CR242 Equity Exception in policy covering disability
Exception in policy covering disability – clause excluding intentionally or self induced illness or injury – insured donated one of her kidneys to save life of her brother – role of equity
The complainant had one of her kidneys transplanted to her brother in order to save his life. For this purpose she had been hospitalised and claimed for a sickness benefit under her policy. The insurer admitted that she had been the only suitable donor.
The insurer rejected her claim on the grounds of an exception in the policy which read:
“A Policyholder shall not be entitled to a sick pay benefit ….:
(c) if a Policyholder’s Sickness …is in the opinion of [the insurer] attributable to, continued by or aggravated by excessive indulgence in liquor or drugs, immorality or disorderly conduct, intentionally self-inflicted or intentionally self-induced illness.”
A “sickness” was in turn defined to include an injury.
The central issue was the meaning of the words “intentionally self-inflicted or intentionally self-induced illness”. Should they be interpreted literally, which would result in the operation wounds having been intentionally inflicted, or should a more limited meaning be attached to them?
We recognised that a literal interpretation would in most sets of circumstances produce satisfactory results, but we suggested to the insurer that in exceptional circumstances a literal interpretation could produce disquieting results. We suggested a few examples. One postulated a doctor who is in charge of patients afflicted by a highly contagious disease. He appreciates the probability that he himself will contract the disease if he makes contact with the patients, but he undertakes the risk and eventually becomes sick. Another example postulates an insured who pays a visit to a bush area. He gets bitten by a snake he believes to be poisonous. In an effort to prevent complications he makes an incision in himself with his pocket knife. The wound gets infected and he lands in hospital.
Applying the exclusion literally in the above examples would result in a claim for the sickness benefit being excluded, but would that really be in accordance with the intention of the parties?
In Lehmbecker’s Earthmoving v IGI 1984 3 SA 513 (A) 520 I Miller JA remarked:
“It not infrequently happens that the parties use simple words, in themselves unambiguous, but which cannot readily or reasonably be applied in their literal sense to all the situations to which their agreement was directed. In such cases an element of ambiguity rises from the fact that ‘an absolutely literal interpretation’ may be wholly or substantially impracticable, or productive of startling results which could hardly have been intended. See MacGillivray and Parkington (ibid para 1040 at437-8).) ‘Therefore’, say the learned authors, ‘some gloss on the words becomes essential and their surface plainness is seen to be illusory.’ ”.
Our impression was that although the expression “intentionally self-inflicted or intentionally self-induced illness” appears on the face of it to be otherwise, it is in the final analysis ambiguous because a literal interpretation produces unsatisfactory results when applied in the above examples. We therefore thought that a corrective interpretation was called for.
In dealing with the problem of ambiguity the remarks of the SCA in SA Forestry CO Ltd v York Timbers, 2005 3 SA 323 (SCA) at 340 should be borne in mind:
“In the interpretation process, the notions of fairness and good faith that underlie the law of contract again have a role to play. While a court is not entitled to superimpose on the clearly expressed intention of the parties its notion of fairness, the position is different where a contract is ambiguous. In such a case, the principle that all contracts are governed by good faith is applied and the intention of the parties is determined on the basis that they negotiated with one another in good faith.”
The question was how the words concerned were to be interpreted to avoid an undesirable outcome?
It was noted by us that apart from the reference to “intentionally self-inflicted or intentionally self-induced illness” the exclusion listed some specific causes of sickness (as defined including injury) viz indulgence in liquor, indulgence in drugs, immoral conduct and disorderly conduct. These specific causes of sickness or injury constitute a category of deliberate conduct morally or socially reprehensible according to the convictions of society. Considering the eiusdem generis rule and more specifically its colleague the noscitur a sociis rule (according to which the meaning of a word or phrase used in a series is influenced by others in that series) it could be contended that the words “intentionally self-inflicted or intentionally self-induced illness” are likewise intended to refer only to deliberate conduct of an improper nature. On this basis intentional conduct not amounting to misconduct would not be within the parameters of the exception.
We accordingly suggested to the insurer that the provision might be ambiguous and that the words “intentionally self-inflicted or intentionally self-induced illness” might have to be interpreted to mean deliberate conduct which is improper according to the norms of society. This would bring the meaning of the words in question into line with the rest of the exclusion as well as with the dictates of good faith. The conduct of the complainant in casu was not capricious; on the contrary it was necessary for the preservation of life and therefore irreproachable. For this reason we suggested that her conduct, though deliberate, might not fall within the scope of the exclusion as interpreted.
We raised yet another concern about the clarity of the exclusion clause. We pointed out that only an intentionally self-inflicted or self-induced “illness” was excluded, but not a self-inflicted or self-induced “sickness” which, as defined in the policy, would include an injury. The word “illness” might therefore be said to bear its ordinary meaning, which as such does not embrace an injury. What the complainant suffered, as a result of her operation, was an injury and not an illness. Seen in this light the exclusion would not affect her.
The insurer remained unpersuaded.
In the final analysis, however, we recognised that the interpretation proposed above was not capable of easy solution. In terms of our Rule 1.2.4 the Ombudsman has the power, indeed and is required to ensure, that he accords due weight to considerations of equity which constitutes the equity jurisdiction of the Ombudsman.
While it is not possible or advisable to define equity, it will be required to be considered in all cases of perceived injustice, where the law does not provide a fair solution. Where the interpretation of a contract cannot be satisfactorily resolved by applying the law, the circumstances and consequences should be assessed with equitable considerations in mind.
While equity cannot be defined, it must at least be measured according to the convictions of the community. Would a reasonable person in the given case regard it as fair and just that the claim at issue be rejected?
We finally grounded our decision on the Ombudsman’s equity jurisdiction. On this basis we decided that the claim was not excluded by the clause. The insurer accepted our ruling and paid the benefit.