Non-disclosure – whether the insured disclosed sufficient information to have complied with his duty of disclosure
The insured, 57 years old, was the life insured under two policies. The insurer cancelled these policies due to non-disclosure, retaining all premiums, when the insured instituted a claim for a disability benefit.
The policies were taken out for business purposes. The first policy was taken out in June 1998 by the insured’s employer for R250 000. The policy had an exclusion in respect of back injuries. The second policy, taken out in December 1999 for R500 000 by the insured’s business partner, also had a back exclusion. Both policies had subsequently been ceded to the insured.
The insured instituted a claim for a disability benefit in January 2004 based on his inability to perform his occupation as a strategic planner in marketing, due to Parkinson’s disease. Although the insured had been diagnosed in October 2000 he had continued working until 2003 in a reduced capacity.
The insurer cancelled both policies and retained the premiums on the basis that the insured non-disclosed certain material medical information at application stage. The non-disclosed information on which the insurer relied was a visit to a neurologist, after the insured had experienced problems with his back and neck and had tremors in his hand. The neurologist had sent the insured for scans and x-rays and also suggested urine and blood tests. He prescribed physiotherapy for the insured who had gone for the physiotherapy on several occasions during this period. The physiotherapy had been successful in both his view and that of the physiotherapist. He had, therefore, not returned to the neurologist and had also not gone for the urine and blood tests, which had been suggested.
The neurologist, at claim stage, stated that he had suspected early Parkinson’s. The insured had not been advised of this suspicion if it had been held at the time. A note submitted by the neurologist after enquiries by our office, dated 4.6.1997, stated that there had been “Diminished arm swing on the right and tremor quite prominent with walking. The features suggest early Parkinson’s and to investigate fully with regard to onset of Parkinson’s at such a young age.”
The insured was suspicious about this note as the contents had according to him not been disclosed to him. The note was not addressed to anyone in particular and had surfaced only at the time of enquiry about the neurologist’s diagnosis at the time of the examination.
On both application forms the insured disclosed that he suffered from neck and back problems and he had in fact completed a back questionnaire on the first application. In the questionnaire he disclosed the fact that he had seen a physiotherapist and received treatment for the problem. He had, however, not disclosed the visit to the neurologist nor had he disclosed the fact that he had tremors in his hand.
At the time of the second application the broker sent a letter to the chief underwriter of the insurer in which it was disclosed that the insured’s “stiff neck” might in fact be stress related.
It was as a result of the disclosures about his problems that the back exclusions had been implemented on the policy.
The insured had submitted several affidavits from friends and business associates and submissions in which he made the point that he was unaware of the fact that he suffered from early Parkinson’s disease at the time of the applications. If he had been aware, he said, he would have been unlikely to have left his fixed employment in an advertising agency at a high level to start his own business in 1999.
The question arose whether the non-disclosure of the visit to the neurologist and the non-disclosure of the tremors were sufficient to entitle the insurer to repudiate the policy in the light of the other disclosures that were made by the insured. After considerable debate in our office and after seeking an opinion from an outside medical expert our office concluded that the insurer’s repudiation was justified in the circumstances. Our office was, however, of the opinion, contrary to the view of our own medical expert, that the insured had innocently non-disclosed his medical condition. We were of the opinion that the insured had not been aware of the fact that he suffered from early Parkinson’s disease. Even though we regarded the non-disclosure as not being fraudulent, we could not find in favour of the complainant as fraud is not a prerequisite for the repudiation of a policy.
This office has held in the past, as it did in this case, that where a visit to specialist doctor is not disclosed it would normally be regarded as a material non-disclosure. There had been specific questions about the insured’s visits to specialist doctors which the insured answered without disclosing the visit to the neurologist. The insured maintains that his disclosure of his back and neck problems and the visits to the physiotherapist was a sufficient disclosure, but, we were unable to agree with his opinion on this issue.
It was also clear to us that because of the nature of the policies i.e. the business assurance angle, that this had not been a case where the insured knowingly non-disclosed information in the hope of benefiting at a later stage from the policies. At the time when the policies where taken out the parties who would have benefited from the policies had not been the insured.
The complaint would not be upheld. But when the insured requested us to liaise with the insurer about an ex gratia payment we took the above into account and requested a reconsideration from the insurer, even though we upheld its entitlement to repudiate the policy. We were gratified – and commended the insurer – that it was willing to make an offer of a third of the benefit on each policy, plus a return of premiums less costs incurred. This amounted to R280 683. The insured the accepted the offer in full and final settlement and the file was closed.