Download CR242 Equity - Ombudsman For Long Term Insurance

CR242
Equity
Exception in policy covering disability - clause excluding intentionally or self
induced illness or injury - insured donated one of her kidneys to save life of
her brother - role of equity
Background
The complainant had one of her kidneys transplanted to her brother in order
to save his life. For this purpose she had been hospitalised and claimed for a
sickness benefit under her policy. The insurer admitted that she had been the
only suitable donor.
The insurer rejected her claim on the grounds of an exception in the policy
which read:
“A Policyholder shall not be entitled to a sick pay benefit ….:
(c) if a Policyholder’s Sickness …is in the opinion of [the insurer]
attributable to, continued by or aggravated by excessive indulgence in
liquor or drugs, immorality or disorderly conduct, intentionally selfinflicted or intentionally self-induced illness.”
A “sickness” was in turn defined to include an injury.
Discussion
The central issue was the meaning of the words “intentionally self-inflicted or
intentionally self-induced illness”. Should they be interpreted literally, which
would result in the operation wounds having been intentionally inflicted, or
should a more limited meaning be attached to them?
We recognised that a literal interpretation would in most sets of circumstances
produce satisfactory results, but we suggested to the insurer that in
exceptional circumstances a literal interpretation could produce disquieting
results. We suggested a few examples. One postulated a doctor who is in
charge of patients afflicted by a highly contagious disease. He appreciates the
probability that he himself will contract the disease if he makes contact with
the patients, but he undertakes the risk and eventually becomes sick.
Another example postulates an insured who pays a visit to a bush area. He
gets bitten by a snake he believes to be poisonous. In an effort to prevent
complications he makes an incision in himself with his pocket knife. The
wound gets infected and he lands in hospital.
Applying the exclusion literally in the above examples would result in a claim
for the sickness benefit being excluded, but would that really be in accordance
with the intention of the parties?
In Lehmbecker’s Earthmoving v IGI 1984 3 SA 513 (A) 520 I Miller JA
remarked:
“It not infrequently happens that the parties use simple words, in
themselves unambiguous, but which cannot readily or reasonably be
applied in their literal sense to all the situations to which their agreement
was directed. In such cases an element of ambiguity rises from the fact
that ‘an absolutely literal interpretation’ may be wholly or substantially
impracticable, or productive of startling results which could hardly have
been intended. See MacGillivray and Parkington (ibid para 1040 at4378).) ‘Therefore’, say the learned authors, ‘some gloss on the words
becomes essential and their surface plainness is seen to be illusory.’ ”.
Our impression was that although the expression “intentionally self-inflicted or
intentionally self-induced illness” appears on the face of it to be otherwise, it is
in the final analysis ambiguous because a literal interpretation produces
unsatisfactory results when applied in the above examples. We therefore
thought that a corrective interpretation was called for.
In dealing with the problem of ambiguity the remarks of the SCA in SA
Forestry CO Ltd v York Timbers, 2005 3 SA 323 (SCA) at 340 should be
borne in mind:
“In the interpretation process, the notions of fairness and good faith that
underlie the law of contract again have a role to play. While a court is not
entitled to superimpose on the clearly expressed intention of the parties
its notion of fairness, the position is different where a contract is
ambiguous. In such a case, the principle that all contracts are governed
by good faith is applied and the intention of the parties is determined on
the basis that they negotiated with one another in good faith.”
The question was how the words concerned were to be interpreted to avoid
an undesirable outcome?
It was noted by us that apart from the reference to “intentionally self-inflicted
or intentionally self-induced illness” the exclusion listed some specific causes
of sickness (as defined including injury) viz indulgence in liquor, indulgence in
drugs, immoral conduct and disorderly conduct. These specific causes of
sickness or injury constitute a category of deliberate conduct morally or
socially reprehensible according to the convictions of society. Considering the
eiusdem generis rule and more specifically its colleague the noscitur a sociis
rule (according to which the meaning of a word or phrase used in a series is
influenced by others in that series) it could be contended that the words
“intentionally self-inflicted or intentionally self-induced illness” are likewise
intended to refer only to deliberate conduct of an improper nature. On this
basis intentional conduct not amounting to misconduct would not be within the
parameters of the exception.
We accordingly suggested to the insurer that the provision might be
ambiguous and that the words “intentionally self-inflicted or intentionally selfinduced illness” might have to be interpreted to mean deliberate conduct
which is improper according to the norms of society. This would bring the
meaning of the words in question into line with the rest of the exclusion as
well as with the dictates of good faith. The conduct of the complainant in casu
was not capricious; on the contrary it was necessary for the preservation of
life and therefore irreproachable. For this reason we suggested that her
conduct, though deliberate, might not fall within the scope of the exclusion as
interpreted.
We raised yet another concern about the clarity of the exclusion clause. We
pointed out that only an intentionally self-inflicted or self-induced “illness” was
excluded, but not a self-inflicted or self-induced “sickness” which, as defined
in the policy, would include an injury. The word “illness” might therefore be
said to bear its ordinary meaning, which as such does not embrace an injury.
What the complainant suffered, as a result of her operation, was an injury and
not an illness. Seen in this light the exclusion would not affect her.
The insurer remained unpersuaded.
Conclusion
In the final analysis, however, we recognised that the interpretation proposed
above was not capable of easy solution. In terms of our Rule 1.2.4 the
Ombudsman has the power, indeed and is required to ensure, that he accords
due weight to considerations of equity which constitutes the equity jurisdiction
of the Ombudsman.
While it is not possible or advisable to define equity, it will be required to be
considered in all cases of perceived injustice, where the law does not provide
a fair solution. Where the interpretation of a contract cannot be satisfactorily
resolved by applying the law, the circumstances and consequences should be
assessed with equitable considerations in mind.
While equity cannot be defined, it must at least be measured according to the
convictions of the community. Would a reasonable person in the given case
regard it as fair and just that the claim at issue be rejected?
We finally grounded our decision on the Ombudsman’s equity jurisdiction. On
this basis we decided that the claim was not excluded by the clause. The
insurer accepted our ruling and paid the benefit.