In the absence of an exclusion clause, there is no legal or insurance principle which prevents an insured from claiming under two different policies for a recurrence of a condition, says the Ombudsman for Long-Term Insurance, Judge Ron McLaren.
In a final determination, Judge McLaren ordered Alexander Forbes to pay a life assured for dread disease after she had been diagnosed with cancer a second time although she had been paid an earlier claim for cancer by a previous insurer.
During 2013, the complainant was diagnosed with localised breast cancer and a claim was paid under a policy that was underwritten by another insurer.
She underwent a mastectomy on 16 September 2014 followed by radiation therapy and hormonal blockade without evidence of metastases.
From 1 May 2015 the complainant was covered under her employer’s group risk policy for dread disease, underwritten by Alexander Forbes.
On 22 October 2015 the complainant was diagnosed with liver metastases and stage IV breast cancer. She submitted a claim to Alexander Forbes, but the claim was declined.
The insurer first relied on the pre-existing exclusion clause which stated: “No Dread Disease Benefit shall be payable under this policy during the first 12 months of a Life Assured’s Commencement Date if, in the opinion of the insurer, the Dread Disease claim is directly or indirectly attributable to any injury or illness in respect of which the Life Assured sought medical advice, or about which he know or could reasonably be expected to have known, during the six month period preceding the commencement of his becoming a Life Assured.”
The Ombudsman requested Alexander Forbes to provide the medical evidence on which they relied to invoke the pre-existing exclusion clause. No such evidence was provided.
Alexander Forbes said the complainant’s dread disease claim was assessed in great detail and independent and external industry experts were consulted to arrive at a decision. The insurer had relied on the following arguments to decline the claim:
- The medical evidence indicated that the cause for the claim was directly related to a condition for which a claim had been submitted to the “previous insurer” and for which the full benefit had been paid.
- An insurance contract was based on the supposition that the risk had not yet materialized. Therefore, there can be no binding contract of insurance if the risk had already materialised at the time the contract was concluded;
- Group risk insurance contracts were generally accepted on the same terms and conditions by the new insurer as the “previous insurer” so as not to disadvantage the policyholder as a result of changing insurers. In agreeing to take over her benefit on the same terms and conditions as per previous cover effectively meant that Alexander Forbes would need to keep its decision consistent with the “previous insurer”;
- Shortly after commencing insurance, Alexander Forbes sent out a letter accepting the complainant’s previous cover level from the previous insurer. However, at the time, Alexander Forbes was not aware of her prior claim for the same dread disease with the “previous insurer” and was also not aware that her previous accepted cover letter from the “previous insurer” did not make provision for the dread disease claim that was paid. Alexander Forbes’ decision was based on an accepted cover level and decision made by the “previous insurer” prior to her claim being paid by the “previous insurer” and was, therefore, not valid.”
After an adjudicator’s meeting, the ombudsman made a provisional determination that based on the information on file, the pre-existing exclusion clause could not be invoked by Alexander Forbes.
There was no evidence that there had been medical advice sought during the six months preceding the commencement date of cover with Alexander Forbes. Nor was there evidence that the complainant knew or should have known of an illness which fell within the exclusion clause. Based on the evidence on file, she was under the impression that she was in remission.
Judge McLaren also said Alexander Forbes’ argument that the risk had already materialised when the contract was concluded, was flawed for the following reasons:
- The Alexander Forbes policy was a new contract which was concluded on 1 May 2015. It was not a continuation/transfer of insurance business and, therefore, was not the insurance business which the “previous insurer” had underwritten. The Alexander Forbes policy did not incorporate the “previous insurer’s” terms and conditions.
- Under the “previous insurer’s” policy there was a provision which stated that if the complainant had received the total dread disease capital sum benefits equalling the Maximum Critical Condition Benefit, she would not have qualified for a further benefit under the “previous insurer” policy because of this exclusion. There was also an exclusion clause which would apply and exclude her second claim. As she was now covered under a new policy underwritten by Alexander Forbes, the provisions in the “previous insurer’s” policy did not apply. Nor was there any other provision in the Alexander Forbes policy which excluded her from claiming. If Alexander Forbes had wanted to exclude claims such as these, it had the opportunity to provide for such an exclusion in its policy.
- The current claim was not the same claim as that for which the complainant had claimed under the “previous insurer’s” policy. At the time when Alexander Forbes concluded the insurance contract, there was uncertainty as to whether the complainant would have recurrence of cancer. Because of this uncertainty, the risk had not yet materialised. The complainant was not claiming for the cancer which was diagnosed in 2013.
- This was a new claim for the cancer which was diagnosed on 22 October 2015. There was no legal or insurance principle preventing an insured from claiming for a recurrence of a condition (in the absence of a specific provision). If Alexander Forbes wanted to exclude a new separate claim for the same disease, it should have incorporated an exclusion clause to that effect.
- While a life assured cannot be paid twice for the same claim under one policy, there is nothing preventing a life assured from claiming under two different policies for the same disease and benefit.
- Alexander Forbes had failed to provide documentation reflecting that the complainant or the employer had not disclosed information. Alexander Forbes appeared to have relied on information provided by the “previous insurer” in assessing the risk and issuing the cover letter. There was no evidence on file which suggested that either the employer or the complainant had appointed the “previous insurer” as their agent for purposes of disclosure of medical information to enable Alexander Forbes to assess the risk. In the absence of evidence of a duty to disclose on the complainant and the employer, and the absence of the appointment of the “previous insurer” as their agent for such purpose, the defence of non-disclosure could not be upheld.
Alexander Forbes responded by repeating previous arguments without substantiation. It said the group cover was taken over from the “previous insurer”, on the same terms and conditions that existed at the “previous insurer”.
The Ombudsman wrote to Alexander Forbes: “You make statements in your email for which you provide no substantiation. If you want us to take them into account, you have to substantiate your statements.
“General statements which are contradicted by policy terms and evidence also do not carry any weight.”
In response the insurer responded: “The member was paid a 100% benefit on the cancer definition. The claimant’s condition was in remission but this condition was of the same event.”
The matter was again discussed at an adjudicator’s meeting which concluded that the insurer had not provided any information or arguments which convinced the adjudicator’s meeting that the provisional determination that Alexander Forbes must pay the claim, should be set aside.
In his final determination, Judge McLaren said: “The insurer has the onus of proving that the complainant does not have a claim on the basis that they have alleged i.e. that the risk had already materialised.
“No proof/evidence was presented that the complainant had cancer at the time the cover commenced at Alexander Forbes. That would be for Alexander Forbes to prove, and despite numerous opportunities granted, no such proof/evidence was presented.”
He said the complainant’s claim under the “previous insurer’s” policy was not proof that the complainant was suffering from cancer at the time cover commenced under the Alexander Forbes policy.
The complainant had stated that she was cancer free at that time and there was no medical evidence on file that showed any different.
Judge McLaren said the other defence raised by the insurer was that in group insurance business, an insured can only have one valid claim.
“No substantiation was given for this broad-based generalisation. It appears that in Alexander Forbes’ view, if a new group scheme commenced with a new insurer, even if there was no reference to such an exclusion, a life insured cannot receive a benefit for a claim if the same dread disease re-occurs.
“No substantiation is provided for this statement. We are not aware that there is such a limitation. If an insurer wishes this type of limitation to apply, it is free to include such a provision in the policy.”
The Ombudsman said Alexander Forbes had not discharged the onus in proving that any of the defences they had raised, applied to the claim by the complainant.
Therefore, the claim must accordingly be paid by Alexander Forbes together with interest.
Alexander Forbes paid the benefit to the complainant.