CR60 Contract – amendment of terms

C60

Contract – amendment of terms – unilateral change of contract by insurer – whether unreasonable.

Background

In December 1999 the complainant had entered into a hospitalisation policy with the insurer. From date of inception he had several claims which were paid but in February 2003 his claim for hospitalisation was declined. When he enquired, he was advised by the insurer that during 2002 the policy had been amended and the insurer alleged that a copy of the amending details had been sent to his postal address. The complainant denied having received the document. The hospitalisation policy had provided for a maximum benefit for a health assured payable over a lifetime of the hospital benefit and was limited to a total benefit of 1200 days of hospitalisation, irrespective of the type of ward the assured was hospitalised in. The complainant alleged that due to the amendment to the policy the 1200 days he had been entitled to had been reduced to 20 days.

Assessment

We were of the opinion that although the insurer had the unilateral right in terms of the policy document, to amend the policy, the change from 1200 days to 20 days appeared to be unreasonable. The insurer had taken the precaution of obtaining legal opinion from counsel prior to the amendment being effected and alleged that it was rightfully entitled to amend the agreement as it had done. The insurer had originally intended to amend the contract retrospectively, however, counsel’s opinion was to the effect it could be amended only for the future which would entitle the policyholder to either accept the amendment or terminate the contract. On further investigation, it transpired that the amendment had not reduced the hospital benefit from a total of 1200 days to 20 days, but rather that it introduced a cap to the benefit amount, determined by multiplying the hospital benefit amount by 20.

Result

We accepted that the insurer had been legally correct in its actions, but requested that the insurer consider honouring the claim of the complainant on an equity basis. The assurer, to its credit, agreed to do so.

EdeB
October 2005

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