Category Legal Affairs

Interpretation rules: protection afforded to the insured against repudiation

18 July 2023 Kagiso Tshandu, Senior Associate at Eversheds Sutherland (SA) Inc.

In Delpaul v Hollard Life Assurance Co Ltd (18301/2018) [2023] ZAGPJHC 745 (30 June 2023), the High Court (“HC”) had to determine the appropriate percentage of the benefit amount to which Mr Delpaul (plaintiff) was entitled to, which consideration was contingent on the interpretation of the insurance policy. Hollard (defendant) contended that the plaintiff was only entitled to 25%, and Mr Delpaul contended that he was in actual fact entitled to 100% of the benefit amount.

On 15 August 2015, Mr Delpaul suffered an acute heart attack, whereafter he lodged a claim for payment in terms of the insurance policy concluded with Hollard. Fortunately, the policy provided a benefit amount that would be payable should Mr Delpaul suffer from any one of the listed events or conditions as set out in the policy which was inclusive of his cardiac arrest. Central to this matter, the cardiovascular benefit group as outlined within the policy identifies 12 events and provides that only one payment will be made per cardiovascular event with a single event being defined as all cardiovascular conditions or procedures that occur within a 30 day period.
Briefly put, it was common cause that the policy was effective on the date of Mr Delpaul’s heart attack as he kept up with his monthly premium requirements. It is pertinent to note that, prior to the heart attack under discussion for which he received 25% of the benefit amount, Mr Delpaul suffered from a certain heart and arterial disease which in one instance resulted in a coronary stent for which he was paid 10% of the benefit amount (first event) and on the other hand a bi-femoral bypass for which he was paid 90% of the benefit amount (second event).

In assessing the issue of the appropriate benefit amount, Hollard and Mr Delpaul led evidence respectfully. Hollard contended that the benefit amount that would have been available had no prior claims been made was R2 315 250.00. Hollard also contended that the benefit amount is stable and is subject to a reduction each time a claim is submitted. This was the basis laid by Hollard to justify why only 25% of the benefit amount was paid to Mr Delpaul given that his prior medical complications (the first and second events) depleted the original benefit amount to 25%, and that once the 25% had been paid to Mr Delpaul, he was no longer entitled to any further pay outs.

In contrast, Mr Delpaul contended that his view on the policy was that he would be paid out per event, and that he had in fact not received payment for his heart attack as his previous medical conditions fell under ‘other events’ under the cardiovascular benefit group which was unrelated to his cardiac arrest, and therefore he was entitled to 100% of the benefit amount and not 25%.

The question the HC had to determine how the terms of the policy should be interpreted in consideration of the admissible evidence presented.

At the outset, the HC stated that it is for the court to interpret the insurance policy and that the evidence of witnesses may only be considered within suitable circumstances for purposes of context. The HC opined that when the whole policy is taken into consideration, it is clear that the percentages shown for each event within a benefit group is payable per cardiovascular event.

The HC found that the policy does not provide that once 100% of the benefit amount in a particular group has been paid that no further payment will be made for such group. The court also noted that the policy provided that ‘only one payment will be made per cardiovascular event’. In regard to medical procedures, the HC found that the policy covers an unlimited number of procedures and that each claim for this type of event 10% of the benefit amount is payable.

The HC went onto highlight the contradictory nature of Hollard’s evidence insofar as the policy is concerned. The construction that the HC draws is that the wording of the policy can only be meaningful if one accepts that the policy responds per event and that the amount payable is a percentage of the benefit amount. The contradiction lies in the fact that the policy is clear that under a certain group only one payment will be made per event, however the policy wording states that it will respond by paying out a benefit of 10% of the benefit amount for an unlimited number of procedures.

Regarding causation, no evidence was led as to whether the cardiac arrest and the prior medical complications (first and second event) were related or unrelated. The HC also noted that Hollard changed its reasons for repudiation both of which rejected the notion that any further payment would be made after the first and second event pay outs. This was however not consistent as Hollard paid 25% to Mr Delpaul when on its reasoning for repudiation should not have paid anything. The HC found no need to apply the contra proferentum rule against Hollard as the terms of the policy were persuasive enough.

Consequently, the court found that the amount payable for the cardiac arrest suffered by Mr Delpaul entitled him to payment of 100% of the benefit amount as he had only been paid 25% of R2 315 250.00 being R578 787.50. Hollard was ordered to pay the balance.

The judgment reemphasises the trite principles of interpretation highlighting that this is an exercise involving an objective process of attributing meaning to words used in a document read holistically within its contextual setting. This is very important as it gives a commercially sensible construction which on a balance of probabilities gives effect to the intention of the parties. The process is objective and not subjective as insurance contracts are contracts like any other, therefore the general principles of interpretation are applicable. It remains the insurer’s duty to clearly spell out the specific risks it wishes to exclude or rather specify its limit regarding benefit amounts payable to insureds.

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