Interpreting policy provisions – part 1

This case study looks at a complaint about disability insurance and the interpretation of policy provisions when a client has a heart attack. This is from the Insurance and Savings Ombudsman (ISO) annual report.

Thursday, December 2nd 2010, 10:31AM 3 Comments

Background

In 1992, C arranged life insurance with total and permanent disability and critical illness benefits, with P.

In January 2009, C made a claim to P, because he suffered a heart attack in December 2008.

P declined the claim, because it did not believe C's heart attack had been diagnosed, based on "new electrocardiographic changes" ("new ECG changes"), as required by the policy.

C believed he had "had new ECG changes" and, therefore, met the policy definition of a "heart attack".

Assessment

The policy was the basis of the contractual relationship between C and P.

The policy did not simply state P was liable for a claim, if C had a heart attack.

The policy set out precise criteria, which had to be present for P to consider C's heart attack a "heart attack" in terms of the policy.

For P to be liable for the claim, the diagnosis of C's heart attack had to be based on the following (as required by the policy definition):

"a history of typical chest pain"; and
"new electrocardiographic changes"; and
"elevation of cardiac enzymes".

C's hospital discharge summary stated he "[p]resented ... with ‘chest heaviness'" and was diagnosed as suffering from a "NSTEMI". As such, C's heart attack was diagnosed, based on "a history of typical chest pain".

A Cardiologist examined C's ECG recordings and advised that "none of them show[ed] changes characteristic of myocardial infarction (or myocardial ischaemia)". As such, C's heart attack was not diagnosed based on new ECG changes.

C's cardiac enzymes were not tested for elevation. However, in a letter to C, P said he had had "an elevation in Troponin (cardiac enzyme substitute)".

As such, P accepted the rise in Troponin I that C experienced as equivalent to an "elevation of cardiac enzymes" and considered that C's heart attack was diagnosed based on this elevation.

The medical evidence did not show any new ECG changes. Therefore, C's heart attack did not qualify as a "heart attack" as defined in the policy and C was not eligible for the heart attack benefit.

Result: Complaint not upheld

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Comments from our readers

On 2 December 2010 at 4:28 pm Robert Oddy said:

How distressing for the insured and his family. But then, how many other insured folk believe, because of advertising and marketing material, that their insurance company will pay a claim when they have been advised by a physician that they have had a heart attack?

While legally correct for the insurance company to deny payment of a claim when it does not meet all of a policy's multiple conditions, there is an obvious disconnection between the policyholder's understanding of his or her entitlement and what the insurer intended. And how many New Zealanders understand the medical terminology used in the policy as criteria?

Insurers will be doing themselves an enormous favour by amending marketing and support material to make it clear such a policy does not cover all heart attacks.

Better still, why not design policies upon which policyholders can rely for payment when trouble strikes? After all, isn't that the reason people take out insurance - so that they can rely upon the insurer to set them right when needed? A simple questionnaire will ascertain whether most people expect payment for a heart attack will eventuate if the attending physician, and especially a cardiologist, states they have suffered one. Premium adjustments might be necessary but surely such a change might avoid inducing additional stress on someone already unwell. And of course, the possibility of a subsequent claim under a life policy instead.

Designing policies that clients can readily understand, trust and rely upon for payment when needed may well be the necessary trigger to reverse our nation's appalling level of under insurance. Who knows, the public might actually lift the trustworthiness rating of insurers as a result. Trust can take years to build but seconds to destroy

On 3 December 2010 at 3:19 pm Regan said:

Policy wording dates to 1992, so may be outmoded, or at the least applying wordings which todays policies would out-perform.

I got curious about this so found the following at http://heartdisease.about.com/od/heartattack/g/NSTEMI.htm

In a NSTEMI, the blood clot only partly occludes the artery, and as a result only a portion of the heart muscle being supplied by the affected artery dies.

In contrast to the more severe form of heart attack (the STEMI), the NSTEMI does not produce characteristic elevation in the "ST segment" portion of the ECG. (ST segment elevation indicates that a relatively large amount of heart muscle damage is occurring, because the coronary artery is totally blocked). This means that in a NSTEMI, the artery is only partially blocked.

I wonder if C might have had a claim under the various partial payments on offer today (assuming one is recommending decent policies). Think single stents, the smaller changes in Troponin for a partial payment and such like.

Most good advisers would mention that Trauma policies have a severity criteria, and that the conditions covered are defined.

Robert has a point about client's understanding of policies, the coverage they provide and the medical jargon in the definitions. I disagree that this should be covered by the marketing material, that is the role of the adviser - know your stuff and represent the policy properly!

I take issue with Robert's comments about trust, and paying claims. Cardiologists, in fact all doctors, diagnose all sorts of things which aren't necessarily going to be covered. This one looks like a smaller, relatively minor type of heart attack. So there is unlikely to be much that needs "setting right". A chimney fire is a significant event in the eyes of a home-owner but it should not result in a claim for completely redecorating the house... that would be over-insuring.

To address client's expectations the partial payment was invented. This was highlight by the man who lost one leg, but his (early version) policy didn't cover it, yet the newer version now has partial payment for "loss of use of one limb".

You don't have to pay every claim to earn trust, rather you have to fairly represent the scope of the cover, and use good policies. It also helps to keep in touch with clients, and make sure that their cover is up to date, taking advantage of enhancements etc.

On 7 February 2011 at 6:46 pm Consumer Eyes said:

Yet another failure by ISO to consider the underlying law and standards of insurance. Instead falling back to contract law as the industry prefer. Intent and purpose of the insurance to protect and expectations of the insured who pays premiums for years is extinguished by this trick of using contract law to analyse and assess a claim. NZ insurers repeatedly avoid claims by not looking for ways to pay a claim but rather how to avoid a claim - therein exists a basic breach of insurance good faith principles. As for trust - the entire relationship between policyholder and insurer is based on unspoken trust. Basically every person in the industry will argue this is not the case because it does not protect their patch of earth. The special circumstances create a fact-based trust relationship where we find in NZ every insurer abusing that trust in pursuit of profits by using contract definitions to evade claims. Insurance is for the protection of society. Insurers and their agents are charged with protecting the 'public interest' - but instead most are abusing it. One day the courts will wake up instead of being misled into the terms of the relationship are purely contractual which is so simple for lawyers to fall into if they know little about the industry circumstances.

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