CR220 Funeral Insurance – deceased working in medi-clinic
Funeral Insurance – deceased working in medi-clinic – her death conceivably due to HIV exposure in the course of her duties – effect on co-life insured’s cover – whether policy could be made paid up – compensation for creating false expectation .
1. The deceased policyholder was the main life assured in terms of a funeral policy. Her husband was a co-life assured.
2. The policyholder worked for a private hospital which was duly registered as a Health Services Institution.
3. The policyholder’s death was ascribed to “meningitis and AIDS”.
4. The complainant was the sister of the policyholder’s husband and thus the sister-in-law of the policyholder. As such her status as complainant was somewhat dubious but the insurer made no point of it.
5. The insurer initially declined the claim instituted by the complainant, citing the following provision in the policy:
“2.14 EXCLUSION CLAUSE (HIV,AIDS)
In the event of there being any claim under this policy following the life assured’s death, illness, accident, disorder, disability or inability to carry out a remunerative occupation which in the opinion of [the insurer] is in any way due to or arising directly or indirectly, entirely or partially from the Acquired Immunodeficiency Syndrome (AIDS) or infection from any Human Immunodeficiency Virus (HIV), the sum assured and disability benefits under the policy (if more than the investment account) will be null and void and the claim amount will be restricted to the cash value in the investment account as determine by the actuary of [the insurer], save that the full benefit may be paid if the HIV-infection was –
2.14.2 contracted by lives assured who are registered with he SA Medical & Dental or Nursing Councils during the execution of their medical duties, and/or
6. The complainant was distressed. As she put it in one of her letters:
“I don’t understand this people’s reason for not paying the claim cause my sister-in-law worked in the theatre for a long time and she was exposed to anything, and as well as in the maternity word for a long time as well.
We did ask questions when that lady who wrote the policy, what if one become infected after taking the policy and accidentally is pricked by a needle, she said to us all people working in the hospitals clinics and at private surgeries will be paid.”
7. The first issue was whether there was a claim on the merits. We believed not. Contrary to what the complainant maintained, it was not the institution for which the life assured worked as a nurse that had to be registered with the SA Medical and Dental or Nursing Council but the life assured herself, i.e. the deceased, which was not the case.
8. We next canvassed the issue, arising from the complainant’s letter, whether the deceased may not have been misled as to the terms of the policy. We wrote to the insurer:
“Having regard to the tenor of and the consistency in the complainant’s correspondence to your office and ours, as to what was believed to be the extent of cover under the policy, it seems to us not unlikely that, notwithstanding the wording of the policy, an expectation was created in the mind of the life assured that the life assured would be covered if, broadly speaking, she contracted the disease in the course of her employment, which is most likely what happened.
That being the case this may well be an appropriate case for the insurer, as a gesture of goodwill, to offer, through this office, an ex gratia payment. We have in mind a sum in the region of R1500.”
9. The insurer accepted the suggestion and offered to pay R1500. This amount was paid, at our insistence, to the complainant’s brother, much to the complainant’s irritation. She made two points: one, why was the money paid to her brother when she was the one who paid for the funeral? Two, was her brother covered under the policy or not?
10. On the first of these issues we wrote to the complainant:
The reason why the payment is made to your brother and not to you is two-fold:
In the first place the policy so provides in clause 2.4 where it states:
“payment of any claim(s) in terms of this protection plan will be made to:
2.4.1 the assured, or if the assured has already passed away:
2.4.2 the spouse of the assured….”
In the second place you are not yourself a party to the policy and as such you are not entitled to its proceeds even if, as you say, you had to bear the brunt of the expenses of the funeral.”
11. We then wrote to the insurer on the second issue, namely whether the complainant’s brother still enjoyed cover under the policy.
12. The insurer’s first response was no. It said:
“Since the claim for the main member was declined, the policy is now terminated. Therefore the spouse is no longer covered under this policy.”
13. We responded by expressing surprise at this decision, quoting another provision in the policy which stated:
“The premiums in respect of this protection plan are payable on the date of commencement and each month thereafter until the death of the assured member whereafter the insurance benefits for the then still in life assureds under the protection benefit will be made fully paid-up.”
14. At first the insurer agreed that the policy would be made paid up and would continue for the benefit of the surviving insured.
15. But, a month later, it had second thoughts and wrote to us:
“According to the application form ••• no benefits will be granted if the life insured is tested HIV positive or suffers from AIDS when a claim arises.”
16. The insured appeared to rely on the “Aids exclusion clause” which reads as follows:
“The effect of the exclusion clause is that none of the following benefits, if applicable, will be granted if the life assured/co-life assured is tested positive for HIV or suffers from AIDS, before or when a claim arises.”
17. The clause struck us as being ambiguous. It could mean:
(i) that no death benefits will be payable in respect of both life assured and co-life assured if either of them should be tested positive before or when a claim in respect of either of them should arise. In effect it would mean that the policy comes to an end for both the life assured and the co-life assured;
(ii) that no such benefit will be payable in respect of the particular life assured or co-life assured who tested positive for HIV or suffered from AIDS at the time the claim arose. In effect it would be only the affected life assured or co-life assured who then cannot benefit. Otherwise the policy would continue and the remaining life assured or co-life assured would only be disqualified if he (or she) should afterwards be tested positive himself (or herself).
We expressed the view that the second interpretation should be preferred in line with the contra proferentem approach when ambiguous provisions in insurance policies are interpreted.
18. A week later the insurer wrote:
“We have reviewed our decision and we wish to confirm that the above policy is now paid up.
19. And there the tale, with all its twists, finally ended.