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A few days ago, a story emerged about the news that insurance company Momentum had declined to pay out a R2.4 million claim to a widow, Natalie Ganas, following the death of her husband Nathan Ganas, who was murdered by hijackers, on the basis that the insured failed to disclose that he had a high blood pressure.
This caused a public outcry and eventually, on Tuesday, Momentum announced that it will pay the money due to the claimants.
However, the company remained firm on the importance of full disclosure.
Earlier on, the public was asking: “What does hijacking have to do with high blood pressure?”
It seems as if the general public’s belief is that the insurance company would be justified to decline the payout if the cause of death was the high blood pressure, which the policy holder failed to disclose.
Contrary to this belief, Momentum’s conduct is within the broader parameters of the law of insurance.
When entering into an insurance contract both parties – the potential policy holder and the insurance company – have a contractual duty to disclose all the material facts.
A material fact is a circumstance that would influence the judgment of the insurance company in determining whether to take the risk or when fixing the premium.
As such, the purpose of full disclosure is:
1. To enable the insurance company to determine whether or not to undertake the risk; and
2. To assist the insurance company when determining what premium is to be paid by the policy holder.
An insurance company would, in most cases, ask questions in the way of a form.
The insured would have to answer those questions truthfully.
If needs be, the insured must do a medical check-up.
So, in order for the insurance company to say it will enter into a contract with the insured, all the material facts must have been disclosed.
It is always advisable that the person intending to take out an insurance policy goes beyond the questions asked and disclose further facts if it needs be.
Failure to disclose material facts known to the insured amounts to mala fides on the part of the insured, i.e. the policy holder entered into the insurance contract in bad faith thus entitling the insurance company to avoid liability under the contract.
The premise is that if the policy holder disclosed to the insurance company that he had high blood (if he was aware of this fact), the company would not have entered into the insurance contract with the said insured.
As such, there should have been no contract in the first place.
The insurance company just has to prove that there are facts that were never disclosed by the policy holder before or at the time of the commencement of the insurance contract; that those facts are material; and that at the commencement of the insurance contract the policy holder was well aware of these facts or details.
Both the insurer and the insured are guided by the law of insurance.
It is unfortunate that issues of this nature often arise at the time when one party to the contract is aggrieved due to the loss of life or due to injury.
Momentum had to compromise its policies due to the public outcry.
However, it has to be emphasised that when people take out insurance policies they must disclose all the facts, even what they think is not material to the contract.
They must take time to read the whole contract thoroughly and make sure that everything is in writing.
Should the conditions disclosed at the beginning of the contract change along the way, this fact must also be communicated with the insurance company.
For example, at the commencement of the insurance contract the policy holder might have been in good health but discovers later on that he or she suffers from high blood pressure or any illness.
That person should notify the insurance company and produce the necessary medical records.
This will help in a situation where, for instance, the insurance contract has made a provision that the premium may change if the existing circumstances change.
• Nondima is a candidate attorney at Boqwana Burns Inc.
