Court finds that Discovery was unreasonable in not considering documents generated after the policy had expired.
Discovery Life argued that the legal question before the court was not whether it had been established as a fact the former stockbroker had become permanently incapacitated by that date, but whether Discovery had unreasonably concluded that he had not. Image: Supplied
Discovery Life has been ordered by the High Court in Johannesburg to pay a former stockbroker, who was charged and acquitted of murdering his girlfriend, more than R25 million after previously repudiating his claim that he was “totally and permanently unable” to work as a stockbroker.
The stockbroker, who was not named, claimed he became totally and permanently unable to carry on that work at some point between 28 December 2014 and 30 November 2015.
This followed him suffering a string of deeply traumatic events during that time which left him with a combination of post-traumatic stress disorder and unspecified bipolar mood disorder.
These events were the:
- Drowning of his girlfriend on 28 December 2014 in a swimming pool at a resort in Mauritius where he owned a villa.
- His arrest on 2 January 2015 on suspicion of murdering his girlfriend and being detained pending the trial.
The court heard the former stockbroker appeared to have suffered some sort of breakdown on the same day he was arrested.
He was eventually acquitted of his girlfriend’s murder and returned to South Africa in March 2016, where he was hospitalised in Pietermaritzburg and diagnosed with post-traumatic stress disorder and major depression.
Judge Stuart Wilson said there was no serious dispute between the parties that, over eight years after the events that triggered the former stockbroker’s condition, he was unable to work as a stockbroker and there was no sign he would be able to do so in the foreseeable future.
Judge Wilson said that taking all the evidence into account, it has been established on a balance of probabilities that:
- The former stockbroker suffers from post-traumatic stress disorder and unspecified bipolar mood disorder.
- Such improvement in his condition that may have been achieved by the application of the appropriate techniques of treatment and care has already taken place.
- Despite that treatment and care, his condition renders him totally and permanently unable to resume his occupation as a stockbroker.
However, Judge Wilson said the next question is whether, on a balance of probabilities, the former stockbroker’s condition permanently incapacitated him on or before 30 November 2015, when his policy with Discovery expired.
Judge Wilson said that while nobody could have identified the permanency of the former stockbroker’s condition on 30 November 2015, it is clear on the evidence the condition was in fact permanent, even if the evidence necessary to establish that permanence has only subsequently come to light.
He found that the former stockbroker was, on a balance of probabilities, incapacitated on 30 November 2015, he has remained incapacitated since then, and the care and treatment that might have rehabilitated him has been exhausted.
Judge Wilson said it follows from this that the former stockbroker was “totally and permanently unable” to perform as a stockbroker on or before 30 November 2015, but not earlier than 28 December 2014.
Discovery Life argued that the legal question before the court was not whether it had been established as a fact the former stockbroker had become permanently incapacitated by that date, but whether Discovery had unreasonably concluded that he had not.
Judge Wilson said Clause 6.1.1 of the policy describes the Capital Benefit under the policy, against which the former stockbroker lodged his claim, as one which pays “a capital amount in the event of [the insured] being medically impaired to a degree that [he is] unlikely to be able to generate an income”.
He stressed the benefit accrues at the point the impairment comes into existence and the entitlement to the benefit does not depend upon Discovery forming any particular opinion.
Judge Wilson said Discovery’s liability under the policy was triggered at the point the former stockbroker’s inability to perform as a stockbroker objectively became permanent but its duty to pay out on the policy was only triggered once there were facts in existence that would have satisfied a reasonable insurer that his incapacity had become permanent.
He said the first triggering event that established Discovery’s liability was the onset of the former stockbroker’s permanent incapacity on or before 30 November 2015.
The second triggering event, which established Discovery’s duty to pay out, was the point at which there existed facts that would have satisfied a reasonable insurer that the former stockbroker’s incapacity was permanent.
In Judge Wilson’s view, the second triggering event happened in April 2019 when the former stockbroker’s treating psychiatrist formed the view that there was no realistic prospect of significant improvement in his condition.
Judge Wilson said it follows from this that Discovery became liable under the policy on or before 30 November 2015 and had a duty to pay out, at the very latest, by 1 May 2019 because that is when a reasonable insurer would have known that the former stockbroker’s incapacity was permanent.
He said even on the interpretation most charitable to Discovery, “its position was far from reasonable”.
Judge Wilson said it entailed the proposition not just that the former stockbroker had to have suffered the onset of a permanent incapacity on or before 30 November 2015, but that he had to have assembled, by that date, all the information necessary to prove it.
“That was obviously impossible. It was also inconsistent with Discovery’s policy, properly construed.
“Once it is accepted that there is a difference between the onset of a permanent incapacity and the existence of facts that would satisfy a reasonable insurer that the capacity is indeed permanent, then there is no rational basis on which the insurer may decline to consider documents generated after the policy has expired,”
Judge Wilson said to assess whether the former stockbroker’s condition was permanent, Discovery had to have regard to evidence generated well after his policy expired.
“In closing the door to that evidence when it repudiated [the] claim, Discovery was plainly unreasonable.
Had it conducted itself reasonably, it would have become aware by no later than 1 May 2019, that PR’s [the former stockbroker’s] incapacity had become permanent, and it would have been bound to pay out on the policy by that date,”
Discovery Life was ordered to pay the former stockbroker R25 086 456.94, with interest on that amount at the prescribed rate from 1 May 2019 to the date on which it is paid.
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