Discovery Life has filed a notice for leave to appeal a High Court judgment that ordered it to pay more than R25m to a former stockbroker charged and acquitted of murdering his girlfriend, saying the judgment could potentially have far-reaching implications for the life insurance industry, reports Moneyweb.
“The judgment instructed Discovery Life to pay the claimant in respect of his permanent disability claim, even though it was not possible to determine the permanency of his disability at the time of his claim – in fact, not even until three years after the policy had lapsed.
“The implication of this is that insurers are liable to pay insurance claims when claimants only qualify for the conditions covered under the policy a significant amount of time after the policy has lapsed,” Discovery said.
“This could impact premiums for disability and severe illness cover as well as the insurability of certain conditions across the industry. We are therefore considering the options available to us to obtain legal certainty.”
News24 reports that in his ruling, Judge Stuart Wilson said the man, referred to as PR in the court papers, was a successful stockbroker before the onset of his condition and the insurance policy he took out was evidence of his success.
But PR suffered various deeply traumatic events, leaving him with a combination of post-traumatic stress disorder and unspecified bipolar mood disorder.
He claimed he could not carry out his work duties between 28 December 2014 and 30 November 2015, and said he could never recover, despite psychotherapy, occupational therapy and an extensive range of drug treatments.
His monthly premium due on the policy was in the region of R20 000 and his demanding job involved the investment of clients’ funds and the skilful purchase and sale of financial assets.
His treating psychiatrist and occupational therapist said his work required fine judgment, and an agile set of social skills.
On 28 December 2014, while on holiday in Mauritius, his girlfriend drowned in a swimming pool, and he had tried unsuccessfully to resuscitate her.
In January 2015, he was arrested and questioned by the Mauritian police, before being charged with her murder and detained, pending trial.
After suffering from what he called a breakdown, he was admitted to hospital and stayed there for four days.
A doctor said PR might suffer from bipolar mood disorder, but could not confirm the diagnosis. A Mauritian state psychiatrist assessed him and found he was psychologically distressed, and noted evidence of depressive illness.
PR was eventually acquitted of the murder.
He returned to South Africa in March 2016 and was hospitalised and diagnosed with post-traumatic stress disorder and major depression.
The doctor, who treated him for three years, said there was no significant likelihood of his condition improving in the foreseeable future.
Still, Discovery Life rejected his claim because his insurance cover expired on 30 November 2015.
News24 previously reported that the company said there was no evidence that he had become “totally and permanently unable” to perform as a stockbroker by that date.
The company's legal representative told the court that the question was whether the repudiation was reasonable on the information he supplied to Discovery Life when he submitted his claim.
The company said it had studied the judgment and had filed for leave to appeal against it.
“The judgment instructed Discovery Life to pay the claimant in respect of his permanent disability claim even though it was not possible to determine the permanency of his disability at the time of his claim (in fact, not even until three years after the policy had lapsed),” it said.
However, PR’s lawyer, Marco Martini, disagreed, saying the disability was permanent from its inception, and occurred while the policy was in force.
“Where disability is as a result of mental illness, a passage of time might need to elapse to establish the permanent nature of the disability which prevailed at the time the policy was in force. The disability was permanent from its inception, which occurred while the policy was in force.”
Wilson said Discovery’s liability under the policy was triggered at the point the former stockbroker’s inability to perform as a stockbroker objectively became permanent, but its duty to pay out was only triggered once there were facts in existence that would have satisfied a reasonable insurer that his incapacity had become permanent.
He said the first triggering event that established Discovery’s liability was the onset of the former stockbroker’s permanent incapacity on or before 30 November 2015, reports Moneyweb.
The second triggering event, which established Discovery’s duty to pay out because facts existed that would have satisfied a reasonable insurer that the former stockbroker’s incapacity was permanent, happened in April 2019 when the former stockbroker’s treating psychiatrist formed the view there was no realistic prospect of significant improvement in his condition.
Wilson said it follows that Discovery became liable under the policy on or before 30 November 2015 and had a duty to pay out, at the very latest, by 1 May 2019.
He said even on the interpretation most charitable to Discovery, “its position was far from reasonable”.
Wilson said Discovery’s position entailed the proposition not just that the former stockbroker had to have suffered the onset of a permanent incapacity on or before 30 November 2015, but that he had to have assembled, by that date, all the information necessary to prove it.
“That was obviously impossible. It was also inconsistent with Discovery’s policy, properly construed.”
Onset of disability
The judge continued: “Once it is accepted that there is a difference between the onset of a permanent incapacity and the existence of facts that would satisfy a reasonable insurer that the capacity is indeed permanent, then there is no rational basis on which the insurer may decline to consider documents generated after the policy has expired.”
He said to assess whether the former stockbroker’s condition was permanent, Discovery had to have regard to evidence generated well after his policy expired.
“In closing the door to that evidence when it repudiated [the] claim, Discovery was plainly unreasonable,” he said.
Discovery Life was ordered to pay the former stockbroker almost R25.1m , with interest on the amount at the prescribed rate from 1 May 2019 to the date on which it is paid.
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