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[2018] ZAGPJHC 460
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B v Hollard Life Insurance (2014/10011) [2018] ZAGPJHC 460; [2018] 4 All SA 77 (GJ) (16 April 2018)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
CASE NUMBER: 2014/10011
DATE OF HEARING: 30 JANUARY
2018
DATE
OF JUDGMENT: 16 APRIL 2018
REPORTABLE
OF
INTEREST TO OTHER JUDGES
REVISED
In the matter between:
B,
E
Plaintiff
and
HOLLARD
LIFE ASSURANCE COMPANY
LIMITED
Defendant
J U D G M E N T
AVVAKOUMIDES,
AJ
INTRODUCTION
[1] The plaintiff, who is the surviving spouse of J B, (“the
deceased” or “the insured”), instituted action
against the defendant for payment of the sum of R1 160 000.00, such
amount being in respect of compensation arising from a life
policy
taken out by the deceased with the defendant.
[2] The plaintiff is the beneficiary under such life policy.
[3] The defendant rejected the claim of the plaintiff on the grounds
of the deceased’s alleged misrepresentation, and
non-disclosure,
of certain facts to the defendant at the time when
application was made for the life policy.
[4] The defendant pleaded,
inter alia
, that the insured
breached the terms and conditions of the contract of insurance in
that he misrepresented the truth relating to
a lung mass/dot which
according to the insured was noticed in June 2010 on an X-ray and
that such mass/dot was “
nie kwaadaardig
”.
[5] The four grounds of non-disclosure relate to the insured not
having disclosed that:
[5.1] he had a heart or circulation ailment;
[5.2] he suffered from a breathing or lung ailment;
[5.3] he suffered from depression;
[5.4] that a proposal for life insurance on the insured’s life
was previously declined.
ISSUES
FOR DETERMINATION
[6] In the pre-trial minute dated 29 November 2017 the parties agreed
that the issues to be determined by the court will be the
following:
[6.1] “
did the insured misrepresent and omit or conceal
facts in the proposal stage of the application for insurance and
thereafter? and/or
[6.2]
was
the misrepresentation and non-disclosure material
?”
[7] I shall deal with additional issues raised by the parties during
the trial hereunder.
THE
DEFENDANT’S EVIDENCE
[8] The quantum was agreed and because of the defendant’s
rejection the defendant had the duty to begin and carried the
onus
of proof. Ms Hayley Taylor testified that she is head of underwriting
at the defendant and has been head of underwriting at the
defendant
for two years. She was previously an underwriting manager with the
defendant for close to 13 years. Ms. Taylor explained
each section of
the proposal form which was submitted and used in order to assess the
risk that the defendant would undertake in
insuring the life of the
insured. Ms. Taylor testified on the contents of paragraph 8 of the
proposal form as well as the policy
wording in so far as the
non-disclosure clause and the warranty portion thereof is concerned.
[9] Her evidence dealt with the particular wording of the questions
in the proposal form and that the insured, in terms of the
proposal
form, warranted that all the information provided in the proposal
form, and all the documents that have been, or will
be signed by him,
in connection with the intended application for insurance were, to
the best of the insured’s knowledge
true and complete.
[10] The insured agreed that the application and any declaration,
together with all relevant documents that had been, or were to
be
signed by the insured, or any person whose life was to be insured in
terms thereof, formed the basis of the contract between
the defendant
and the insured, and that if any material information whatsoever is
withheld, the benefits and all monies paid to
Hollard Life shall be
forfeited.
[11] Ms. Taylor explained that the insured’s proposal form and
application for life assurance was accepted by the defendant
and at
underwriting stage the only tests that were called for were the HIV,
Random Glucose, Gamma GT, ALT, Random Cholesterol and
HDL tests.
During cross examination Ms. Taylor testified that the reason why
these tests were called for was due to the insured
having stated in
the proposal form that he had never been tested for these and
furthermore, these tests are the standard tests
which are done by the
defendant when underwriting any application for life assurance.
Ms. Taylor further testified that additional
tests are only called
for by the defendant when the defendant deems it necessary, after
taking into account the disclosures made
by the insured in the
proposal form and any other documents which may be submitted by the
insured.
[12] In this case the insured disclosed, in the proposal form, that
he had an ailment or illness in the muscles, skeletal joints
(e.g.
rheumatism, arthritis, back or neck trouble, gout). He further
answered yes to the question whether he had “
sought or
received medical treatment in the past 5 years in connection with any
symptom or condition or been a patient in a hospital
or nursing home
not mentioned in the proposal form or undergone any medical
examination”
. The insured then later on elaborated by
stating that he had “
X-strale van longe – verlengde
brongitis (nie longontsteking nie)
”. The insured had
further disclosed that he had a small spot on his left lung which the
doctor noticed with an X-Ray during
June 2010 and that the spot was
not malignant.
[13] Ms. Taylor testified that the defendant works on a principle of
good faith and, given that the insured disclosed that the
dot on the
lung was “
nie kwaadaardig
”, and that the
disclosure of gout and one episode of bronchitis does not raise any
“red flags” at underwriting
of a life assurance policy,
the defendant did not deem it necessary to send the insured for any
additional tests.
[14] Ms. Taylor testified that she was informed that the insured had
passed away when the defendant’s claims department sent
the
proposal form and several personal medical reports to the
underwriting department to re-underwrite the policy. She said that
policies are sent back to the underwriting department when a
misrepresentation or non-disclosure is discovered at claim stage.
The
underwriters are then requested to re-underwrite the policy to
determine whether the underwriter would have reached a different
outcome when assessing the risk and whether they would have offered
to insure the insured on different terms or not at all had
they been
aware of the misrepresented or non-disclosed facts at the
underwriting stage.
[15] In this case the policy was sent to the underwriting department
for re-underwriting given that the claims department at the
claims
stage had identified one misrepresentation and four non-disclosures
in respect of the insured’s policy. Ms. Taylor
dealt with each
non-disclosure and the misrepresentation separately.
[16] In the proposal form the insured was specifically asked whether
any proposal for life, sickness, accident or disability insurance
on
the insured’s life had ever been declined, deferred, withdrawn
or accepted at special terms or on special rates. The insured
answered “no” to this specific question.
[17] At the claims stage the plaintiff as well as the insured’s
broker each submitted a letter to the defendant requesting
that the
defendant review its decision rejecting the plaintiff’s claim.
In the broker’s letter, discovered in terms
of rule 35 by the
plaintiff, he referred to an application to Old Mutual in December
2010 which was rejected due to the dot on
the lung. During
cross-examination the broker, Mr. De Waal, testified that he obtained
this information from either the plaintiff
or the insured’s
daughter; he was unable to recall which one.
[18] The plaintiff’s letter, she also refers to the Old Mutual
Policy which was rejected in December 2010 and mentions a
Momentum
Policy application which was also declined. The plaintiff did not
testify and therefore was no cross-examined as to the
contents of
this letter.
[19] Ms. Taylor testified that, aside from the insured disclosing
that there were other applications that were declined, there
is no
other way for the defendant to establish this information.
[20] At the proposal stage the insured was specifically asked whether
he was suffering, or had ever suffered from difficulties
with the
nervous system (e.g. concussion, fainting, paralysis, dizziness,
depression, anxiety, persistent headaches?) to which
the insured
responded “No”.
[21] The plaintiff, in her admissions sought by the defendant,
admitted that the insured was diagnosed with depression during
2008/2009 and that the insured received treatment for depression and
was cured. The plaintiff admitted that the insured did not
disclose
that he suffered from depression in 2008/2009.
[22] Ms. Taylor referred to the personal medical attendant report
submitted by Dr Van der Merwe at claim stage (the contents of
which
was admitted by the plaintiff as being correct) which shows that the
insured had symptoms of depression and consulted with
Dr Van der
Merwe on 28 August 2003, 4 August 2009 and on 3 September 2009, the
insured had symptoms of, and consulted with Dr Van
der Merwe, for
tension, prior to policy inception.
[23] Ms. Taylor also referred to the personal medical attendant
report submitted by Dr Rian Smit at the claims stage (the contents
of
which was also admitted by the plaintiff as being correct) which
shows that the insured had symptoms of, and consulted Dr Smit,
for
chronic depression on 19 August 2009, prior to policy inception.
[24] Ms. Taylor referred to the Old Mutual report completed by Dr Van
der Merwe (the contents of which were admitted by the plaintiff)
which shows that the insured was on anti-depressants during
2008/2009. Ms. Taylor’s evidence was that had the insured
disclosed
at application stage that he had suffered from depression,
the defendant would have asked for additional medical information and
would have investigated the severity of the depression and, depending
on the results of the investigation, the defendant could
have applied
a permanent suicide clause, as a condition to the policy.
[25] During cross-examination Ms. Taylor testified that the insured
was obliged to disclose that he had previously suffered from
depression as this would affect how the defendant assessed the risk
it was to undertake in insuring the insured and that the duty
is on
the insured to disclose what conditions he had.
[26] At the proposal stage the insured was specifically asked whether
he had ever, or currently suffers from heart or circulation
ailments
(e.g. Blood pressure, chest pain, heart murmur, palpitations,
rheumatic fever, stroke) to which the insured responded
“No”.
Ms. Taylor referred to the personal medical attendant report
submitted by Dr Rian Smit at the claims stage (the
contents of which
was admitted by the plaintiff) which shows that the insured had
symptoms of and consulted with Dr Smit for early
cardiac heart
failure on 14 February 2011 and for which he was treated for prior to
policy inception.
[27] It was put to Ms Taylor under cross examination that the insured
had undergone a cardiac failure test by Dr Smit on 17 February
2012,
after policy inception, and one year after the insured’s
initial symptoms and treatment for cardiac failure. Dr Smit
reported
that cardiac failure was not supported by pro BNP (300) on 17
February 2012. The plaintiff failed to call the relevant
doctor to
explain the reason for this test, one year after the initial symptoms
and treatment for cardiac failure.
[28] Ms. Taylor testified that had the insured disclosed at the
application stage that he had suffered from cardiac failure, the
defendant would have obtained a full medical ECG and reports from the
treating doctor and the defendant would have asked for additional
medical information.
[29] It was further put to Ms Taylor that the reason why the cardiac
failure was not disclosed is because the question was not
clear and
“to suffer” was understood to mean “to have a
prolonged issue” whereas the insured was treated
for the
medical condition and cannot be said to have suffered from it. Ms.
Taylor maintained that the insured, even though he had
been treated
for cardiac failure, should have still disclosed that he had suffered
therefrom given that this is a condition that
would affect how the
defendant assessed the risk it was to undertake in insuring the
insured.
[30] At the proposal stage the insured was specifically asked whether
he had then, or ever before suffered from a breathing or
lung ailment
(e.g. persistent cough, shortness of breath, tuberculosis, asthma,
bronchitis) to which the insured responded “No”.
The
plaintiff however admitted that the insured had symptoms and was
diagnosed with chronic obstructive pulmonary disease (COPD)
prior to
the inception of the policy. In the Old Mutual Medical file report
dated 17 November 2011, prior to inception of the policy,
and
completed by Dr Van der Merwe, it is indicated in three different
sections, that the insured had been diagnosed with COPD and
that he
suffered from COPD for approximately 10 years.
[31] Ms. Taylor testified further that the ECG submitted to Old
Mutual by Dr Van der Merwe states that the patient coughed a lot
and
this could be due to the insured suffering from COPD. Ms. Taylor
testified that had the insured disclosed at the application
stage
that he had suffered from COPD, the defendant would have called for
lung function tests and a pulmonologist’s report
for the
defendant to assess the risk it would be undertaking in insuring the
insured.
[32] Ms. Taylor testified that when an applicant, suffering from
cardiac and pulmonary disease, applies for cover, the defendant
would
not have offered terms to the applicant and would have declined the
policy application. In the proposal form the insured
was asked
whether he was aware of any other health condition (past or present)
which may influence the risk attached to the application,
to which
the insured answered “yes” and went on to elaborate that
he had a small spot on his left lung which the doctor
noticed on
X-rays. The insured went on further to state that the dot was
not malignant and inserted a date of “6/2010”.
[33] Ms. Taylor testified that an ASISA search (common data based
search) was performed on 30 September 2011, which showed that
Old
Mutual had recorded that the insured had a benign lung tumour and
that the ASISA search is based on what the other insurers
capture on
the system based on the information which they have. Ms. Taylor
testified that there had been nothing in any report
to indicate that
there was a diagnosis to the effect that the dot was not malignant
prior to policy inception. She referred to
the X-Ray report verified
by Dr Louw dated 5 October 2010 which indicated that the insured had
a mass lesion and that a tumour
cannot be excluded.
[34] Ms. Taylor testified further that the report submitted to Old
Mutual by Dr Van der Merwe in which he referred to a mass lesion
detected on a test X-ray, shows that Dr Van der Merwe suggested to
the insured that he should go for a CT Scan, but the insured’s
response was that he would go later. Dr Van der Merwe in the same
report and at a different section wrote “query tumour on
lung”.
Ms. Taylor pointed out that in the clinical file Dr Van der Merwe
again refers to the tumour on the lung and states
that the insured
was reluctant to go for a CT Scan.
[35] She drew the court’s attention to Dr Van der Merwe’s
personal medical attendant’s report which indicates
that on 5
October 2010 he recorded that the insured has a mass lesion on his
left lung and does not want to undergo further tests.
Ms. Taylor
testified that had the insured indicated that the spot had not been
diagnosed, the defendant would have called for an
exact diagnosis and
only once the defendant was aware of what it was acting on, would it
be able to assess the risk properly. Ms.
Taylor testified that
without a diagnosis the defendant would have deferred the application
until there was a diagnosis and, upon
a malignant diagnosis the
defendant would only consider cover on terms 3 years post completion
of treatment.
[36] During cross-examination Ms. Taylor, when questioned on Dr Van
der Merwe’s report to Old Mutual in which he had stated
that
the insured had never been diagnosed, treated or had symptoms of
cancer, growths or warts of any kind, responded that the
reason for
Dr Van der Merwe’s response, is because the dot had not been
diagnosed due to the insured being reluctant to undergo
further
testing.
[37] Ms Taylor maintained that the misrepresentation by the insured
on the benign status of the dot on the lung lies in the following:
from 5 October 2010 when Dr Van der Merwe identified the mass lesion
in the lung and reported that the insured did not want to
undergo
further investigation, up until April 2012, when the insured was
diagnosed with lung cancer, there were no other investigations
on the
lung and the insured could thus not at the stage of inception have
known that the dot was not malignant. The fact that he
ascribed a
benign status to the dot on the lung is the crux of the
misrepresentation.
[38] Under cross examination Ms Taylor was asked whether the
defendant had not “
seen the red light
” when faced
with an application in which mention is made of a dot on the lung and
that the insured had in addition disclosed
that he smoked 15
cigarettes a day. She responded that a dot on the lung is not unusual
and 15 cigarettes per day are not excessive.
Ms. Taylor testified
that there was no disclosure which warranted the insurer requesting
further tests.
[39] Ms. Taylor stated that at the re-underwriting stage the
underwriters look at the policy as well as the doctor’s reports
and decide whether they would have still offered cover on terms if
they had those doctors reports with them at the underwriting
stage
and confirmed further that underwriters do not look at the cause of
death at all when re-underwriting a policy. The cause
of death is
kept separate from the enquiry and only the medical reports are
looked at.
[40] In conclusion, Ms. Taylor testified that the doctors’
reports referred to above were only given to the defendant at
claim
stage and the defendant did not have these reports at the
underwriting stage. Furthermore Ms. Taylor reaffirmed that the
defendant would not have offered cover on terms based on the
combination of cardiac failure and COPD as well as the undiagnosed
tumour.
[41] Ms. Susan Mary Gonnerman, an employee of the defendant,
confirmed that the doctor’s personal medical reports and all
medical reports referred to only came to the defendant’s
attention at the claim stage. She testified that when the defendant
receives a claim within three years of date of inception of the
policy, the defendant always requests personal medical reports
from
the treating doctors. Ms. Gonnerman went on to testify that the
defendant refunded the premiums to the plaintiff after rejecting
the
claim.
[42] In addition, the defendant paid out the insured’s funeral
policy as is customary, given that at that stage the defendant
would
not have had any reports and should the defendant after
re-underwriting the policy, decide to reject or avoid the life
policy, the funeral payment would be considered an
ex gratia
payment and not be claimed back.
[43] Ms. Gonnerman testified that payment in respect of the funeral
policy was made at 10h00 am on 29 August 2012 and Dr Van der
Merwe’s
report was received at 11h00 am on 29 August 2012 and that when
medical reports are received by the defendant they
are allocated to
the assessors who have a 5 to 10 day turnaround time. The plaintiff’s
counsel’s cross examination
on this point did not achieve
anything, save to suggest that perhaps the report of Dr Van der Merwe
had been received earlier and
that, by paying the benefit under the
funeral policy, the defendant had elected to be bound by the life
policy, in terms of which
the funeral benefit is not a stand-alone
benefit, but linked to the life cover.
[44] Initially the plaintiff’s counsel informed Ms Gonnerman
that the plaintiff denied having received repayment of the premiums
and with the leave of the court, and no objection from the plaintiff,
Ms Gonnerman returned to court on the next day of trial with
documents evidencing the repayment.
THE
PLAINTIFF’S EVIDENCE
[45] Mr Krige De Waal testified that he sat with the insured and
completed the proposal form with the answers furnished to him
by the
insured. Under cross examination he testified that the insured signed
the proposal form after Mr De Waal had completed same
for the
insured. Mr De Waal testified that he asked the insured if he was
currently (i.e. at that stage) suffering from any of
the conditions
listed in the proposal form, and not whether he had in the past
suffered from any ailment. This he explained was
so because he knew
there was a question further on in the application dealing with any
other conditions which the insured would
have to disclose, and from
which he may have suffered in the last 5 years. Under cross
examination Mr De Waal conceded that the
proposal form does not read
“any current conditions” but reads “do you, or have
you ever...”, so phrased
in Afrikaans.
[46] Further under cross examination, Mr De Waal explained that the
failure to disclose the depression in paragraph 8 of the proposal
form was because he was mistaken about the preamble to the wording of
paragraph 8. Mr. De Waal explained that the disclosure
of the
dot on the lung and that it was not malignant was what was conveyed
to him by the insured. The insured further informed
Mr De Waal that
he had consulted a doctor but did not know what it was, that it could
be anything, and this is why it was disclosed.
Mr De Waal testified
that he expected the defendant to have performed tests on the dot but
only enquired about this at claim stage.
None of the other
undisclosed conditions were dealt with in the “5-year question”
to which Mr De Waal referred.
[47] Mr De Waal accepted that the insured, acting through Mr De Waal,
agreed to be bound by the answers set out in the questionnaires
as
well as the declarations made by, or on behalf of, the insured.
[48] Mr De Waal testified that he asked the insured if he at that
stage was suffering from any “
aandoening van die hart of
bloedsomloop
” to which the insured answered “no”.
It was only during cross examination when his attention was drawn to
the
phrasing of the question: “
Ly u, of het u al ooit gely
aan die volgende
?” that Mr De Waal conceded that he had not
conveyed the actual the question to the insured. No evidence was
presented that
the insured in actual fact read the pre-amble and/or
read the question itself.
THE
DEFENDANT’S CONTENTIONS
[49] The defendant argued that the insured had a lung mass which his
doctor noticed in June 2010 and which the insured represented
to have
been benign, whereas in fact the insured had refused further
treatment and/or investigation and therefore could not have
known
whether the lung mass was benign or malignant.
[50] The insured had symptoms of, and sought medical treatment for
COPD and that the condition was diagnosed and treated prior
to the
date of completion of the policy application form. However on the
proposal form the insured indicated that he did not previously,
or at
the time of the proposal stage, suffer from a breathing or lung
ailment.
[51] The insured had symptoms and sought medical advice for early
cardiac failure and received treatment for the cardiac failure,
however on the proposal form the insured indicated that he did not
previously, or at the time of the proposal stage, suffer from
a heart
or circulation ailment.
[52] The insured applied for two life insurance policies that were
declined prior to the proposal stage, one by Old Mutual and
one by
Momentum, however on the proposal form the insured indicated that no
proposal for life, sickness, accident or disability
insurance in
respect of the insured had ever been declined.
[53] The insured suffered from chronic depression and was treated for
this condition in 2008 and 2009, however on the proposal
form the
insured indicated that he had not previously, or at the time of the
proposal stage, suffered from difficulties with the
nervous system
(e.g. concussion, fainting, paralysis, dizziness, depression,
anxiety, persistent headaches).
[54] The insured signed a declaration in which he warranted that all
the information provided in the application, and all the documents
that had been or would be signed by him in connection with the
intended application were, to the best of his knowledge, true and
complete. The insured agreed that if any material information
whatsoever was withheld, the benefits and all monies paid to Hollard
Life would be forfeited.
[55] The insured was afforded 30 days to review his policy and to
ensure that the policy met his expectations and was informed
that
“
the owner and all persons claiming under the policy are
bound by all questionnaires and declarations answered or made by or
on behalf
of the owner
”.
[56] The defendant contended that the insured misrepresented or
failed to disclose the above facts and that these facts were material
to the assessment of the risk, and that the misrepresentations and
non-disclosures induced the defendant to enter into the agreement,
even though that this is not a requirement given that the insured had
breached the warranty.
THE
PLAINTIFF’S CONTENTIONS
[57] The insured indicated in the questionnaire that he had not, and
did not at the time suffer from any “
aandoening van die hart
of bloedsomloop
”. It was conceded that the insured should
have answered this question in the affirmative, given the content of
Dr Smit’s
report. However, the plaintiff argued that the
evidence of Mr De Waal on how the questionnaire was completed is
important. Mr De
Waal completed the questionnaire in his own hand
writing. He solicited a yes or no answer from the insured to each
question.
[58] Evidently the insured only suffered this once off cardiac
failure, no further evidence was presented of any other or further
cardiac failure(s). The defendant’s answer to this was
obviously that if it was aware or had been made aware of the
insured’s
cardiac failure, prior to inception it would have
requested further medical tests in this regard.
[59] The defendant pleaded that the insured failed to disclose that
he had symptoms and sought medical advice for COPD and that
this was
diagnosed and treated prior to the policy inception. The plaintiff
admitted the report of Dr. Van der Merwe and one would
have expected
that the insured would have answered this question in the proposal
form in the affirmative. One has to however consider
this in the
light of Mr De Waal’s evidence to understand why the answers
were furnished in the manner in which they were.
Mr De Waal’s
evidence was that although the insured indicated that he had a lung
problem the nature, extent and severity
thereof was to be disclosed
elsewhere in the questionnaire.
[60] In respect of the prolonged bronchitis the insured disclosed
this to such an extent that he was admitted to hospital and X-rays
of
his lungs were taken by Dr Van der Merwe and the insured then
indicated that he has spot/mass on his lung.
[61] The plaintiff’s main contentions were that the insured had
completed the questionnaire through Mr De Waal, and that
Mr De Waal
incorrectly understood and conveyed the question dealing with
previous ailments, that in respect of the dot/mass, the
defendant
should have been alerted by the mention thereof and should have sent
the insured for more tests or declined the application.
The same
applies to the question regarding the depression.
[62] The defendant’s witness Ms Taylor testified that the
defendant has a very lenient policy in respect of depression. Thus
even if the insured had answered the question, as he was obliged to,
correctly, it would not have made a difference at all.
[63] The defendant’s reliance on a letter written by Mr De Waal
wherein he indicated that an Old Mutual policy was declined
in 2010
is misplaced and the context of Mr De Waal’s evidence is
important. Mr De Waal had not seen a formal letter of rejection
from
Old Mutual but was advised thereof after the death of the insured by
either the plaintiff, or her daughter.
[64] The defendant’s reliance upon this letter is ill founded
because, despite the agreement on the contents of the discovered
documents, no witness was called to verify the letter, neither has
the letter from Old Mutual been discovered. Ms Taylor had testified
that the defendant could not obtain the letters of rejection from Old
Mutual and Momentum.
[65] In this case the plaintiff admits that the insured failed to
disclosure certain facts however the manner in which the two
questions were phrased was confusing and the insured acted in the
honest belief that he was answering correctly. According to the
plaintiff once it is shown that the insured acted
bona fide
and with an honest belief, it cannot be regarded as
misrepresentation.
[66] The plaintiff argued that under these circumstances the
representations made by the insured were not misrepresentations.
Furthermore and given the evidence of Ms Taylor, and in particular in
response to question 8.5 of the proposal form, the plaintiff
argued
additionally that the non-disclosures were not material. The
defendant bears the
onus
to show the non-disclosures and in
particular in regard to question 8.14 of the proposal form were
material and failed to do so.
The defendant relies on inadmissible
hearsay evidence to anchor its case by failing to show any evidence
that the two prior policy
applications were indeed declined in 2010
and 2011.
[67] In respect of the non-disclosure and misrepresentation regarding
the COPD, the plaintiff admitted that the insured did not
disclose
that he had COPD, but argued that the insured did disclose that he
had been treated for prolonged bronchitis, which is
one the examples
listed in question 8.2 of the proposal form and that he had a
spot/mass on his lung and this is the information
which the Defendant
required to assess its risk.
[68] The insured did disclose a potential life threating condition,
which in his opinion was benign, acting presumably on medical
advice.
The insured disclosed what he knew.
[69] Thus the mere statement of an opinion is
prima facie
not
wrong, even if the insured’s opinion turns out to be wrong.
Secondly, and if the court finds that it was a misrepresentation
it
can never be said that it had been brought on by the insured.
[70] Insofar as the insured’s apparent refusal to seek medical
advice is concerned, it cannot be overlooked that the insured
disclosed a potential life threatening condition, but the defendant
chose to ignore the possible consequences thereof. Once again
the
question as phrased in the questionnaire needs to be considered.
The defendant had the necessary resources to assess
and ask for
further advice in this regard, which it failed and/or refused to do.
[71] In relation to the defendant’s recourse when a material
breach to an agreement has occurred or misrepresentation(s)
was/were
made, the plaintiff referred to Segal v Mazzur
1920 CPD 634
at
644-645 (applied in Trust Bank van Afrika Bpk v Eksteen
1964 (3) SA
402
(A) ). The plaintiff relied on this case to show that the
defendant in paying out the funeral benefit to the plaintiff, elected
to be bound by the policy despite having purportedly repudiated the
policy. The reasoning is that the funeral benefit is not a
stand-alone cover and forms part of the life policy. Watermeyer AJ,
in Segal, illustrated the position of a party to a contract
who is
entitled to resile from a contract and that such party has to elect
what to do, after which he is bound to his election.
[72] The plaintiff argued thus that any material misrepresentations
would constitute forfeiture of
all
benefits in terms of the
agreement. Accordingly, if the defendant submitted that the
misrepresentations were material and therefore
the life insurance
benefit was forfeited, the same misrepresentations would have
rendered the funeral benefit forfeited as both
benefits are regulated
by the same agreement. This notwithstanding, the funeral benefit was
paid to the plaintiff.
[73] The policy does not provide for an
ex gratia
payment. The
defendant is either liable to perform or not, given the fact that it
did perform by paying the funeral benefit, the
defendant accepted
that it is liable.
THE
LEGAL POSITION AND JUDICIAL REASONING
[74] Section 59 of the Long-Term Insurance Act, 52 of 1998, reads as
follows:
“
Misrepresentation and failure to disclose material
information (Heading substituted by section 19 of Act 17 of 2003)
(1)(a) Notwithstanding anything to the contrary contained in a
long-term policy, whether entered into before or after the
commencement
of this Act, but subject to subsection (2)-
(i)
the policy shall
not be invalidated;
(ii)
the obligation of
the long-term insurer thereunder shall not be excluded or limited;
and
(iii)
the obligations
of the policyholder shall not be increased, on account of any
representation made to the insurer which is not true,
or failure to
disclose information, whether or not the representation or disclosure
has been warranted to be true and correct,
unless that representation
or non-disclosure is such as to be likely to have materially affected
the assessment of the risk under
the policy concerned at the time of
its issue or at the time of any variation thereof.
(b)
The representation or non-disclosure shall be regarded as material if
a reasonable, prudent person would consider that the particular
information constituting the representation or which was not
disclosed, as the case may be, should have been correctly disclosed
to the insurer so that the insurer could form its own view as to the
effect of such information on the assessment of the relevant
risk.
(Section 59(1) substituted by section 19 of Act 17 of 2003) (2) If
the age of a life insured under a long-term policy has
been
incorrectly stated to the long-term insurer, the policy benefits
shall, notwithstanding subsection (1), be those which would
have been
provided under that policy in return for the premium payable had the
age been correctly stated: Provided that if the
nature of that
long-term policy, or kind of long-term policy, is such as to render
such arrangement inequitable, the Registrar
may direct the long-term
insurer to apply such different method of adjustment to the policy
benefits of that long-term policy,
or type of long-term policy, as
the Registrar considers equitable in relation to the misstatement of
age
.”
[75] An insurer has the right to avoid a contract of insurance not
only if the proposer has misrepresented a material fact but
also if
he has failed to disclose one. The burden of proving materiality is
on the party alleging the misrepresentation or non-disclosure.
See:
Fransba Vervoer (Edms) Beperk v Incorporated General Insurance Ltd
1976 (4) SA 970
(W) 977 and Clifford v Comme4cial Union Insurance Co
of SA Ltd ZASCA 37
[1998] ZASCA 37
; ;
1998 (4) SA 150
(SCA) at 156E. There is a duty
ex
lege
to disclose in insurance contracts.
[76] In Tucker Land Development Corporation (Pty) Ltd v Hovis
1980
(1) SA 645
(A) the following was held: “
It should therefore
be accepted that in our law an anticipatory breach is constituted by
the violation of an obligation ex lege,
flowing from the requirement
of bona fides which underlies our law of contract. It would also be
desirable, in order to obtain
clarity of thought, to jettison the
terminology of offer and acceptance in this regard, and to denote a
creditor's decision to
act upon an anticipatory breach not as an
'acceptance' but as an election
.
(Cf Kerr Law of Contract 2nd
ed at 289 - 90.) Once the existence by operation of law of an
obligation not to commit an anticipatory
breach is accepted, the
question remains as to how that obligation can be violated. The
answer generally given is: by repudiation
.”
[77] The learned authors, Gordon & Getz in The South African Law
of Insurance (4th edition, pp 126 to 128) describe the duty
of
disclosure as follows: “
The duty of disclosure
continues throughout the negotiations. It terminates when the
contract is concluded. Material facts which
come to the proposer's
knowledge before the contract is concluded, or facts which, though
previously immaterial, become material
owing to changed circumstances
before then, must be disclosed
”.
[78] Once the contract has been concluded, however, the proposer is
not obliged to disclose further material facts. In an ordinary
life
policy the rule is different. The life insurance contract is a
continuing contract which the insured has the right to keep
in
existence by paying the premiums when they fall due. As the ‘renewal’
is not a ‘new contract’, no fresh
duty to disclose
arises. See: Pereira v Marine & Trade Insurance Co Ltd
1975 (4)
SA 736
(A).
[79] Closely coupled with the duty to disclose is the duty of good
faith. In Mutual and Federal Insurance Company Ltd v Municipality
of
Oudtshoorn (240/82) [1984] ZASCA 129
[1984] ZASCA 129
; ;
[1985] 1 All SA 324
(A) (16
November 1984) the court jettisoned the concept of utmost good faith
or
Uberrimae Fides
. This did not result in the law of
insurance contracts no longer requiring the parties to act in good
faith but emphasized that
there cannot be degrees of good faith and
did away with the term “utmost good faith” in favour of
plain and simple,
“good faith”.
[80] For a non-disclosure or a misrepresentation to be legally
relevant it must be material. The representation or non-disclosure
shall be regarded as material if a reasonable, prudent person would
consider that the information constituting the representation,
or
which was not disclosed, as the case may be, should have been
correctly disclosed to the insurer so that the insurer could form
its
own view as to the effect of such information on the assessment of
the relevant risk.
[81] The defendant’s application and proposal form, in my view,
is clearly worded and unambiguous. Both the insured and Mr
De Waal
used the Afrikaans language and the form was printed in Afrikaans.
There can thus be no question of having misunderstood
the form. Mr De
Waal himself conceded that he misunderstood the preamble of paragraph
8 of the form and this does not assist the
plaintiff at all. Mr De
Waal in his capacity as the insured’s agent would therefore
have bound the insured to the contents
so disclosed.
[82] In the latter regard, the authors Gordon and Getz refer to the
case of Rabinowitz & Another NNO v Ned-Equity Insurance
Co Ltd
1980 (1) SA 403
(W) at 407 G, wherein the legal position of the
broker was clarified. The insured in Rabinowitz, who had effected a
whole –
life insurance policy as well as an aviation accident
policy, was killed in a glider crash and the two insurers repudiated
liability
on a number of grounds. The company with whom the insured
had effected the life policy repudiated liability,
inter alia
,
on the ground of misrepresentation. The insurer had requested
information in respect of the purpose of the proposed policy as
well
as a statement of the assets and liabilities of the insured. It was
alleged by the insurer that the information had been supplied
by the
insured to his broker and from the broker to the insurer. As the
information supplied was incorrect, the insurer repudiated
liability
on the basis of a misrepresentation.
[83] Nicolas J, although holding that the statements had not been
proved to be false, dealt with the plaintiff's contention that
in any
event the contents were not imputable to the insured. The court
stated the following:
"
It was pointed out that it was specifically provided in the
form that the statement (which was signed by the broker) should be
completed
by the broker, and that there was no evidence that the
deceased supplied the information or authorised the broker to
communicated
it to the first defendant… Nevertheless I am
satisfied that the deceased was bound by the statement as fully as if
he had
signed it himself. Where a person employs an insurance broker
to obtain insurance for him, the broker is his agent and
responsibility
for the acts and omissions of the broker is governed
by the ordinary law of agency. The communication of information
relevant to
the proposed insurance during the course of negotiating
therefore is plainly within the authority of an insurance broker
.”
[84] The failure to answer the relevant questions truthfully
therefore falls short of what is required to overcome the breach of
the warranty pleaded by the defendant. On the question of the dot on
the lung, in my view the defendant, although not obliged to
do so,
could reasonably have sent the insured for tests and this would have
alerted the defendant to an issue with the insured’s
lung. The
aforesaid however does not exclude the remaining and material
information that was not disclosed by the insured, neither
does the
defendant’s failure to further investigate the dot on the lung
take the matter any further.
[85] The question of the previous refusals to insure by another
insurer is in my view simple. That there were two applications
which
were declined is an objective fact. This is on the plaintiff’s
own version. The plaintiff’s reliance on the absence
of
documentary proof thereof is misplaced because this information fell
within the knowledge of the insured and the plaintiff prior
to the
conclusion of the life insurance policy. The evidence of the previous
two applications being declined is hearsay evidence
however, whilst
being hearsay evidence it is the hearsay evidence of the plaintiff’s
own witness.
[86] Therefore the plaintiff was in a position to call “
the
person upon whose credibility the probative value of such evidence
depends
” however elected not to do so. The plaintiff
argued that the hearsay evidence must be excluded on the basis that
the
plaintiff (who could confirm the previous rejections) did not
testify, thereby rendering Mr de Waal’s evidence as hearsay.
When this is viewed in conjunction with the other aspects set out in
section 3
(1) (c) of The
Law of Evidence Amendment Act, 45 of 1988
,
it may be that the evidence regarding the previous two applications
having been declined should be admitted in the interests of
justice.
I thus cannot accede to the plaintiff’s line of argument.
[87] The plaintiff’s submissions regarding the payment of the
funeral cover costs also do not assist the plaintiff. The defendant’s
evidence was clear. After it was established that the insured had
passed on the defendant usually processes these claims quickly
in
order to assist the family of the deceased. Only after payment of
such proceeds did the defendant establish that there were
material
non-disclosures and misrepresentations and the policy fell to be
voided. The defendant chose not to recover the
funeral benefit
paid out to the plaintiff and considered this to be an
ex gratia
payment. I find that nothing turns on this and it befalls the
defendant to waive repayment of these costs without it affecting
the
repudiation of the main benefit and main claim.
[88] Even if waiver was pleaded, the plaintiff would have had to
prove that the defendant had knowledge of right to avoid the policy
and abandoned such right. The evidence was that the funeral cover was
paid 1 hour prior to receipt of the medical reports which
ultimately
evidenced the non-disclosures and misrepresentations.
[89] Consequently the representations by the insured were not true.
The insured failed to disclose, or disclosed information which
he
warranted to be true and correct, which was not true and correct and
in circumstances where the representations and non-disclosures
were
likely to have materially affected the assessment of the risk by the
defendant under the policy . The defendant was accordingly
entitled
and justified in avoiding the policy.
[90] As a consequence of the voidance of the policy the defendant
repaid the premiums to the plaintiff on 7 December 2012, 15 months
prior to institution of the action. No evidence was led by the
plaintiff suggesting that the premiums so repaid, were not accepted.
ORDER
[91] The plaintiff’s claim is dismissed with costs.
_______________________________
G. T. AVVAKOUMIDES
ACTING JUDGE OF THE HIGH COURT
GAUTENG LOCAL DIVISION, JOHANNESBURG
DATE
:
16 APRIL 2018
Representation for parties:
For Plaintiff: D F Claassens
Instructed by: Faure & Faure
For Defendant: M Rodrigues
Instructed
by: Marques Soares Fontes