OMBUZZ

IN THIS ISSUE

Late submission of claims

Insurers' denial of liability on the late submission of claims is the cause of a number of complaints to our office. Most policies contain a clause which sets a time limit within which a claim has to be notified and submitted. An example of such a clause in a disability policy provides the following:

"The claim must be proved to the satisfaction of the insurer within 12 months from the date of injury or manifestation of illness or disease."

In some instances, there is a time limit for notification of a claim and a further time limit for lodging the required documents. The claimant must accordingly comply with both time limits.

It is unfortunate when a claim, otherwise valid, fails because of its late submission. Our office can in certain circumstances rely on our equity jurisdiction to make a determination in favour of a complainant when a claim has been submitted after the period prescribed in the policy. (See ‘A practice note on late submission of claims’ on our website www.ombud.co.za).

Factors taken into account by our office in deciding whether to exercise our equity jurisdiction include:

• the extent of the delay;
• the claimant could not reasonably have been expected to claim because of a medical condition;
• the insurer was largely to blame for causing the delay – for instance, in not having the prescribed claim forms available;
• the insurer was not significantly prejudiced by the delay.

It is particularly in group schemes that the time barring clauses can be problematic because of the multitude of parties involved, as the following case demonstrates.

First case

The facts

• The complainant was a member of a National Bargaining Council (NBC) provident fund. The risk benefits were underwritten by an insurer. The claimant had a stroke at work on 25 June 2004 and was hospitalised. He has been paralyzed on his left side ever since.
• The employer notified the NBC of the prospective disability claim and was telephonically told what the requirements for submission of a claim were. No time limits were mentioned.
• After the claimant was released from the hospital in July 2004 he was taken to his home in a remote area of Kwazulu-Natal, by his family. The employer struggled to obtain certified copies of the required information from the claimant. The employer had to send employees to the claimant’s home to obtain the required documentation on three different occasions.
• It was only when the claim was submitted to the NBC for onward transmission to the insurer, that the employer was advised of the 12 month restriction period on claims contained in the contractual documents. The clause reads as in the example cited above. The employer submitted a motivation for the waiving of the time period, when advised of this requirement.
• The claimant cannot walk, talk or write and his two wives are both illiterate. They were accordingly also not aware that there were time limits to the claim procedure.
• The claim documents reached the insurer on 7 November 2005, 4½ months late. The insurer rejected the claim of R57 000,00 on the grounds of late submission of the claim. When the employer complained to the insurer, the insurer correctly pointed out that the administrator of the fund should have provided the employer with a copy of the policy. The administrator, however, provided an incorrect policy to the employer which did not contain the time barring provision of 12 months.
• When the complaint was lodged in our office by the employer the insurer persisted in its denial of the claim and suggested that the claimant should take legal action against the employer, the administrator and the fund for failing to ensure the timeous submission of the claim. The insurer furthermore submitted that it had specifically communicated with the fund administrator regarding late claims. In April 2005 there had been a “moratorium” on late claims and the insurer had advised the administrator that no further late claims would be accepted. The insurer pointed out that the claims history is an important factor in determining the premium of the fund. The insurer argued that late submission of claims prejudices them as the premium determination is then based on incorrect information.
• Although the insurer had declined the claim correctly in terms of the contractual wording, our office was of the opinion that the circumstances of the complaint required an equity based solution.
• It would be practically difficult, if not impossible, for the complainant in his circumstances to institute legal proceedings against his employer, the fund or the NBC as was suggested by the insurer.
• We weighed up the circumstances and the potential prejudice suffered by both parties, and concluded that the claimant should be accommodated. We, therefore, requested the insurer to make an ex gratia settlement in the matter.
• In two other late submission complaints involving the same fund we could not, however, find factors favouring the complainants.

The above case illustrates the importance of alerting employers and claimants to the clauses which apply to claim submissions. This applies not only to group scheme situations but also to individual policies.

At the same time insurers should not seek to hide behind late submission defences to avoid valid claims where it is not justified. In a recent complaint lodged with our office the insurer denied liability based on late notification where it was unjustified.

Second case

• The life assured had died on 24 October 2005. The group scheme policy provided for a claim notification period of 6 months. A death claim was lodged on 3 March 2006 well within the submission period. All the required documents were submitted by the deceased’s wife to the scheme administrator. The copy of the death certificate was not legible, although it was clear that the document was a death certificate. The insurer requested a legible copy in April 2006. The complainant submitted the legible copy in May 2006 (one month after the 6 months period expired). The insurer then declined the claim on the basis that the legible certificate was submitted beyond the notification period.
• The complainant had unsuccessfully requested an ex gratia payment from the insurer on the basis that she lived in a remote part of the Eastern Cape and recovered her mail infrequently from her post box. She maintained that she had not had sufficient time to resubmit a legible copy of the certificate within the prescribed time.
• The insurer persisted in its denial of the claim after the complaint was lodged at our office.
• We pointed out to the insurer in our determination that the claimant had in fact submitted all the requirements within the prescribed time. It was only the resubmission of a more legible copy of the death certificate at the insurer’s request, which was after the 6 month period. We were of the view that the insurer could not rely on the late submission clause and should pay the claim, if otherwise valid and advised the insurer accordingly.