The Ombudsman for Long-term Insurance (OLTI) has faulted a life insurer that rejected a disability claim for not taking “a holistic view” and not considering medical and other evidence before and after a complainant’s employment was terminated.
The OLTI has published a summary of the case, which involved Fedgroup Life and an employee who belonged to a group benefit scheme.
Fedgroup rejected the disability claim, as well as a critical illness claim, submitted on the employee’s behalf. The quantum of the claims was not disclosed.
The disability claimed for was mental illness. The dispute over this claim centred on whether the employee was, in fact, unable to perform her duties at the date of termination.
The date of termination was another contentious issue.
Clause 4 of the Termination Settlement Agreement recorded the employee’s termination date as 18 July 2022. But clause 5 changed the date to the earlier of 90 days from 19 July 2022 or the date on which the insurer decides to approve a disability claim by the employee – that is, 17 October 2022.
The complainant and her employer maintained that 17 October was the actual termination date.
The decision to terminate the complainant’s employment was made because she suffered from migraines, anxiety, depression, and memory loss, and had “cognitive challenges”. She made “serious mistakes” at work.
The employer kept the complainant on the payroll and paid her risk benefit premiums until November 2022.
A psychiatrist admitted the complainant for psychiatric care in August 2022 and booked her off until 31 January 2023.
The critical illness claim arose after the complainant was diagnosed with breast cancer on 17 October 2022.
As an alternative to the critical illness claim, the employer submitted a form on 15 December 2022 for the conversion of the complainant’s death benefit.
Why Fedgroup declined the claims
Fedgroup declined the income disability claim on the grounds that the medical evidence “does not tender sufficient, objective medical information to support a disability as at the last day actively at work”, which, it asserted, was 18 July (not 17 October).
This was the mainstay of Fedgroup’s rejection of the disability income: there was no objective medical evidence of disability for the period leading up to the termination date (18 July). On the contrary, it contended the evidence suggested the complainant was performing her work satisfactorily until that date.
The insurer was not satisfied with reports provided by the complainant’s treating psychiatrist and an occupational therapist (OT). It wanted “objective or accurate” reports from other specialists. It said the complainant must pay for these reports, except for the report from another OT, to which it would refer the complainant.
The insurer said an opinion from its reinsurer supported its decision to decline the income disability claim.
Fedsure put forward the following as evidence that the complainant had been performing her work satisfactorily:
- She had not taken excessive sick leave before 18 July.
- She had not undergone medical treatment that suggested a disability.
- She received study assistance and had taken study leave.
- She received a salary increase in January 2022.
Fedsure said the employee had breached the Protection of Personal Information Act (POPIA), which resulted in a performance/disciplinary discussion with the employer. The employee used health problems as the reason for the incident, which the employer accepted instead of gross negligence and dismissal.
Regarding the critical illness claim, Fedsure said the complainant was not an eligible employee at the date of diagnosis.
The Termination Settlement Agreement stated the employee “will not work and will not be eligible for remuneration” after the termination date. Therefore, Fedsure said, she no longer met the policy eligibility criteria of being “a permanent, active, full-time employee … employed for no less than 25 hours a week”.
Fedsure said it could not process the continuation option because the request was submitted 150 days after the resignation/dismissal on 18 July 2022, instead of within 60 days as provided for in the contract.
The insurer stated it would refund any premiums paid after 18 July.
The OLTI commented: “It appeared to be the insurer’s position that the termination of employment, loss of income, and subsequent cancer diagnosis precipitated the complainant’s distress and disability, but that this was not present before she lost her job, or as at 18 July 2022.”
The OLTI’s provisional determination
The case was discussed at an adjudicators’ meeting presided over by the Ombudsman, Judge Margie Victor, and the Deputy Ombudsman, Denise Gabriels. The adjudicators’ conclusions can be summarised as follows:
Responsibility for paying for the specialists’ reports
The adjudicators did not accept Fedgroup’s “overly technical” argument that it had been able to assess the income disability claim based on the initial information submitted, and its decision to decline based on that information justified it requiring the claimant to pay for independent reports for a review of the decision.
The adjudicators drew attention to the following clause in the policy: “The employee may be required to submit to further medical examinations by medical practitioners and experts as may reasonably be required by Fedgroup Life. The cost of providing any further medical evidence or expert opinions to consider the claim shall be borne by Fedgroup Life.”
Termination did not occur on 18 July
The date of termination had been extended beyond 18 July.
The reason for the extension provision (clause 5) was to help the complainant – she was retained as an employee while a disability claim was pending – and to protect the employer – the complainant stopped trying to work and possibly make further mistakes after 18 July. She remained on the employer’s books, and her risk benefit premiums were paid.
Critical illness cover was in place
The complainant was covered for critical illness in terms of the policy when she was diagnosed with breast cancer on 17 October 2022. The critical illness claim must be assessed and paid if found to be valid.
The complainant met the eligibility requirements when her membership commenced in 2018. She was a permanent, active, full-time employee who had not reached benefit expiry age, and who was employed for no less than 25 hours a week. At that time, she also met the requirement to be “actively at work, attending to and capable of fulfilling his or her normal duties on the first working day on which his or her cover commences”.
These clauses did not disqualify from cover a member who was not working because of disability at a later date.
The evidence established disability
There was sufficient medical and other evidence to substantiate disability from 18 July 2022.
The employer had provided “considerable” evidence of the mistakes the complainant had made at work. These mistakes included three breaches of POPIA.
The complainant, who was an employee benefits consultant, appeared uncertain of basic retirement-funding and group risk concepts with which she had worked for years. She could not solve queries and had to be guided like a junior consultant. She was constantly overwhelmed and worked increasingly long hours to try to catch up.
The complainant had paid back the study assistance because she had not completed her studies.
The complaint’s salary was increased, but this was in terms of a company-wide salary increase.
There was also evidence from the complainant that she had been battling to cope and tried to continue doing her job in denial of being ill. She only realised that she had cognitive problems after this was pointed out to her during her admission to a mental health facility in August 2022.
Then there was the medical evidence, before and after July 2022.
The complainant had received psychiatric treatment since 2020 for stress, panic attacks, anxiety, and depression. She had been put on medication to control these illnesses.
The complainant had seen a cardiologist in 2020 because she thought she was having a heart attack, but her heart palpitations were within normal range. The cardiologist attributed her symptoms to panic attacks.
She consulted a neurologist in November 2021 for migraine headaches and vertigo.
Contrary to the insurer’s dismissive opinion, the adjudicators said the OT’s report was thorough and well-constructed, based on a battery of objective neuropsychological and other tests.
The adjudicators found that the medical evidence after 18 July 2022 was “certainly relevant” to the period before 18 July 2022 – admission to a psychiatric hospital a few weeks after the last day at work reinforced the evidence of psychiatric issues leading up to the last day at work.
They said, “one must take a holistic view and not only have regard formalistically to medical evidence dated prior to 18 July 2022”. The High Court judgment in the case between Discovery Life and a former stockbroker who suffered a mental breakdown confirms that later medical evidence can also be relevant to a consideration of disability at an earlier stage.
Read: Discovery must pay R25m to ex-stockbroker who suffered mental breakdown
The adjudicators also found that the reinsurer’s opinion did not support Fedgroup’s decision to decline the income disability claim – it reached the opposition conclusion.
The meeting decided that the income disability benefit must be paid from the date of any applicable waiting period.
The benefit must continue to be paid until the complainant:
- recovered from her disability and was able to perform her own occupation (in the initial period); or
- was able to start working in her own occupation or any occupation, including self-employment, for which she could reasonably be expected to be qualified or suited (after the initial period); or
- no longer suffered any loss of income despite her disability.
Fedgroup sticks to its guns
The insurer objected to the provisional determination and persisted with its view that the date of termination was 18 July 2022.
Fedgroup quoted the clause on “discontinuance of group risk cover for an employee” stating that one of the events on which group risk cover may terminate was “the employee ceasing to be an eligible employee or member”.
The OLTI said this overlooked clause 8.2 and 8.3, which state that cover terminates “at the date that the employer leaves the employment of the employer”. The OLTI found this date to be effectively 17 October 2022 because of the intention expressed in the Termination Settlement Agreement and because the employer kept the complainant on its books and continued to pay premiums.
It also overlooked the OLTI’s finding that the policy definition of an “eligible employee” could not be invoked to disqualify from cover a member who has satisfied the definition from the commencement of her membership but is not “active” at work.
The insurer restated its position that there was no objective medical evidence on 26 October 2022 (when it decided to decline the claim) to support an allegation that the complainant was unable to perform with reasonable continuity the material and substantial duties of her regular occupation.
The insurer also maintained its position that subsequent medical reports related to medical diagnosis and opinion after the complainant had lost her employment and been diagnosed with cancer and had consequent financial and personal problems.
The final determination
The adjudicators discussed Fedgroup’s objections to the provisional determination and concluded they could not be sustained.
They said the insurer failed to engage with the extensive medical evidence in the provisional determination, as well as the extensive employer evidence of the complainant’s inability to cope with her work before her employment was terminated.
The adjudicators maintained that 17 October 2022 was the correct termination date; therefore, the complainant still had cover when the breast cancer was diagnosed.
The provisional determination did not explicitly deal with the complainant’s request that she be allowed to exercise her conversion option. The adjudicators said the complainant’s right to exercise this option flowed from their finding that she left the service of the employer on 17 October 2022.
The OLTI issued a final determination that the critical illness claim must be assessed (and paid if valid), and the monthly income disability claim must be paid from the expiry of the waiting period after 18 July 2022, and must continue to be paid until there were grounds for the payments to be terminated.
Fedgroup accepted and implemented the final determination.
