The High Court in Johannesburg has ordered Hollard to top up a policyholder’s benefit pay-out by more than R1.7 million after finding that his insurance policy’s percentage pay-outs should be applied individually to each event within the policy’s benefit groups.
Neil Delpaul filed a claim with Hollard after suffering a heart attack in 2015. Hollard interpreted the policy as entitling him to be paid 25% of the benefit amount, whereas Delpaul argued for a 100% payment.
According to the judgment, the policy provided that the benefit became payable if Delpaul suffered one of the events or conditions described in the policy. The amount payable was expressed as a percentage of the benefit amount as reflected for each event. The policy described 13 separate benefit groups.
Each benefit group identified events under sub-headings. The Cardiovascular Benefit Group identified 12 events and provided that only one payment would be made per cardiovascular event. A single event was defined as all cardiovascular conditions or procedures that occurred within 30 days.
Hollard’s claims manager testified that the benefit amount would reduce according to the percentage pay-out of the event on which the claim was based until no benefit remained for events falling under that benefit group.
Once the 100% pay-out point was reached, the cover for events falling under that benefit group would be endorsed to reflect a 100% pay-out. The insured would have to wait for 90 days for the benefit amount to be reinstated. But the pay-out would be limited to 25% if the insured was under the age of 75 years, and 15% thereafter.
The following facts were common cause:
- In April 2012, Delpaul submitted a claim under the Cardiovascular Benefit Group for ischaemic heart disease and peripheral arterial disease, which resulted in a coronary stent and for which he was paid 10% of the benefit amount (Event 1).
- In July 2012, Delpaul submitted a claim for peripheral arterial disease, which resulted in a bi-femoral bypass for which he was paid 90% of the benefit amount (Event 2).
- On 15 August 2015, he suffered an acute heart attack for which he was paid out 25% of the benefit amount (Event 3).
Different interpretations
The claims manager explained to the court that Delpaul was paid 25% of the benefit amount for Event 3 because this event was a condition related to the conditions (Events 1 and 2) that led to the original benefit amount being completely drawn down.
Thus, 90 days thereafter, the reinstatement of the benefit amount had been capped at “25% of the original benefit amount, plus any benefit increases”. Delpaul’s cover in terms of the Cardiovascular Benefit Group was completely exhausted, and he was, once the 25% had been paid to him, no longer entitled to any further pay-out under this benefit group.
Delpaul testified that he understood the policy to pay out per event. He had not been paid out for the event described as “heart attack” before Event 3 because Events 1 and 2 related to other events under the Cardiovascular Benefit Group. He contended that he was accordingly entitled to payment of the percentage shown for this event, which was 100% of the benefit amount of about R2.3m.
The significance of the reinstatement clause
Judge Ingrid Opperman said it was clear, when the policy was read as a whole, that the percentages shown for each event within a benefit group were payable “per cardiovascular event”. The “reinstatement of benefit amount” clause supported this interpretation.
The clause relied on whether the claim was for a related or an unrelated condition.
If there was a 100% pay-out for a particular type of condition and a subsequent claim was made for a related condition, 90 days would have to pass between the two related claims for the benefit amount to be reinstated and for the policy to respond to the second claim. However, it would pay only 25% of the original benefit amount if the insured was under 75 years of age.
If the conditions of the two claims were unrelated, only 14 days would have to expire between the first claim and the second claim, and both claims could be paid up to 100% each because the benefit amount automatically topped up for unrelated claims after 14 days.
Judge Opperman said the payment of the benefit was pursuant to a claim for an event, not a benefit group. The benefit amount would automatically be reinstated for conditions that were related to that event.
“On a proper interpretation, this means that if Hollard paid 100% for a specific cardiovascular event, such as the event ‘heart transplant’, the benefit amount would be reinstated for that event after 90 days subject to a cap of 25% if Mr Delpaul were younger than 75 years of age,” she said.
The policy did not provide that once 100% of the benefit amount in a particular group has been paid, no further payments would be made for that group.
The policy provided that “only one payment will be made per cardiovascular event”. Twelve events were described under this group, so Delpaul could claim for each event once. He could, in principle, claim for a different event every six weeks because a single event was defined as all cardiovascular procedures that occurred within 30 days and a claim would be admitted after a 14-day survival period.
‘Unlimited number of procedures’
Judge Opperman highlighted that for the event “Coronary Angioplasty/Stent”, the policy stated the benefit covered an unlimited number of procedures.
“The policy provides that for each claim for this event, 10% of the benefit amount is payable. For Hollard’s interpretation of the policy to be correct, the benefit ought to have been limited to 10 procedures because 10 x 10 = 100, and once that amount is reached, the benefit amount would, on Hollard’s interpretation, be depleted,” the judge said.
Confronted with this dilemma, Hollard’s claims manager testified that the benefit amount did not, in fact, cover an unlimited number of procedures, as stated in the policy, but only 10 procedures at a payment of 10% of the benefit amount for each claim to a maximum of 100% of the benefit amount.
Judge Opperman said this answer contradicted the express wording of the policy.
“The sentence in the policy can only be meaningful if one accepts that the policy responds per event, and the amount payable is a percentage of the benefit amount. Under this group, only one payment will be made per event. The policy, however, states that it pays out a benefit of 10% of the benefit amount for an ‘unlimited’ number of procedures,” she said.
‘Absurd outcome’
Counsel for Hollard said Delpaul’s interpretation of the policy would result in an absurd outcome. Delpaul’s monthly premium was R3 955.75, and the parties could not have intended that he would potentially be paid R2.3m every six weeks.
Judge Opperman said no evidence was presented as to Hollard’s risk assessment in relation to the various groups, what the probabilities were of suffering from conditions that would trigger payments, and, more importantly, surviving them.
She said Hollard’s argument had “limited persuasive force in the context of this case”.
Hollard paid out R578 787.50, or 25% of the full benefit amount, for Delpaul’s heart attack on 15 August 2015. Judge Opperman ordered Hollard to pay him R1 736 437.50, plus interest of 10.25% a year calculated from 23 May 2018 to the date of final payment.
