Applicants must fully disclose all relevant information during the underwriting process, even if they disclosed similar information during prior applications for insurance cover, to avoid the possibility that their claim will be repudiated. And insurers are not required to seek out additional information beyond what an applicant provides during the assessment process unless explicitly directed to do so.
The High Court in Gqeberha reaffirmed these principles governing disclosure in insurance contracts in a judgment handed down last month.
The case centred on Liberty’s decision to repudiate the applicant’s claim under a salary protection policy and subsequently cancel the policy.
The applicant (whose name was redacted) took out the “salary protection cover: injury only” policy with Liberty in February 2021.
This was the not first time the applicant had interacted with Liberty.
In 2015, she applied for long-term insurance through a Liberty agent. She disclosed her pre-existing conditions, including cardiomyopathy, depression/anxiety disorder, and hearing loss. Her application was declined because of medical reasons. An application for “long-term indemnity insurance” in 2017 was also rejected for the same reasons.
In August 2020, she contacted the agent again to apply for long-term insurance. She signed a pre-populated form in September 2020 and reminded the agent about her medical history disclosed in the previously declined applications. The underwriting department required further medical assessments, which the applicant abandoned, effectively discontinuing this application.
In December 2020, seeking cover against severe bodily injury, the applicant discovered Liberty’s advertisement online. She applied telephonically, answering health-related questions, and her application was approved, leading to the issuance of the policy in February 2021.
In March 2021, the applicant sustained injuries to her right arm and hand during an attempted hijacking, leading to the termination of her employment. She submitted a claim under the policy in May 2021 but did not receive a decision. Frustrated, she lodged a complaint with the Ombudsman for Long-term Insurance (OLTI) in September 2021. The OLTI closed her complaint in July 2023.
In July 2022, Liberty informed her that the policy was void because of non-disclosure of pertinent medical information and repudiated her claim. Liberty asserted that if the applicant had disclosed all relevant medical history during the underwriting process, it would have been able to assess her risk more accurately.
Prior disclosure of medical history
The applicant contended she disclosed her medical history during her previous applications (2015 and 2017) and correctly answered all questions for the current policy.
She argued Liberty’s decision to cancel the policy based on non-disclosure was inconsistent because her medical conditions had been disclosed in the past, and the insurer previously issued the policy despite this knowledge.
She said the policy covered injury-related disabilities, not those arising from illness, which aligned with her situation.
The applicant sought an order that Liberty failed to comply with the Policyholder Protection Rules when it repudiated her salary protection claim and cancelled her policy. If the court granted that order, she sought an order setting aside the repudiation and cancellation of her policy. If that order was granted, she sought orders requiring Liberty to reinstate the salary protection benefits and the payment of a sum equivalent to the temporary disability benefits for the period from the last payment date to the date of the court’s order as a reimbursement.
No obligation to ‘fossick’
In its submission, counsel for Liberty provided further context to the application for the salary protection policy.
The applicant completed an online assessment on Liberty Direct, a division of Liberty that used to trade as Frank.Net. Liberty Direct is different from Liberty’s intermediated business. Frank Financial Services/Liberty Direct does not have access to Liberty’s systems. Having completed an online assessment, the applicant was contacted by an employee of Frank Financial Services who asked her certain questions on 3 February 2021. This culminated in three insurance policies being concluded, one of which was the salary protection policy.
Counsel argued that Liberty was under no obligation to search through its records for past disclosures made by the applicant in connection with her previous applications for insurance. Counsel supported this position by referring to the judgment in Regent Insurance Company Ltd v King’s Property Development (Pty) Ltd t/a King’s Prop. The Supreme Court of Appeal held that insurers are not legally required to “fossick” (search extensively) through their records to find information that might have been disclosed by an insured. The duty of disclosure rests on the insured to provide all material facts proactively.
Counsel argued it would have been different if the applicant referred to her previous applications for cover when she was questioned about her medical history or conditions.
New policy, new assessment
The court noted that the applicant did not dispute her failure to disclose certain medical conditions but offered two justifications:
- She answered the questions honestly as she understood them.
- She had already disclosed the same information in earlier applications, and Liberty should have accessed it from its records.
Judge Nomathamsanqa Beshe said it was made clear to the applicant, during the telephonic interview, that because they were dealing with a new policy, a new assessment would be performed. She was informed that the product was directly distributed by Frank Financial Services.
The interview transcript showed that the applicant was cautioned to think of everything associated with her health and not only those conditions that were mentioned in previous questions. Later, the interviewer asked whether there were any other illness or symptoms, activity or occupational risk that she had not mentioned. Her answer was “no”.
Judge Beshe agreed with Liberty there was no obligation to verify the applicant’s information unless she explicitly directed the insurer to her prior disclosures. “Besides, it was made very clear that the cover she qualifies for is based on the telephonic assessment of the medical, as well as other information she provided during that telephone interview.”
The applicant’s claim was dismissed with costs.
The judgment underscores that prospective policyholders must provide complete and accurate information during every new policy application process, regardless of prior disclosures. Even if similar information was provided in earlier applications, it must be disclosed again. The insurer has no obligation to search through past records unless explicitly directed to do so by the insured.
