Do “days” mean “business days” or “normal days”? After the legal wrangling over the interpretation of business interruption policies – which took the Supreme Court of Appeal to settle – one would think that insurers, whether short- or long-term, would have gone through all their policies with a fine-tooth comb to remove this kind of ambiguity.
Last month, the Financial Services Tribunal (FST) ordered the FAIS Ombud to reconsider a case involving the rejection of a funeral policy claim. The nub of the dispute is ambiguous wording.
Background
The applicant (“CD”) took out a Clientéle Funeral Dignity Plan in April last year, and the person whose life was insured died on 12 January 2022.
This is the second time the FST has referred the dispute over the claim back to the FAIS Ombud.
Clientéle initially rejected the claim on the basis that the deceased had not been family of the applicant and did not have an insured interest in ensuring the life of the deceased.
CD filed a complaint with the ombud, and the complaint was dismissed. He applied to the FST for reconsideration of that decision. The complaint was upheld, and the matter was referred back for reconsideration.
Clientéle accepted liability for the claim. It then allegedly discovered that CD had failed to pay the premium for December 2021 and that he had been in default for more than 15 days thereafter. Consequently, there was no cover when the life insured died.
Why the claim was rejected
In rejecting the claim, Clientéle Life said:
- The premium for December 2021 was outstanding when the life insured died on 12 January 2022.
- The policy’s debit date was the 25th day of every month.
- Clientéle Life initially attempted to debit the December 2021 premium on its debit date, but the debit order was returned as unmet because insufficient funds were available.
- On 5 January 2022, the client was sent an SMS advising that a premium was outstanding, and cover would resume only upon receipt of a premium. No premium was received in this interim period, and therefore no cover was provided from the time the December 2021 premium was missed on 25 December 2021.
- If the December 2021 premium had been paid timeously, the claim would have been covered.
- It appears that the client paid the missed premium for December 2021 on 14 January 2022, after the death of the insured.
Tribunal queries the payment date
The deputy chairperson of the tribunal, Judge Louis Harms, said he had “difficulties” with some of the allegations made by the insurer.
“I find nothing which states that the monthly debit date was the 25th of every month.
“The implication is that the debit was sent through on Christmas Day, namely 25 December. On that day, no bank operated, and the insurer knew that, and the same applies to the other holidays during December/January.
“I may add that the bank statements of the applicant show that there had not been any attempt to debit him on that date.”
Judge Harms said Clientéle debited CD on 31 December, and the debit was not paid.
CD said he paid the premium on 12 January by EFT. His bank account reflected the debit on 13 January, and Clientéle said it received payment on 14 January.
“That appears to be according to normal banking practice, and the rule the applicant failed to appreciate is that payment occurs once the payee receives the funds and not when they are transmitted,” Judge Harms said.
‘Business days’ or ‘normal days’?
The Policyholder Protection Rules (PPRs) give policyholders a grace period of at least 15 days if a premium has not been paid.
Clientéle Life’s internal arbitrator argued that these days were “normal days” and not “business days”.
“She may be correct as far as the rules are concerned, but here we are to interpret a contractual term where the rule definitions do not apply, nor does the Interpretation Act apply, because that is limited to the interpretation of statutes,” Judge Harms said.
“The word ‘day’ is inherently ambiguous, and it depends on the context and the understanding of the parties to the contract what it means. The insurer, without doubt, would like to apply that interpretation that suits it best. There is, however, no reason to assume that the applicant or an uninterested bystander would have attached a limited meaning to the word within the context of the policy.”
He referred to the common law “impossibility principle” – the law cannot compel one to do the impossible – as discussed in the case of Montsisi v Minister van Polisie (1984).
“What I wish to convey is that it was legally and factually impossible to pay on at least four days during January, and to count them in appears to me to be unlawful and unconscionable and breaches the obligation of treating the customer fairly,” Judge Harms said.
The FST referred the matter back to the FAIS Ombud.
