Discovery must pay R25m to ex-stockbroker who suffered mental breakdown

The High Court in Johannesburg has ordered Discovery Life to pay more than R25 million to a policyholder who suffered a mental breakdown after he was charged with murdering his girlfriend in Mauritius.

The evidence, on a balance of probabilities, established that the policyholder – referred to as “PR” – was totally and permanently unable to resume his occupation as a “very successful” stockbroker, Judge Stuart Wilson said.

The policy’s monthly premiums of about R20 000 and the permanent incapacity pay-out of more than R25m indicated that PR’s “high-pressure and high-stakes” occupation was “highly lucrative”. His work required “a resilient personality and fine judgment”, the court said.

Discovery Life repudiated PR’s claim on the basis that there was no evidence that he had become totally and permanently unable to perform as a stockbroker by 30 November 2015, which was the date on which his insurance cover expired.

Counsel for Discovery also submitted that, even if there were such evidence, and even if it were true that PR became totally and permanently unable to perform as a stockbroker by 30 November 2015, the question before the court was not whether Discovery’s repudiation of the claim was correct. It was whether the repudiation was reasonable on the information PR supplied to Discovery when PR submitted his claim.

Accordingly, Judge Wilson said, the outcome of the trial hinged on two principal issues:

• Whether PR’s condition, and the incapacity it caused, had become permanent by 30 November 2015; and
• Whether, if PR’s condition had become permanent on 30 November 2015, Discovery was nonetheless justified in repudiating PR’s claim.

Breakdown following murder charge

While PR was holidaying with his girlfriend at his villa in Mauritius, his girlfriend was found drowned in the resort’s swimming pool on 28 December 2014. PR tried to resuscitate her, but he could not.

“For reasons that are not clear from the evidence,” the judge said, PR was suspected of having murdered his girlfriend. On 2 January 2015, PR was arrested and questioned by the Mauritian police. He was charged with his girlfriend’s murder and detained pending trial.

“On the same day, PR appears to have suffered some sort of breakdown. He was admitted to the secure ward of a local hospital and stayed there for four days,” Judge Wilson said.

The judgment described PR’s mental and physical deterioration as noted by a Mauritian state psychiatrist and subsequently by a South African psychiatrist, Dr Larissa Panieri-Peter, who was appointed by PR’s initial legal team to assess whether he was fit to stand trial.

Dr Panieri-Peter diagnosed PR with post-traumatic stress disorder and major depression with psychotic features. She considered that PR might be suffering from bipolar mood disorder but was unable to confirm that diagnosis.

Dr Panieri-Peter was not called to give evidence at PR’s trial in Mauritius because his new legal team decided not to pursue the point that he was unfit to stand trial.

‘Significant and lasting impact’

PR was eventually acquitted of his girlfriend’s murder. In March 2016, he returned to South Africa and was hospitalised in Pietermaritzburg. He was diagnosed with post-traumatic stress disorder and major depression.

Dr Panieri-Peter, who became PR’s treating psychiatrist, adjusted her diagnosis to post-traumatic stress disorder and unspecified bipolar disorder.

“Dr Panieri-Peter testified that PR’s condition has had a significant and lasting impact on his daily life. PR does not drive. He struggles to keep appointments. He finds it difficult to make bookings online. He spends a lot of time indoors. He is estranged from his family. He becomes irrationally angry. PR’s diagnoses, in combination, lead to what Dr Panieri-Peter called ‘thought disorder’, a disorganised way of thinking that manifests in abnormal speech. PR struggles to sustain conversations of any length,” the judgment said.

Judge Wilson said there was no serious dispute that, at the time he heard evidence, more than eight years after the events that triggered PR’s condition, PR was unable to work as a stockbroker, and there was no sign that he would be able to do so in the foreseeable future.

Was PR’s incapacity permanent by 30 November 2015?

After hearing evidence from Discovery’s expert witnesses and Dr Panieri-Peter, Judge Wilson found that PR was incapacitated on 30 November 2015, that he has remained incapacitated since then, and that the care and treatment that might have rehabilitated him have been exhausted.

It followed that PR was “totally and permanently unable” to perform as a stockbroker on or before 30 November 2015 but not earlier than 28 December 2014.

When would a ‘reasonable insurer’ have known the incapacity was permanent?

Turning to the issue of whether it was reasonable for Discovery to repudiate the claim, Judge Wilson made the following observations with reference to PR’s policy:

• The purpose of the policy was to insure against the event that triggers the incapacity, but there may be some time between that event and anyone being able to say that the injury has caused a permanent incapacity.
• In cases of mental illness brought on by trauma, the lag between the onset and the identification of the permanent incapacity may be months or years.
• It seemed the text of Discovery’s policy recognised this by drawing a distinction between the onset of the incapacity and proof to Discovery’s satisfaction that the incapacity was permanent.
• Discovery’s liability was triggered at the point that PR’s inability to perform as a stockbroker objectively became permanent. But its duty to pay out was only triggered once it could be reasonably satisfied that PR’s condition had become permanent.
• The first triggering event – the event that established Discovery’s liability – was the onset of PR’s permanent incapacity on or before 30 November 2015.
• The second triggering event – the event that established Discovery’s duty to pay out – was the point at which facts existed that would have satisfied a reasonable insurer that PR’s incapacity was permanent. That happened in April 2019, when Dr Panieri-Peter formed the view that there was no realistic prospect of a significant improvement in PR’s condition.

Therefore, Judge Wilson said, Discovery became liable under the policy on or before 30 November 2015, and it had a duty to pay out, at the very latest, by 1 May 2019, because that is when a reasonable insurer would have known that PR’s incapacity was permanent.

“The subjective reasonableness or otherwise of Discovery’s opinion of whether and when PR’s condition became permanent is irrelevant to its duties under the policy,” he said.

Refusal to consider post-lapse reports was ‘far from reasonable’

Judge Wilson said even if the question before the court was confined to an assessment of the reasonableness of Discovery’s conduct in repudiating PR’s claim, it did not seem that Discovery conducted itself reasonably.

Discovery repudiated PR’s claim on 25 August 2016. Its letter “vacillated” between the proposition that PR has no claim because his policy had expired, and the proposition that it had not at that point been established that PR’s incapacity had become permanent on or before 30 November 2015, and that PR’s claim was not “ready for assessment”.

This “confusion” was deepened in an email dated 15 September 2016 in which Discovery’s legal manager reiterated that the information then available did not establish the onset of a permanent incapacity on or before 30 November 2015, and that any reports dated after the lapse date would not be taken into account in assessing PR’s claim.

This position was “far from reasonable”. It not only entailed the proposition that PR had to have suffered the onset of a permanent incapacity on or before 30 November 2015, but also that he had to have assembled, by that date, all the information necessary to prove it. “On the facts of this case, that was obviously impossible.”

Once PR submitted his claim, Discovery had a duty to establish whether he suffered a permanent incapacity on or before 30 November 2015, because it was that event that triggered its liability under the policy. There was no basis in the policy, or in reasonableness, on which Discovery could have refused to consider that question by reference to documentation generated after the policy expired, Judge Wilson said.

“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 the case illustrated the point.

There was no dispute that PR’s incapacity could not have been diagnosed as permanent until an appropriate course of care and treatment had been administered. In this case, the kind of treatment required – drugs, psychotherapy, and occupational therapy – could take months or years to perfect and implement.

To assess whether PR’s condition was permanent, Discovery had to have regard to the evidence generated well after his policy expired, Judge Wilson said.

“In closing the door to that evidence when it repudiated PR’s claim, Discovery was plainly unreasonable. Had it conducted itself reasonably, it would have become aware, by no later than 1 May 2019, that PR’s incapacity had become permanent, and it would have been bound to pay out on the policy by that date.”

Order

Discovery Life was ordered to pay PR the sum of R25 086 456, plus interest at the prescribed rate from 1 May 2019 to the date on which the sum is paid, and his legal costs.

Click here to download the judgment.