CR251 Dread disease claim – interpretation of contract
Dread disease claim – interpretation of contract – complainant making second claim in respect of dread disease benefit – insurer refusing to pay claim on ground that benefit cancelled after first claim – policy wording did not support this interpretation – if any ambiguity in policy, wording to be construed contra proferentem
The insured had had a life policy for 17 years. There was a dread disease benefit attached, covering heart attack, heart surgery, cancer, stroke, kidney failure, and paralysis. In 2005 he underwent heart surgery, submitted a claim and was paid R53 322. He thereafter paid full premiums, escalating each year, and continued to receive updated annual schedules, the latest of which indicated a dread disease benefit in 2007 of R63 500 (and a death benefit of R318 000).
In May 2007 the insured was diagnosed with cancer of the colon. The insurer refused to pay his claim, contending that the policy provided that any payment of a claim on the dread disease benefit would cancel this benefit, and reduce the life cover and disability benefits by the amount paid out. The insurer stated that they had neglected to adjust the policy after the claim payment in 2005, and the benefits had mistakenly remained in force so that he could not submit a second claim. The insurer adjusted the policy and applied the surplus premiums of R3 425 to investment; alternatively the insurer was prepared to refund the premiums plus interest if the insured preferred.
The insured was unhappy about these suggestions, stating that if he had known in 2005 that the benefit was cancelled, he could have made arrangements for alternative savings or dread disease cover. He now had huge medical bills which he could not pay, as he had relied on his insurance for such eventualities.
In our view it was not at all clear that the relevant policy clauses could be interpreted to mean that the dread disease cover would be cancelled after a payment of the benefit.
The policy stated that any dread disease benefit accruing shall
“(a) be payable in lieu of the benefit(s) or such amount of the benefits (as stated in the schedule) which would otherwise have been payable had death occurred at the date on which the event giving rise to the claim took place, and
(b) have the effect of terminating the benefit(s) or such amount of the benefit in lieu of which the [dread disease] benefit is payable”.
In our view clause (a) meant that payment of the dread disease benefit is in place of payment of the death benefit, or that proportion of the death benefit which is stipulated in the schedule as being the amount of the dread disease benefit. Clause (b) appeared to refer to the same benefits as clause (a) (ie the death benefit) and apparently stipulated that payment (of the dread disease benefit) shall have the effect of terminating the death benefit or such amount of the death benefit in lieu of which the dread disease benefit was payable. On this reading of the clauses the death benefit would either be cancelled (only if it was equivalent to the amount of the dread disease benefit) or reduced by the amount paid in respect of the dread disease benefit (as set out in the schedule).
The wording in the clauses could be compared with a clause under the accidental death and injury benefit, which stated that
“Payment of any benefit accruing in terms of this provision shall have the effect of terminating the Accidental Death and Injury Benefit and no further premiums or benefit can or will become payable thereunder”.
There was no mention under the dread disease benefit that no further premiums or benefit can or will become payable after a claim has been paid.
When we pointed this out, the insurer took the view that the wording was ambiguous, but that the insured was not entitled to be paid the dread disease benefit again. They were prepared to grant an amount of R6590, however, being the upgrades that had taken place between the first and second claim dates, less the premiums they had already refunded. R3165 was paid into his bank account.
The matter was discussed at an adjudicators’ meeting. The unanimous view was that to the extent that there was any ambiguity, which we did not perceive, the wording should in any event be interpreted contra proferentem i.e. against the drafter of the policy, the insurer. In effect the policy provided for an acceleration of a part of the death benefit, being the part stipulated in the schedule as being the amount of the dread disease benefit. There was no restriction in the policy to payment of only one claim under the dread disease benefit, nor was there any provision for the benefit to be cancelled; the death benefit was however reduced by the amount paid in respect of the dread disease benefit (as set out in the schedule).
We made a provisional ruling that the insured be paid the benefit in respect of his second dread disease claim, for cancer, less any amounts already paid, together with interest as from the date of the second claim. The insurer accepted the ruling and the benefit was paid.