to apply. The complainant contended on the other hand that even in claim the monthly benefits should increase at the annual rate of 7.5%.

In a determination made by the Ombudsman on 25 May 2011 the complainant’s contention was upheld. On application the Ombudsman granted Liberty Life leave to appeal, however, and by a ruling dated 9 November 2011 the Appeal Tribunal, Mr Justice LS Melunsky, confirmed the Ombudsman’s determination.