In PWR v Discovery Life Limited and Another (17/18098) [2023] ZAGPJHC 282 (31 March 2023), the Johannesburg division of the High Court recently reiterated that an approach promoting efficacy must be adopted when interpreting a (disability) policy. 

Background

The plaintiff was a successful stockbroker who took out an insurance policy with Discovery, which required Discovery to pay a lump sum once it was satisfied that the plaintiff had become “totally and permanently unable” to work as a stockbroker. 

In December 2014, the plaintiff discovered his late girlfriend’s body floating in a swimming pool while on holiday in Mauritius. He was unable to resuscitate her. He was suspected of her murder and arrested on 2 January 2015. The plaintiff suffered a mental breakdown and was admitted to the secure ward of a hospital where he stayed for four days. The plaintiff appeared to be in a state of psychological distress with evidence of depressive illness, having lost 20 kilograms by 31 March 2015. By 8 December 2015, his condition had deteriorated further, having lost a further 30 kilograms since his incarceration. He was described as agitated, tearful, at times incoherent, his memories were confused, and he could not sustain a logical account of his experiences. The plaintiff was diagnosed with post-traumatic stress disorder and major depression with psychotic features. He was also considered to be suffering from bipolar mood disorder. 

The plaintiff was acquitted of murder charges in March 2016 and returned to South Africa, where he was hospitalised in Pietermaritzburg. The plaintiff’s diagnoses later changed to post-traumatic stress disorder and unspecified bipolar disorder.

The plaintiff claimed that at some point between 28 December 2014 and 30 November 2015, which is when the policy expired, he became totally and permanently unable to carry on his work, entitling him to the policy benefit of over R25 million. The plaintiff’s claim was rejected by Discovery on the basis that his insurance cover had expired on 30 November 2015 and that there was no evidence that he had become totally and permanently unable to perform as a stockbroker by that date.

Policy provisions

Clause 6.1.1 of the policy described the Capital Benefit under the policy as one which pays a capital amount in the event of the plaintiff being medically impaired to a degree that he is unlikely to be able to generate an income.

Clause 6.3 of policy provided that that Discovery would pay out a capital sum “once it is established to the satisfaction of Discovery that [the plaintiff] is totally and permanently unable” to work as a stockbroker. 

Considerations by the court

The plaintiff argued that the policy benefit vests at the point his incapacity exists objectively. It is payable, however, only when he satisfies Discovery that his incapacity is in fact permanent. 

The court reiterated that the policy must be read as whole in light of the circumstances in which it was taken out. The court described the language in clause 6.1.1 as objective, finding that the benefit accrued at the point the impairment came into existence. This did not depend upon Discovery forming any opinion.

The court also found that clause 6.3 meant that Discovery’s duty to pay the policy benefit only arose once the total and permanent inability to work as a stockbroker was established to its satisfaction. 

The court therefore drew a distinction between:

• the onset of the incapacity (clause 6.1.1) – which triggers Discovery’s liability; and 
• proof to Discovery’s satisfaction that the incapacity is permanent (clause 6.3) – which triggers Discovery’s duty to pay. 

This formulation was necessary to give the policy efficacy, according to the court. The purpose of the policy was to insure against the event that triggers the incapacity, but there may be some time between that event and anyone being able to say that the injury has caused a permanent incapacity. There will inevitably be, in most cases, a lag between the onset of the permanent incapacity and the point at which anybody can say that the incapacity is permanent. In cases of mental illness brought on by trauma, that lag between the onset and the identification of the permanent incapacity may be months or years.

It follows, the court held, that Discovery’s liability under the policy was triggered at the point that the plaintiff’s inability to perform as a stockbroker objectively became permanent (which took place on or before 30 November 2015 on a balance of probabilities). But, its duty to pay out on the policy was only triggered once it could be reasonably satisfied that the plaintiff’s condition had become permanent. In the court’s view, that happened in April 2019, when the plaintiff’s doctor formed the view that there was no realistic prospect of significant improvement in his condition.

The court therefore found that Discovery became liable under the policy on or before 30 November 2015 and had a duty to pay out by 1 May 2019 at the very least as this was when the reasonable insurer would have known that the plaintiff’s incapacity was permanent. 

Conclusion

The judgment is a reminder to consider claims holistically, reading all relevant provisions against the nature and purpose of the policy. 

Discovery sought leave to appeal the judgment from the trial court, but this was unsuccessful. It appears that Discovery will petition the Supreme Court of Appeal for leave to appeal.

A copy of the judgment can be accessed here.