CR217 Disability claim under credit life policy
Disability claim under credit life policy – insurer relying on pre-existing condition exclusion clause – was claimant aware of or ought reasonably to have been aware of the pre-existing condition?
Mr Z effected a credit life policy underwritten by the insurer commencing on 1 March 2005. During October 2005 Mr Z underwent bilateral knee amputations as a result of Wegener’s Granulomatosis and subsequently submitted a disability claim under the above policy to the insurer. The insurer declined the claim due to its reliance on the pre-existing condition exclusion clause.
Mr Z alleged that Wegener’s Granulomatosis before had not been diagnosed before 1 March 2005 and accordingly complained to our office.
The relevant exclusion clause read as follows:
“The Insurer shall not be obliged, under Section B (Permanent Disability Benefit)… to make any payment in respect of any claim event arising directly or indirectly from or traceable to:
• Any physical defect, condition, illness, bodily injury or infirmity of which the 1st Life Insured was aware or ought reasonably to have been aware and which had its origin prior to the Commencement Date of the Policy (Pre-existing Condition)”.
The insurer’s decision was supported by the Certificate of Medical Attendant (CMA) completed by Mr Z’s treating doctor, Dr A, on 9 August 2006. In this CMA he indicated that relapsing polychondritis and Wegener’s Granulomatosis were diagnosed on 3 August 2004. As the diagnoses were made prior to the commencement date of 1 March 2005, the office’s provisional view was that the insurer was entitled to rely on the exclusion clause.
However, Mr Z contested our provisional view, as he was fully entitled to do, by pointing out that Dr A only treated him for relapsing polychondritis in August 2004 and that Wegener’s Granulomatosis was only diagnosed on 29 September 2005, some six months after the commencement date of 1 March 2005. In this regard he referred to a disability claim form completed by Dr A on 5 May 2006.
On the face of it the doctor had in fact provided contradictory information in the CMA dated 9 August 2006 and the disability claim form dated 5 May 2006. Mr Z suggested that the office contract Dr A to clarify the discrepancy.
Dr A confirmed that he first saw Mr Z on 3 August 2004 as he presented with a nasal deformity to his ENT. His task was to exclude a collagen vascular disease. He confirmed that all tests, including those for Wegener’s Granulomatosis, were negative. Dr A confirmed that Mr Z was in fact hospitalised during 2004 and discharged from hospital on 16 August 2004 on steroid therapy. cANCA tests performed on 30 July 2004 and 26 July 2005 were negative. The cANCA test performed on 21 September 2005 was positive and a definitive diagnosis of Wegener’s Granulomatosis was made on 29 September 2005.
When Dr A’s report was referred to the insurer, the insurer reiterated its decision on the strength of its Chief Medical Officer’s (CMO) opinion that the condition of relapsing polychondritis was pre-existing.
In view of the medical nature the course of the complaint was taking, the office, at its own expense, referred the matter to an independent specialist, Dr B. Dr B wrote was follows:
“In this case the diagnosis of Wegener’s Granulomatosis was suspected by Dr A at his first encounter with Mr Z in August 2004, seven months before inception of insurance. This condition may present with nasal ulceration and deformity and may affect major arteries leading to amputation. The cANCA test is accepted as the confirmatory test, but like most tests involving the collagen vascular and immune systems, the test has limitations both with regards to specificity and selectivity. Hence the physician knows that a negative test does not exclude the diagnosis, and also, that false positives may occur. Clearly, Mr Z was suffering from Wegener’s Granulomatosis when he first consulted an ENT surgeon with ‘nasal deformity’.
As Wegner’s Granulomatosis is known to present with nasal ulceration before affecting other parts of the body, one would confidently conclude that was so in Mr Z’s case, despite the initially negative cANCA test”.
Dr B’s view concurred with the insurer’s CMO’s view.
The matter was discussed at a fortnightly adjudicators’ meeting. Our view was that Mr Z misinterpreted the relevant clause. He was not expected to have been aware of a diagnosis of Wegener’s Granulomatosis before 1 March 2005; this would have been impossible. He was, however, expected to be aware of “any physical defect, condition, illness…which had its origin prior to the commencement date of the policy” and that was causally connected to the claim event i.e. his disability as a result of Wegener’s Granulomatosis.
The office took the view that, from the medical information obtained and considered, relapsing polychondritis was in fact an early symptom or manifestation of Wegener’s Granulomatosis. Mr Z confirmed that he was aware that he was suffering from relapsing polsychondritis. Even though the cANCA tests were initially negative, on a balance of probabilities, he was already suffering from the condition of Wegener’s Granulomatosis before the policy incepted, although that condition was only afterwards diagnosed as such.
The meeting also expressed the view that Mr Z’s condition of relapsing polychondritis would have been considered to be material and should have been disclosed to the insurer. This could have in fact resulted in the insurer not accepting the application for the policy.
The office’s provisional ruling that the insurer’s reliance on the exclusion clause was justified, was made final.