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ombudsman news

issue 13

January 2002

conditions and conditions

We continue to face difficult decisions on how insurers have applied exclusions for pre-existing medical conditions. And in considering these cases, we continue to adopt the approach suggested by our predecessors following the House of Lords' decision in Cook v Financial Insurance Company Ltd [1998] 1 Weekly Law Reports 1765.

Briefly, "condition" - in the context of these exclusions - should mean a medical condition recognised as such by doctors (not simply some generalised symptoms). When we consider individual cases we will look at the position when the policy was taken out. In particular, we will review the customer's medical history, including:

We will also consider the significance of the difference between the customer's symptoms up to the point when the policy was taken out, and the medical condition that gave rise to the claim, when it was finally diagnosed. The more remote the connection, the less likely we are to accept that the "condition" existed at the time the policy was taken out. Finally, we try to ascertain what the customer knew about their condition when entering into the policy.

Since the Cook case, some insurers appear to have altered their policy wording, in an attempt to extend the exclusion for pre-existing conditions to conditions that are related to symptoms that were apparent before the start of the policy. Case 13/03 provides an example of this, albeit in the rather specialist context of a moratorium exclusion in medical expenses insurance. A moratorium of this type excludes, for a specified period, a medical condition that existed when the insurance was issued. The specified period (frequently two years) must then have passed without the policyholder having received any further treatment or advice for this condition before it is covered by the insurance. The use of moratorium exclusions means that the insurer does not require details of the policyholder's health before it issues the policy. Instead, it relies on the exclusion to reject any claim made for existing conditions during the specified period.

Our approach in this area is developing and we will need to consider further, in the light of a wider range of cases, how such exclusions should be interpreted. In particular, we need to consider if it is reasonable:

  • to describe a person with a common condition - such as high blood pressure - as having a "related condition"; and then
  • to apply the exclusion when the person subsequently suffers from a more serious condition, such as a stroke, where the original condition is known to be a contributory or risk factor.

Our initial view is that such exclusions have the potential to be onerous. Whatever the case, we are more likely to uphold insurers' preferred interpretation of such exclusions if their wide potential scope was fully and clearly explained to customers before they took out the policy.

case studies - (medical) conditions and (policy) conditions

Private medical expenses - moratorium - whether emergency condition exempt from moratorium - whether blood pressure ‘related to' stroke.

Mr and Mrs L took out insurance in May 1999 to cover the cost of private medical treatment. The policy included a moratorium exclusion. This excluded treatment "of any illness or injury ... which existed or was foreseeable prior to or which recurs after the Insured Person's Date of Entry, until a continuous period of two years has gone by".

In February 2000, Mrs L suffered a stroke and was admitted to hospital. Her claim under the insurance was rejected. The insurer said that her stroke was related to the high blood pressure for which she had been treated during the past few years. As the two-year moratorium period had not passed, she was not entitled to any benefit. Mr and Mrs L argued that the insurer should meet her claim, since she had been admitted as an emergency patient and the insurer did not require prior authorisation in such circumstances.

complaint rejected
It was true that emergency admissions did not require pre-authorisation in the same way as other claims, but when Mr L notified the insurer of the claim, it explained that he and his wife would be liable for all expenses if it did not accept the claim.

Mrs L was receiving treatment for hypertension at the time the policy came into force, so hypertension would not be covered until two years had passed without her needing any treatment for it. This exclusion covered not just the condition itself but also "any other illness ... related to it". Hypertension was a contributory factor for strokes and Mrs L's stroke was therefore covered by the exclusion. The insurer was entitled to reject the claim.

Income protection - "totally disabled" - disability due to stress - policyholder physically well - whether possible future stress sufficient to render policyholder "disabled".

On holiday in France, Mr N had a transient ischaemic attack. He was subsequently diagnosed as suffering from heart disease and he gave up work. He claimed benefits under his permanent health insurance on the ground that his state of health totally prevented him from working. The insurer made medical enquiries and found that although Mr N's GP and his consultant neurologist had both recommended he should give up work, they agreed that he was physically fit to resume work. His occupation, as managing director of the company he had started many years before, was highly stressful. The insurer maintained that there was no physical reason why Mr N should not return to work.

The medical evidence was inconclusive. So we arranged for Mr N to undergo an independent examination. The independent consultant considered there was no medical reason why Mr N could not return to work, but that he should not do so because of the risk to his health. The consultant felt that Mr N's occupation involved such a degree of stress that the risks of further disability would be increased if he went back to work, and there would be a very real risk of his illness recurring.

complaint upheld
This was an unusual case. Generally, a person with a stable medical condition who is fearful that returning to work may aggravate their condition - perhaps through stress - will have difficulty demonstrating they are not able to work. Here, however, the medical evidence pointed strongly to a worsening of the policyholder's condition being not just a worry but a foreseeable result of returning to work. So although Mr N's position had clearly stabilised after he gave up work, that was not sufficient justification for rejecting his claim. The medical evidence made it clear that he was only well so long as he did not work. Returning to work would put his health at risk, so it was not right to conclude that he was not "disabled".

We required the insurer to meet Mr N's claim from the end of the deferred period of six months, and to add interest to the back payments.

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.