If you take out cover for serious illness or disability, you expect the policy to pay out when such an event occurs. But that will depend on whether or not your condition meets certain medical definitions in the policy.
Life assurance companies often make decisions based entirely on the terms of these definitions, but, with a little persuasion by the Ombudsman for Long-term Insurance, Judge Ron McLaren, after consultation with independent medical experts, the life companies may amend their decision to something a little fairer to you. Three cases reported in the recent Ombuzz newsletter from the ombud’s office are evidence of this.
You must survive
To qualify for a benefit on a dread disease policy, you typically have to survive for a certain period after contracting the disease. The rationale for this requirement is that you are diagnosed with an illness and die shortly thereafter, you will qualify for a benefit on your life assurance policy, while your dread disease cover provides protection from the expenses of living with a serious illness, rather than dying from it.
A claim on a dread disease policy was denied after the insured died of cancer despite evidence that she had contracted the illness and survived with it for longer than the qualifying period on her policy.
Ms A, the insured, saw her general practitioner for a chest condition and was hospitalised for pneumonia. She was re-admitted with a swollen leg and was found to have a pleural effusion (a build-up of fluid around the lungs). Less than two weeks later, she was diagnosed with stage-four pancreatic cancer, and four days later she died.
A claim for a dread-disease benefit by Ms A’s beneficiary was rejected by the assurer on the grounds that she did not survive the 28-day “survival period”, as required by the policy. The beneficiary laid a complaint with the ombudsman.
The policy defined the survival period as starting from the “date of occurrence”, which, in turn, was defined as “the date on which the dread-disease event first manifested itself, as determined by the assurer on the basis of objective evidence”. The dread-disease event was defined as “the onset or diagnosis” of one of a number of diseases listed in the policy, and it was around this phrase that the case revolved.
The assurer argued that Ms A did not meet the requirement of surviving for at least 28 days after the diagnosis of her cancer, but the complainant submitted that Ms A had survived 28 days from the onset of the condition.
In support of the complaint, Ms A’s GP confirmed that it was likely that the cancer was present, even though it was not detected, when she consulted him, and that the other conditions she was suffering from could have emanated from the cancer. And her specialist physician said the medication Ms A used would have made it less likely for the cancer to be detected.
The ombudsman’s office asked an independent medical specialist for an opinion. The specialist noted that there was no evidence to indicate that Ms A or her doctors were aware of the malignant cells until they received the results of a CT scan, on which the cancer diagnosis was made.
He said, however, that Ms A had showed signs of an initially “hidden” pancreatic cancer, which meant that, although the cancer had not been diagnosed until a late stage, there were signs that it had been present in Ms A’s body for some time.
The assurer considered the report from the independent specialist and admitted the claim.
Severe impact
A policyholder’s claim for disability or dread disease was denied because her condition did not fit the medical definitions. However, the ombudsman got the assurer to agree to pay half the insured amount to the woman because her condition, like those defined, had a severe impact on her life.
Ms B had had several surgical procedures over five years for a dysfunctional colon, during which time she had not been able to work. Eventually, she had a colectomy and colostomy (removal of the diseased part of the colon and the connection of its healthy end to an opening in the abdomen, to which a bag is attached), which severely limited her lifestyle. Her claim for an impairment and/or dread-disease benefit was repudiated on the grounds that her condition did not fall under any of the conditions covered by her policy.
On further investigation, Ms B did not meet all the criteria for the impairment benefit, and the case then centred on whether she qualified for the dread disease benefit.
The dread-disease benefit was payable for certain stipulated conditions, and the full sum assured was R1 million. Under the policy’s gastro-intestinal category, the conditions covered were Crohn’s disease, ulcerative colitis and pancreatic disorders. Ms B’s condition was not any of these.
The assurance policy did, however, have a “catch-all” category, under which she would be covered if she suffered from a condition of equivalent severity to one that qualified for a 100-percent payout under another category.
The ombudsman consulted Ms B’s doctors, and even though it was found that she did not quite meet the criteria under the “catch-all” category, her condition was severe enough for a request to be made to the assurer to reconsider the case “on equitable grounds”.
The ombudsman pointed out that 100 percent was payable for Crohn’s disease or ulcerative colitis “requiring permanent colostomy”. Although Ms B did not have these diseases, she had undergone a colostomy, and this was certainly a marker of the severity of her illness, he said.
The assurer responded that, although it did not believe there was any legal obligation to pay the claim, “in terms of equity” it was prepared to offer a concession, or ex gratia, payment of half of the sum assured, R500 000. Ms B accepted the offer.
Evading purpose
A claim denied became a claim paid out after the ombudsman’s office found that strictly adhering to a policy’s medical definition would deny the purpose of a policy.
Mrs W underwent surgery because of suspected ovarian cancer and because peritoneal fluid around the ovaries showed signs of cancer having spread beyond the point from which it originated.
However, when Mrs W submitted a dread disease claim to her assurer, it was rejected, because a test of the ovarian tissue itself had revealed no evidence of “infiltrating cancer”.
The life assurance company said its policy stated that any cancer or tumour described as pre-malignant or showing early change would not qualify as cancer.
The ombudsman referred the matter to an independent medical consultant, who found that two different laboratories had been involved in the tests. One, which had tested the sample of ovarian tissue, had found no signs of “infiltrative malignancy”, while the other, which had tested the peritoneal fluid, had found unequivocal evidence that the cancer had spread, which could only have been the result of a cancerous ovary. In addition, during the operation, the surgeon had observed what appeared to be growths from cancer that was metastising or spreading within the peritoneum, but had felt it would be dangerous to biopsy these sites.
The consultant believed that, had the laboratory testing the ovarian tissue known about the results of the tests on the peritoneal fluid from the other laboratory, it would have done further testing of the tissue, “with the probability of finding overt malignancy”.
He said he would conclude that the diagnosis of invasive cancer had been adequately substantiated and that “the insurer would be evading the underlying function of the policy by insisting on strict adherence to the contractual definition”.
A copy of the report was sent to the assurer, which then settled Mrs W’s claim.