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ombudsman news

issue 40

September/October 2004

"any occupation" - an unfair contract term in personal/critical illness insurance

You can insure yourself against the risk of an accident or illness leaving you totally and permanently disabled and preventing you from carrying on:

  • your own occupation;
  • any occupation for which you are suited (for example, because of your education, training or experience); or
  • any occupation whatsoever.

The most expensive level of cover is that which pays you benefits if you are unable to continue with your "own occupation". As long as your disability prevents you from continuing in the occupation you had before the accident or illness (your "own occupation"), you will get benefits - even if you are still able to carry out some alternative form of paid employment.

The cheapest form of cover is that which pays you benefits if you become so disabled that you are unable to continue with "any occupation". Insurers usually interpret this to mean that you will receive policy benefits only if you are unable to carry out any occupation at all. It is a high threshold to pass, since few people are so disabled that they cannot, ever again, carry out any occupation at all.

However, the Court of Appeal has indicated that the term "any occupation" is ambiguous, so it should be interpreted in favour of the policyholder rather than the insurer. In the case of Sargent v GRE (UK) Ltd (reported 16 April 1997 on, Mr Sargent had "any occupation" cover and suffered a serious hand injury. The insurer argued that benefit was payable only if the injury meant that Mr Sargent was now unable to undertake any occupation at all. And since Mr Sargent was still able to do some manual labour, even though this was at a less skilled level than the work he had done before the accident, the insurer said he was not entitled to any benefit.

Mr Sargent thought that the term "any occupation" in his policy meant that if, as a result of his accident, there was any occupation that he was now physically incapable of doing, even if this was an occupation for which he had received no training or shown no previous aptitude (such as being a concert pianist), then he should receive the benefit.

The Court of Appeal found unanimously in favour of Mr Sargent: "the potential width of the expression "any occupation" is circumscribed by its context and implicitly limited to any relevant occupation. The evident purpose of personal accident insurance against permanent disablement of a to provide for the event that he is permanently disabled from attending to his occupation as at the time of his disabling injury and not just to provide for the more drastic and remote event that he would not be able to attend to any occupation of any kind at all ever again."(Lord Justice Mummery).

The outcome of the Court of Appeal's judgment broadly corresponds with our "fair and reasonable" approach to such cases. We feel it is very harsh to limit benefits to those rare situations where a policyholder is completely unable to carry on any occupation whatsoever (unless, of course, the policy clearly and unambiguously states this - and the limited nature of the cover has been adequately explained to the customer at the point of sale).

If a policy is just restricted to "any occupation", we interpret this as meaning "any relevant occupation", that is, any occupation for which the complainant is suited by reason of their education, training, experience, social standing, etc. Much will turn on the individual facts of the case - in particular the medical evidence and, to a lesser extent, the evaluation made of the policyholder's "functional capacity". However, we would not usually consider it reasonable to expect an unskilled manual worker to retrain as a skilled professional and vice versa.

case studies - "any occupation" - an unfair contract term in personal accident/critical illness insurance-

critical illness - "any occupation" cover - whether firm correct to reject claim solely on the basis of video evidence

Mrs T put in a claim under her critical illness policy for permanent total disability resulting from fibromyalgia. The insurer rejected her claim, saying she was not disabled from carrying out "any occupation". It based its view on the video surveillance it had carried out. This showed Mrs T walking and moving normally. Mrs T was unhappy with the firm's decision and she complained to us.

complaint rejected
We did not think it was fair for the insurer to reject the claim solely on the basis of a short piece of video footage, so we asked the insurer to show the video to Mrs T's doctors.

The doctors agreed that the way in which Mrs T was seen to be moving on the recording was not consistent with the manner in which they had seen her moving during consultations. This cast some doubt over Mrs T's claim.

The policy covered Mrs T if illness prevented her from performing "any occupation". We were satisfied that, even applying the more generous "Sargent" interpretation, the weight of the medical opinion established that Mrs T's condition did not prevent her from performing any occupation for which she was suited by reason of her education, training or experience. We therefore rejected her complaint.

personal accident - "any occupation" cover - whether policyholder "unable to carry out any occupation whatsoever"

Miss G, a professional dancer, suffered a serious injury while performing in a West End show. The injury effectively ended her career as a dancer and she put in a claim under her "any occupation" cover.

Although Miss G was receiving state incapacity benefits, the insurer refused to pay her disability claim. It said that she did not fulfil the policy definition of disability: "unable to carry out any occupation whatsoever". Miss G then complained to us, arguing that the insurer's decision was unfair and discriminatory.

complaint rejected
We noted that, unlike some policies, this one was written in very clear terms. Indeed, because of the nature of her occupation, the firm had required Miss G to sign a specific endorsement as part of her application for the policy. This confirmed that "benefit will only be payable if Miss G is unable to perform any occupation whatsoever."

Having carefully reviewed all the medical evidence and "'functional capacity" reports, we concluded that Miss G was certainly so disabled that she was unable to continue working as a dancer. However, she was an educated and intelligent person, and was not disabled from any occupation for which she was suited, let alone from any occupation whatsoever.

The fact that Miss G was classed as "disabled" for the purpose of state benefits did not necessarily mean that she was also disabled within the terms of the policy. We decided that the insurer's decision was neither unfair nor unreasonable in all the circumstances. There was no evidence to support Miss G's allegation that the insurer had contravened the Disability Discrimination Act 1995. We therefore rejected the complaint.

personal accident "own occupation" insurance - whether insurer's actions after receiving consultant's report were correct

Mr D, a motor mechanic, developed a phobia about germs. He felt compelled to wash his hands so frequently during the day that, eventually, he was unable to complete any of his tasks and he had to give up work altogether.

He was covered for illness that prevented him from carrying out his "own occupation", and he put in a claim to his insurer. The insurer paid him disability benefits for a few months. However, it stopped these payments as soon as it received a report on Mr D's condition from a consultant psychiatrist.

The insurer told Mr D that it would not pay him any further benefits because the psychiatrist had concluded, "... once Mr D receives cognitive behavioural treatment for his phobia, it is likely that he will be able to return to work and have a relatively normal life within six months of the start of the treatment."

Mr D felt his benefits should continue, at least for the time being, but the insurer disagreed, so Mr D complained to us.

complaint upheld in part
We felt that the insurer's interpretation of the medical evidence was rather harsh. We were satisfied that, at present, Mr D's illness was preventing him from carrying out his "own occupation" of motor mechanic.

The psychiatrist had not said that Mr D could now return to work. She had said that it was likely he would be able to return to work:

  • if certain conditions were satisfied (about the overall hygiene standards of the workplace); and
  • after he had successfully completed six months of cognitive behavioural treatment.

The consultant indicated that a premature return to work would probably cause a recurrence of Mr D's underlying depression and anxiety.

We were satisfied that, at present, Mr D's illness was preventing him from carrying on with his occupation as a motor mechanic. We decided that the fair and reasonable solution was for the firm to reinstate benefits, at least until Mr D had completed the six months' cognitive behavioural treatment. After that, Mr D would have a medical reassessment. Future benefits would depend on the outcome of that reassessment and of the cognitive behavioural treatment.

Walter Merricks, chief ombudsman

ombudsman news issue 40 [PDF format]

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.