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ombudsman news

issue 1

January 2001

case studies - chronic medical conditions

01/01 medical expenses - exclusion - chronic conditions - formerly acute condition - whether insurer required to notify policyholder when condition considered chronic.
01/02 medical expenses - acute illness or injury - "occurrence of brief duration" - meaning of "brief duration".
01/03 medical expenses - exclusion - pre-existing condition - whether undiagnosed condition excluded.
01/04 medical expenses - exclusion - pre-existing condition - representations by insurer's agent - whether insurer estopped from relying on exclusion.
01/05 medical expenses - group scheme - provision of medical services in UK - policyholder resident abroad - whether overseas medical expenses covered.

01/01
medical expenses - exclusion - chronic conditions - formerly acute condition - whether insurer required to notify policyholder when condition considered chronic.

The policyholder suffered from heart disease and received various treatments between 1998 and 1999. The insurer met his claims for the cost of these treatments, making payments of approximately £40,000. Open heart surgery was recommended in August 1999 but, for reasons which were unclear, the insurer did not receive the claim form until 20 September 1999.

The insurer made enquiries and, on 8 October, notified the hospital that it had decided the policyholder's condition was chronic so it would not meet his claim. The policy specifically excluded "treatment of a chronic condition". It defined "chronic" as "a disease where you need observation or care, and treatment will only relieve or control the symptoms but not cure the medical condition". The policyholder was informed of this decision either that day or on 9 October. Nevertheless, surgery was performed as scheduled on 13 October. The policyholder did not survive and his widow claimed £11,595 to meet the cost of surgery.

complaint upheld
The operation was clearly a serious one and the prognosis was uncertain. But there was some significant prospect that the operation would successfully arrest the decline in the policyholder's condition without the need for further extensive treatment.

Whether this would have amounted to a "cure" was debatable. However, the insurer failed to give the policyholder any notice that it had decided his condition had become chronic. Given the conflicting medical evidence and the need for urgent action in September 1999, the insurer should have accepted the claim. It might then have explained that any further treatment would be excluded. We required the insurer to meet the cost of the treatment.

01/02
medical expenses - acute illness or injury - "occurrence of brief duration" - meaning of "brief duration".

The policyholder was involved in a motor accident in May 1999 and sustained serious injuries, leaving her paralysed below the waist. She was hospitalised for three months. The insurer met all her medical costs. The policyholder continued to receive physiotherapy as an outpatient until December 1999. The insurer then decided her condition was no longer acute and terminated payments. It relied on the policy definition of "treatment". This provided that benefit was only payable for "surgical or medical procedures the sole purpose of which is the cure or relief of acute illness or injury. An acute illness or injury is characterised by an occurrence of brief duration, after which the insured person returns to his/her normal state and degree of activity".

The policyholder argued that further physiotherapy was essential for her recovery and cited her consultant's opinion that her condition was still acute. He considered she would continue to improve and expected her to achieve 90% of her previous functional abilities within one to two years. The insurer maintained it had always intended to transfer the policyholder's treatment to the NHS. However, it produced no evidence to prove her condition was no longer acute.

complaint upheld
Although the policy only covered "acute" illness or injury, this was not clearly defined. We considered that the phrase "occurrence of brief duration" should be interpreted according to the extent of the injury. For example, a broken finger might mean a few days' disability, whereas a broken back - as in this case - would mean many months.

The medical evidence established that the policyholder's condition would continue to improve as a result of treatment. We were therefore satisfied that it was still acute and thus covered under the policy. We also agreed with the policyholder that her claim had not been administrated properly. However, the insurer's apology and its ex gratia payment of £1,800 towards the cost of the policyholder's home care were sufficient compensation for the distress caused.

01/03
medical expenses - exclusion - pre-existing condition - whether undiagnosed condition excluded.

The policyholder submitted a claim under his company medical scheme for his daughter's tonsillectomy and adenoidectomy. The insurer rejected the claim on the ground that the daughter's GP disclosed that she had suffered from tonsillitis since 1991, almost seven years before the policy was purchased.

The policyholder complained about this decision. He stated that surgery had not been recommended until February 1999 and contended that his daughter's consultations had been for illnesses typical of childhood, not indicative of a serious condition which had not been diagnosed.

complaint rejected
The clinical notes revealed a long history of bouts of tonsillitis which were not indicative of ordinary childhood infections. The policy clearly excluded claims for treatment of any illness or related condition which originated prior to the policy cover. The insurer was therefore fully entitled not to accept liability for the daughter's operations.

01/04
medical expenses - exclusion - pre-existing condition - representations by insurer's agent - whether insurer estopped from relying on exclusion.

In December 1998, when the policyholder decided to switch insurers, she had had medical expenses cover for over 20 years. She discussed her situation with the new insurer's agent, who completed an application form for her. Details of previous medical problems were recorded on the form. Before she signed the form, she asked the agent to double-check her position and ensure she would maintain her existing level of cover.

In October/November 1999, the policyholder began experiencing pain in her hip and requested a claim form. She saw her consultant the following month and he recommended a complete hip replacement without delay. The insurer refused to meet the cost of surgery on the ground that it was due to a pre-existing medical condition.

The policyholder contended that she had informed the agent of a previous hip operation in February 1996, with further surgery in December 1996. She said the agent had advised her that the insurer did not consider as relevant any operations which took place more than two years before the start date. He had also confirmed that her level of cover would remain the same. She said she had never received any policy documents and was not aware of an exclusion for pre-existing conditions.

The insurer agreed to meet the consultation fee and X-ray costs and to return the premiums paid by the policyholder, but refused to reimburse the £12,000 cost of her private operation.

complaint upheld
We were satisfied that the policyholder had the highest possible level of cover under her first policy. The insurer no longer employed the agent and was unable to investigate how the subsequent policy had been sold. As there was nothing to rebut the policyholder's allegations, we accepted her version of events.

The actions of the insurer and/or its agent had seriously prejudiced the policyholder's position and we did not agree that a premium refund was an acceptable settlement. The insurer accepted our recommendation that the policy should be reinstated - subject to payment of the outstanding premiums - and that the claim should be met, in accordance with the level of cover originally selected. It also agreed to pay £500 compensation for distress and inconvenience.

01/05
medical expenses - group scheme - provision of medical services in UK - policyholder resident abroad - whether overseas medical expenses covered.

The policyholders retired in 1989 and moved to Mallorca. They had been allowed to continue as members of their employer's private medical insurance scheme after their retirement, paying the premiums personally. It was not drawn to their attention that cover was restricted to "medical services specified in this Policy if they are provided in the United Kingdom, Channel Islands or Isle of Man".

Their employer asserted that it had written to them in 1994, explaining that cover was not provided for people residing abroad. The policyholders did not receive that letter as it was sent to the wrong address. In any event, the employer continued to collect premiums and renew the policy.

One of the policyholders needed dental surgery and part of the treatment was carried out in Mallorca. He submitted a claim for the cost of this and also for further treatment he required. The insurer rejected the claims on the ground that there was no cover for treatment performed abroad.

complaint upheld
There was no formal agency agreement between the employer and the insurer. However, we considered that by confirming the policyholders' membership of the scheme after they retired and collecting their premiums, the employer was acting as the insurer's agent. Given that the policy was clearly unsuitable for the policyholders, we decided the claims should be settled without reference to the restriction on where treatment could be performed.

The policy included cover for "oral surgical operations", so the policyholder's claims were valid if the territorial restriction were ignored. We required the insurer to meet the cost of both treatments.

Walter Merricks, chief ombudsman

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.