Issue Number 10
March 2009

IN THIS ISSUE

Exclusion clauses: Who has the burden of proof?

Policies often contain exclusion clauses. An exclusion clause allows the insurer to deny liability in the circumstances described in that clause. One of the most common exclusion clauses is a pre-existing exclusion clause. A pre-existing exclusion clause reads something like this:

“No claim for any benefit will be payable under this policy if the claim is related, in the opinion of the insurer directly or indirectly to a physical defect, medical condition or injury which manifested symptoms to the claimant before the commencement of this policy and which would have caused a reasonable and prudent person to seek medical advice and/or treatment. This exclusion applies whether the claimant received treatment for the condition or not.”

Pre-existing exclusion clauses are the most common reason for denying claims in the complaints that are submitted to our office. These clauses are used in all policies where there is no underwriting. (Underwriting is the process the insurer uses to assess risk, by asking medical and other questions, before deciding whether to accept the application for the policy).
 

When a claim is lodged, insurers often mistakenly place the burden of producing medical evidence about the insured’s medical history on the claimant and then delay the claim when the claimant does not produce the medical evidence. The claimant has to provide evidence that substantiates the claim, nothing more. If an insurer wishes to rely on the pre-existing exclusion clause, it has to prove the existence of a medical condition prior to inception of the policy. (We have mentioned this to insurers repeatedly in Annual Reports, in workshops and in correspondence). It is only if the information the insurer seeks is something only the claimant knows about that the claimant has to produce the information or evidence.

The following case illustrates our approach.
 

Case Study

• The deceased had owned a dread disease policy which contained the above quoted pre-existing exclusion clause. The claimant, who had been married to the deceased, was a nominated beneficiary under the policy.
• On 3 September 2008 at the age of 47 the life assured died in hospital from a cerebro vascular accident (a stroke). This was a dread disease covered in the policy.
• The information as to the cause of death appeared on the notification of death (B1-166 form) and the Certificate of the Medical Attendant. These documents indicated that the deceased had been admitted to hospital on the date of his death and later died from the stroke.
• The claimant submitted the claim documentation to the branch of the bank that had sold the policy, for onward transmission to the insurer. The claimant had gone to a great deal of trouble to obtain the documentation, which she mentioned in her letter of complaint. “I struggled, slept on hospital benches, I spent 3 days living in danger as I didn’t know that I have to pay for the forms, had nobody to borrow R600.00 for them. Listing the forms :

• Death certificate document
• Copy of Identity document
• Personal Medical attendant’s report
• Certificate of medical attendant
• Declaration of identity”
  

• She had a great deal of difficulty obtaining a response to her claim.

• On 30 September 2008 the complainant submitted the documentation to the bank’s Bloemfontein Branch.
• On 8 October 2008 she went to the bank for feedback and was told she would be called back.
• On 9 October 2008 the insurer phoned her and asked whether medical tests had been done. She suggested they speak to the doctor who attended to her husband. She was told she would be phoned.
• On 21 October 2008 she went to the Ficksburg bank branch where they called the Bloemfontein branch to check progress.
• On 17 November 2008 the complainant phoned to check again and she was asked the same questions about medical tests and she again suggested that they contact the doctor.
• On 26 November 2008 the complainant went back to Ficksburg branch and the insurer was called again – there had been no progress.

After 2½ months the insurer eventually wrote to the complainant requesting a post mortem report and clinical evidence that the deceased had died from a stroke. After the complainant responded that a post mortem had not been done the insurer persisted in its demands stating that it needed confirmation that the insured suffered a stroke and it also required a personal medical attendant’s report to prove that the insured had not suffered from a related illness prior to inception of the policy, as there was a pre-existing exclusion clause in the policy.

After the complaint was lodged with our office by the complainant, we pointed out to the insurer that if it wished to rely on a pre-existing exclusion clause it would have to obtain the medical evidence it sought, itself. The insurer could not expect the claimant to search for evidence on which the insurer could rely to decline the claim. We also pointed out that the medical certificate she submitted and the death certificate indicated that the deceased had suffered a stroke. As no post mortem had been done after the insured died – he died in hospital from natural causes – it was futile requesting a copy of the post mortem report. The submitted medical evidence was the only evidence of the cause of death.

The complainant had not lived with her husband in the city where he worked as a driver. She lived in their home in a rural area and consequently had no personal knowledge of his visits to a doctor. Even so she managed to find out the name of his doctor and the insurer was advised. It was then up to the insurer to request a medical history from the doctor. The insurer promptly contacted the doctor who disclosed that the insured had consulted him but only after the commencement of the policy.

Outcome

There was no evidence of a pre-existing condition and the insurer paid the claim immediately.

We also suggested to the insurer that it should pay compensation for the inconvenience and distress the complainant suffered as a result of the poor service she received, which was done.

Burden of proof

The claimant has to prove the death, and the cause of death where that is relevant (e.g. accidental death under an accidental death benefit).

The insurer has to prove the existence of a pre-existing condition and therefore it will have to obtain the medical history of the insured. It cannot demand this from the claimant.