CR362 Waiting period / Disability / Equity
Waiting period / Disability / Equity
Unusual 24 month waiting period for permanent disability; equity invoked
1. The life insured had an accidental death and permanent total disablement policy. He was involved in a motor vehicle accident in March 2015 and suffered head injuries and a consequent stroke. The medical evidence indicated that he was totally and permanently disabled (see below).
2. A claim was submitted in June 2015. The insured’s claim for permanent disablement was declined.
3. In explaining its decision, two policy clauses were cited by the insurer:
“Permanent Total Disablement means total and absolute disablement that entirely prevents an Insured Person from engaging in a gainful occupation of any kind. The diagnosis and determination will be made by a Medical Practitioner. The permanent total disablement must be continuous and permanent for at least 24 (twenty-four) consecutive months from the onset of the disablement.”
“CONDITIONS IN RESPECT OF CLAIMS
• We will not pay or be liable for any claim:
○ after 24 (twenty-four) months have elapsed from the date of the event that gave rise to a claim”.
4. The insurer then gave its reason for declining the claim:
“The policy provides for a 24 month waiting period for permanent total disablement as defined above. [The insured’s] motor vehicle accident occurred on 4 March 2015. When applying the waiting period, [his] disablement must be continuous and permanent for 24 months from the onset of disablement. The claim cannot be finalised unless [his] permanent total disablement has lasted for 24 months”.
5. The insurer also stated that it was “too soon to make a decision as to whether his injury is deemed permanent total disability”.
6. We pointed out to the insurer that there was another relevant clause in the policy:
“We will not pay you:
• For Permanent Total Disablement, unless you submit proof that the disablement will in all probability continue for the remainder of your life”.
7. We also mentioned that the aspect of the definition requiring that permanent total disablement “must be continuous and permanent for at least 24 (twenty-four) months”, effectively a waiting period, was an unusual clause in a policy of this nature. We questioned whether this unusual clause had specifically been brought to the insured’s attention when he took out the insurance.
8. The other clause cited by the insurer (see paragraph 3 above), to the effect that the insurer would not pay any claim after 24 months had elapsed from the date of the event giving rise to a claim, appeared to afford a time period for lodging a claim, and was not relevant at all to this case.
9. We then canvassed the claim forms and medical evidence. The treating doctor had stated on the claim form that the stroke symptoms from which the life insured was suffering (two months after the accident) were left-sided weakness, inco-ordination, reduced reflexes, sensory loss, behavioural disturbance, forgetfulness, mood fluctuations and reduced vision. Asked to provide clinical details indicating severity and permanence, he replied “Continued symptoms as above. Unable to drive, care for himself”. Under “Current major complaints”, he indicated “Urinary frequency, severe lower back pain, falling daily due to imbalance, mood swings”.
10. Under the section on “Disability details”, the doctor indicated that the life insured had not previously followed any occupation other than that of an electrician. The question was then posed: “Is the life insured in your opinion, totally and permanently disabled and unable to follow his/her occupation?” The doctor replied “Yes”. The form continued “If Yes – state reasons and date you advised insured to cease work”. The doctor stated “Danger to himself and others”. The form asked the question “Is the life insured in your opinion, able to follow any other occupation?” The doctor answered “No”. A further question asked “What part of the duties of the life insured’s normal occupation is he/she capable of carrying out?” The doctor responded “Nothing”. A further question asked “Will the life insured at any stage in future be able to follow his/her occupation or a similar occupation?” The doctor replied “No”.
11. Under “Prognosis”, the form asked “What are the chances of recovery (good/fair/poor/nil)?” The doctor underlined the word “poor” and also stated the word “Poor”. Asked whether any residual problems were likely he stated “Yes. Continued weakness; inco-ordination, imbalance”. Under “Function abilities”, the doctor indicated that the life insured effectively could not perform any of the listed activities as he was a “Danger to self or others”, and that this state of affairs would remain constant.
12. In a Medical Certificate signed and dated 19 May 2005, when asked the question on the form “Is permanent disability expected?”, the doctor replied “Yes”, reiterating that the life insured was unable to drive, work, or take care of himself. Asked the direct question “Are you prepared to certify that the patient is TOTALLY DISABLED from attending to any portion of his/her business or occupation?”, the doctor replied “Yes”.
13. From this documentation it appeared that a diagnosis and determination of permanent total disablement (see the definition in paragraph 3 above) had been made by a Medical Practitioner.
14. There was also a rehabilitation discharge report dated 9 April 2015 stating “It is not recommended that [the life insured] returns to working as an electrician at this stage due to his impaired cognition, and that he will “be unable to work effectively as an electrician at this stage” [our emphasis]. The same phrase “at this stage” was used in an August 2015 report from an occupational therapist and physiotherapist (not medical practitioners). We pointed out however that none of these parties was pertinently asked to provide a prognosis. Their reports merely described the current situation, which was why the phrase “at this stage” was used. In our view there was no indication in these reports that the cognitive deficits and other problems would improve to the extent that the life insured would ever be able to return to work. Certainly this was not the view of his medical practitioner.
15. The life insured’s wife had outlined the financial hardship she and her family were suffering because of her husband’s disability and inability to earn an income, and would continue to suffer if they were obliged to wait 24 months before a disability claim could be assessed.
16. We asked the insurer to reconsider whether the claim could not be paid on an equitable basis, taking into account all the circumstances, including the perspective of Treating Customers Fairly.
17. The insurer agreed to pay the claim.