Swanepoel N.O (Executor in the Estate Late Mignon Adelia Steyn) v Profmed Medical Scheme [2024] ZACC 23

The South African Constitutional Court recently handed down a judgment in the matter of Swanepoel N.O (Executor in the Estate Late Mignon Adelia Steyn) v Profmed Medical Scheme[1], shedding light on the interpretation of material non-disclosure in applications for membership in a medical scheme as envisaged in Section 29(2)(e) of the Medical Schemes Act of 1998 (“the Act”). This case concerned a medical scheme’s right to cancel a member’s membership due to the non-disclosure of material information.

The Court was asked to determine whether the failure to disclose a diagnostic procedure that did not result in the diagnosis of a serious medical condition by a medical scheme member amount to material non-disclosure in terms of the Act, thereby entitling the Medical Scheme to terminate the member’s membership. The court held that it is not sufficient to prove material non-disclosure in the context of medical schemes; something more is required. What is important is whether the non-disclosure also induced the medical scheme to contract with its member.

Summary of Facts

In this case, the applicant is the executor of the estate of the late Ms Steyn (“the deceased”). The deceased was a member of Profmed Medical Scheme (“Profmed”) until her membership was terminated by Profmed due to an alleged failure to disclose material information in her membership application form.

The deceased was required to disclose if she had “any affliction of the digestive system, liver, and gallbladder such as gastric ulcers, hernia, and others.” The deceased answered this in the negative despite having undergone a gastroscopy and colonoscopy which resulted in a diagnosis of gastritis.

In 2016, the deceased and her dependent underwent various medical procedures amounting to R400,000 and submitted her claim to Profmed for reimbursement. Profmed declined the claim and subsequently terminated the membership, citing non-disclosure of a gastric ulcer, breast aspiration, wrist pains, and hip problems as bases for termination. In a further letter, Profmed stated that its grounds for termination were the deceased’s non-disclosure that she underwent gastroscopy and colonoscopy procedures for a gastric ulcer where the final diagnosis was gastritis (“medical procedure”).

Subsequent to the termination of the deceased’s membership, and pursuant to Section 47 of the Act, the deceased lodged a complaint with the Registrar contending that the termination of her membership was unlawful and seeking an order for Profmed to honour the policy and reimburse the deceased for the medical expenses incurred. Profmed argued that the deceased failed to disclose, among other things, that she underwent a gastroscopy and colonoscopy for gastric ulcers on 4 March 2015. In ruling in favour of Profmed, the Registrar relied on various authorities[2] and held that the test for materiality is objective, with the question being whether a person in the position of the deceased would consider the particular fact (in this case, the medical procedure) reasonably relevant to the assessment of the risk by the insurer.

The deceased unsuccessfully appealed the decision of the Registrar to the Council for Medical Schemes , where the test for materiality was formulated as follows: “materiality of the non-disclosure lies in the fact that the scheme was denied the opportunity to make an accurate assessment and mitigate its risk by imposing a statutory empowered condition-specific waiting period if it had been aware of a pre-existing medical condition.” 

At the hearing before the Council for Medical Schemes, Profmed sought to raise new grounds for the termination of membership being the no-disclosure of a hip athroscopy, a heart murmur, kidney stones and fibromyalgia. The Council found in Profmed’s favour. It concluded that, the MRI scan and breast aspiration were not matters that warranted disclosure. Relying on the above test, the Council for Medical Schemes found that the non-disclosure of the gastritis, although a lesser condition than a gastric ulcer, was material and thus should have been disclosed by the deceased. The Council for Medical Schemes made no finding regarding the hip arthroscopy.

The deceased’s appeal before the Appeal Board met the same fate. The Appeal Board further held that the non-disclosure of the hip arthroscopy was also material as Ms Steyn suffered from arthritis, most likely osteoarthritis. It held further that a hip arthroscopy is also not a prescribed minimum benefit and so non-disclosure prevented Profmed from applying a condition-specific waiting period.

The deceased approached the High Court, where she sought the review and setting aside of the appeal bodies’ rulings and a declaratory order that the termination of her membership was unlawful and should be set aside, and lastly, that Profmed be directed to honour the terms of the policy. The High Court, in finding in favour of the deceased, held that the onus to prove materiality rests on the insurer (Profmed) and that the non-disclosure induced Profmed to conclude the contract and assume the risk. According to the High Court, Profmed did not adduce any evidence that the alleged material non-disclosure induced it into assuming the risk in instances where it would otherwise have not or contracted on different terms. The High Court held that the appeal bodies’ decisions were not only erroneous in law but also that a reasonable person in the position of the deceased would not have deemed the disclosure of the gastritis to be material to the assessment of the risk given its common nature.

In reversing the decision by the High Court, the Full Court in an appeal by Profmed held that what a reasonable person in the position of the deceased would have done in this instance should be apparent to the deceased when concluding the application form and responding to the questionnaires. Disgruntled with the decision of the Full Court of the High Court, the deceased, now substituted by the executor of her estate, appealed the full Court’s decision to the Constitutional Court. Several procedural issues were before the Constitutional Court; however, this article focuses on the central question of the interpretation of material non-disclosure in the context of medical schemes.

The core Issues before the Constitutional Court

The main legal question before the court was whether the Appeal Board and subsequently the Full Court were correct in finding that the deceased had a duty to disclose the hip arthroscopy and gastritis diagnosis and whether such non-disclosure was material, entitling Profmed to terminate the deceased’s membership.

The executor contended that a hip arthroscopy is a diagnostic tool, and the deceased cannot be expected to disclose a non-existent condition. Furthermore, it was submitted that if the Full Court’s judgment was to be followed, it would have the consequence that where the insured fails to disclose any hospital visits or a doctor’s appointment irrespective of the diagnosis, medical schemes would be entitled to terminate medical cover. In so far as the disclosure of gastritis is concerned, it was submitted on behalf of the deceased that the Full Court overlooked the fact that the application form did not require disclosure of diagnostic procedures, and that the gastroscopy established that the deceased did not have a gastric ulcer but merely gastritis.

Profmed, on the other hand, argued that the test for materiality requires an enquiry as to whether the undisclosed information ought to have been disclosed to afford the medical scheme the opportunity to properly assess the risk the scheme undertakes to take and to afford the scheme an opportunity to exercise its statutory rights to impose waiting periods in terms of Section 29A of the Act.

Constitutional Court Analysis

In finding in favour of the deceased, the Court firstly took note of the fact that the hip arthroscopy was performed some 17 months prior to the application for Profmed membership when the application form was completed and had regard to the fact that in terms of Section 29A(7) of the Act, the insurer is only entitled to request an insured to provide medical information within the 12-month period preceding the date of the application.

Secondly, with respect to the duty of disclosure, such duty only arises in circumstances where a medical condition can be regarded as material. Drawing from various authorities, the court shed light on the test for materiality and held that the test is objective, and whether information ought to have been disclosed is objectively assessed from the position of a reasonably prudent insured and not that of the insurer. The court thus summed up the test as whether the reasonable person would have considered the fact not disclosed as relevant to the risk and its assessment by the insurer.

Furthermore, the non-disclosure must be tainted with an element of inducement – the insurer must show that the non-disclosure caused it to issue the policy and assume the risk. The court further held that the Act does not define what constitutes materiality and thus this must be interpreted in line with the common law position which requires that materiality must be coupled with an element of inducement.

In this instance, the court found that mere examination and diagnostic medical procedures which resulted in no material diagnostic condition cannot be classified as a material non-disclosure and a prudent reasonable person would not regard it as such.

Concluding Remarks

This judgment has far-reaching implications for medical schemes and the interpretation of medical scheme application forms and contracts. It demonstrates that the lack of a definition of materiality in the Act has left some grey area regarding the medical scheme’s right to cancel a medical aid cover on the basis of material non-disclosure. This confirms that it might be time for medical schemes to reconsider their policies insofar as they relate to the duty of disclosure and what constitutes material information for purposes of the Act.

Again, the judgment confirms that the test for materiality is an objective test assessed from the position of the prudent, reasonable insured and that inducement is the insurer’s justification for terminating a policy. The duty to prove materiality and inducement rests on the insurer.

[1] [2024] ZACC 23.

[2] Mohamed v Genessis Medical Scheme, 649 17351/2010; and Mahadeo v Dial Direct Insurance Limited 2008 (4) SA 80 (W).