The processing of group disability claims by employers and life assurance companies can be fraught because of the imprecise and often complex nature of physical disability: when is your disability severe enough for you not to be able to do your job, and when does temporary disability become permanent?
This is highlighted in a recent case that came before the Ombudsman for Long-term Insurance, Judge Ron McLaren, who ordered Liberty Life to pay an unemployed diabetic a disability benefit of R166 095 plus interest after Liberty rejected the claim because it had been submitted late.
According to the ombudsman’s determination, Mr A was employed as a machine operator for about 14 years. He was diagnosed with diabetes with “severe peripheral neuropathy”, as a result of which, by July 2012, he was no longer able to work.
His employer’s occupational health doctor recommended that Mr A apply for six months’ temporary disability leave through the Unemployment Insurance Fund (UIF).
The complainant claimed against the UIF for September, October and November 2012. However, in December 2012, when Mr A showed no signs of improvement, the doctor recommended he be considered for a permanent disability benefit.
Liberty received Mr A’s claim on May 3, 2013. The assurer’s rules state that a claim must be submitted within three months of the date of disability, which is defined as the date on which the member ceases his or her normal occupation as a result of being disabled.
Liberty pegged July 31, 2012 as the date of disability. Therefore, according to Liberty, the claim was lodged some six months after the period prescribed by the policy. On the grounds of late submission, it repudiated the claim.
Mr A lodged a complaint with the ombudsman. The case was discussed at a meeting of adjudicators.
Although, contractually, a life assurer may be entitled to repudiate a claim that has been submitted late, this is not the end of the matter, because, in certain circumstances, the ombudsman may, in terms of equity, request the assurer to accept the claim. A range of factors are considered, including the explanation for the delay, the degree of lateness, the prospects of success, and the prejudice or potential prejudice to the assurer.
Mr A’s employer explained that it did not expect July 31, 2012 to be his last day of service and that, because of the complex nature of the illness, the matter at that stage was not regarded as a disability claim.
However, as soon as it received the recommendation of its occupational health doctor that Mr A be considered for disability benefits, it embarked on the claims process. The employer also pointed to the transfer of the group scheme from Liberty Life to a new assurer with effect from December 1, 2012 as being a complicating factor.
The adjudicators concluded that six months was not an inordinate delay, particularly in the context of the explanation for the delay.
Although Liberty contended that it would be significantly prejudiced if required to honour the claim, its explanation provided to support such a contention was not entirely clear, according to the ombudsman’s report.
In a provisional determination, the adjudicators decided that, on the grounds of equity, the late submission should be condoned and Liberty should be required to process the claim.
Liberty did not accept the provisional determination. It argued that, when the employer submitted the claim application on May 6, 2013, it did not provide any reasons for the late submission. It provided reasons only in August 2014 after Mr A had lodged a complaint with the ombudsman.
Liberty also told the ombudsman that the employer had previously submitted two claims outside the notification period. “We waived the late notification clause for these cases. However, we clearly informed the employer that future claims notified late will not be assessed or validated,” it said.
The seriousness of Mr A’s medical condition and knowledge of the time-frame within which to submit claims, coupled with the change in assurers, should, in fact, have compelled the employer to resolve this matter earlier by submitting the claim on time, Liberty argued.
According to his report, the ombudsman countered with the following reasoning: “If the employer’s explanation for the delay is reasonable, then the fact that such was not conveyed to Liberty at the time the claim was submitted does not render the explanation unreasonable.
“It does not necessarily follow that, because Liberty brought the submission period to the employer’s attention, the employer was negligent in submitting this claim late. The employer’s explanation for the delay was not that it was unaware of the submission period. Rather, it did not expect July 31, 2012 to be the complainant’s last day of service and that, due to the complex nature of the complainant’s illness, the matter was not considered to be a disability claim at that stage. The seriousness of the complainant’s medical condition came to the employer’s attention only when the occupational health doctor recommended he be considered for disability benefits.
“Liberty Life is saying that a delay of six months or more should, in every case, be regarded as unreasonable, irrespective of the circumstances. However, such a blanket approach in this context is problematic. A six-month delay in one set of circumstances may be excessive or unreasonable, but, in another set of circumstances, it may not be.”
In the absence of any proven prejudice to Liberty Life, and taking into account the explanation for the delay and the degree of lateness, the adjudicators unanimously decided in a final determination that, on the grounds of equity, Liberty Life should honour the claim.
Liberty Life has since paid the benefit, totalling R203 415 (R166 095 plus interest of R37 320).