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ombudsman news

issue 24

January 2003

assessing evidence about health in insurance disputes

Many insurance disputes require us to reach a view about the policyholder's state of health.

Dealing with such disputes can be particularly demanding for our casehandlers, both because of the sheer volume of (frequently conflicting) medical evidence and because handling medical records and other personal information requires an especially high degree of care. We must, for instance, be alert to the fact that our investigations may uncover particularly sensitive matters about which the policyholder was previously unaware.

assessing conflicting evidence
Typically, in such disputes, the policyholder's general practitioner - and perhaps a consultant or other specialist - will have expressed distinct views about the policyholder's circumstances. These views may have been contradicted by medical opinions obtained by the insurer and also by other evidence (such as video surveillance).

It is not part of our role to diagnose the policyholder's condition. We look at all the evidence before reaching an opinion on their probable circumstances - and how these relate to the insurance policy.

Given the range of circumstances we are called on to assess when we examine conflicting evidence, there can be no hard and fast rules about the weight we attach to different factors. However, these are some of the matters we will generally take into account.

  • The doctor's professional qualifications and specialisation.
    We usually favour the opinions of a relevant specialist consultant over those of a general practitioner. However, we assess with caution any remarks that specialists, however eminent, make about matters that fall outside their area of specialisation.
  • The degree of knowledge that the doctor providing the evidence has of the policyholder's circumstances.
    All other things being equal, we place more weight on evidence from a doctor who has been involved with the policyholder over a period of time, than on that from one who has seen the policyholder only once or twice.
  • The nature of the doctor's examination.
    So, for example, we favour reports based directly on a recent physical examination of the policyholder over those based simply on a review of notes that were made after earlier examinations.
  • How close in time the report was to the events at issue.
    We place most weight on reports made closest in time to the events being considered.
  • The independence of the person reporting or commenting on the issues.
    Although we take into account reports produced by the firm's staff, and observations made by the policyholder, we normally place more weight on evidence provided by more independent commentators.
  • Any special circumstances surrounding the report.

reports by general practitioners and consultants
When we consider a doctor's report on a patient's condition, we need to bear in mind that the doctor may have used different criteria or definitions from those used by the firm.

Firms sometimes argue that a doctor has been too ready to "sign-off" a policyholder as "unfit" for work. Firms also consider that some doctors - when asked whether a policyholder is capable of continuing to work - place undue weight on whether suitable work is available, or on the policyholder's social and economic circumstances, rather than reporting against the specific requirements of the policy.

Conversely, we find that some doctors make over-ambitious estimates of what the policyholder can reasonably be expected to achieve. This may result from a misunderstanding about what the person's occupation entails, or perhaps from comparison with an apparently similar patient who may have been more than normally well-motivated, or have had very different circumstances to contend with.

Sometimes we find perfectly logical reasons for the apparently conflicting assessments presented to us. For example, a general practitioner's view of a relatively unusual medical condition, based on symptoms present in the early stages of the illness may - understandably - differ from the view of a consultant. The consultant has a specialist knowledge of the condition and generally sees the patient when the condition is more advanced and the symptoms may be more distinct.

Some firms use reports from occupational physicians as evidence in connection with a claim. In our view, while these reports may be helpful in forming an overall picture, they are unlikely to overturn assessments made by consultants in the relevant specialisation.

use of "capacity evaluation" or similar tests
Just as firms sometimes have concerns about the medical evidence that policyholders present in support of a claim, so policyholders may sometimes have severe reservations about evidence used by firms. This is particularly the case with evidence based on the results of "capacity evaluation" or similar tests. These tests try to measure - on a consistent basis - the policyholder's ability to carry out various activities. They are most appropriate for assessing a limited range of conditions, such as back pain and muscular complaints, and they can help add to the range of medical evidence available. However, the tests are not decisive and they can often produce findings that are inconsistent with other test results.

Firms sometimes conclude that policyholders must have been exaggerating the effect of their physical symptoms if they appear not to have exerted maximum effort during a test. Substantial exaggeration is, of course, likely to raise questions about the validity of the claim. But there may be a perfectly innocent explanation for a policyholder's appearing to "hold back" when undertaking test activities. Someone already in considerable pain, for example, may understandably be wary of any movement that might make matters worse.

We are unlikely to support firms that, having agreed to pay benefits to a policyholder, subsequently use the results of a capacity evaluation test, on their own, to justify stopping payment of those benefits.

use of video evidence
Firms often ask us to take into account evidence obtained by surveillance - usually by video. Inconsistencies between what a video shows a policyholder doing - and what the policyholder has told their doctor and the firm that they can manage - will not necessarily lead to the failure of the complaint. However, serious inconsistencies are likely to weaken the policyholder's case and to reduce the weight we would normally place on the relevant medical reports.

Someone who claims to be too ill to continue in work, for example, but who is then filmed carrying out a similar occupation, is unlikely to succeed with their claim.

More often, however, video evidence is ambivalent. First, it may show activity over a limited period, so it does not prove that the person can perform the activity consistently over the longer term. Second, videos seldom show activity that is of direct relevance to the dispute. So it should not automatically be assumed that the ability to perform one sort of activity indicates the ability to carry out another.

What, for example, does a trip to the supermarket demonstrate, in relation to the ability to carry out a full-time occupation- The definition of "disability" in most policies does not require a person to be housebound. So video evidence of someone shopping, hanging out washing on the line, or making a trip to the pub with friends is unlikely to be proof that the person fails to comply with the policy definition of "disability".

In assessing video evidence of a policyholder's capabilities, we exercise caution before reaching any conclusions that conflict with the medical evidence. Normally, we favour medical evidence over video evidence unless an independent medical assessment suggests that the activity shown in the video is inconsistent with previous medical reports. So where appropriate, for example, we may ask the doctor who carried out the independent medical examination, to comment on the apparent inconsistency.

additional medical reports commissioned by the ombudsman service
We expect firms to have investigated cases thoroughly before they are referred to us, and to have obtained any necessary reports. However, we may occasionally conclude that further medical reports would help us settle the dispute.

In such instances, we will appoint a relevant medical expert to review the medical evidence and/or to examine the policyholder. Where this happens, the doctor will report direct to us and it will be for us - not the firm or the policyholder - to decide which doctor to appoint and what the terms of reference will be.

case studies - assessing evidence about health in insurance disputes

income protection - disability - policyholder disabled from original occupation but not disabled from "any" occupation - policyholder's condition deteriorating - whether firm entitled to terminate benefits

Mr B, an electrician, took out an income protection policy. This would provide him with benefit for up to 24 months if he were unable to carry out his normal occupation due to disability caused by accident or sickness. The benefit would, however, stop after 24 months unless he was medically unable to perform "any" occupation for which he was suited.

In May 1997, Mr B was injured in a road traffic accident. As a result, he suffered severe back, neck and arm pain and saw a consultant orthopaedic surgeon, who identified a degenerative condition. Mr B made a successful claim under the policy and his benefits continued after the initial 24-month period.

However, in January 2001, the firm arranged for Mr B to be examined by a consultant neurosurgeon, who concluded that Mr B might be able to undertake a "desk job". In November of that year, the firm appointed an investigator to carry out some video surveillance of Mr B. This showed him bending, lifting, crouching and driving without any apparent restriction. In December 2001, on the strength of this video, the firm terminated his benefits.

In response to this, Mr B produced further medical evidence in support of his claim for "total disability". Although, as the video showed and his doctor's report confirmed, he was able to carry out some activities, he said this was only possible at the risk of his health, and that undertaking a job would aggravate his condition.

complaint rejected
We accepted that Mr B's condition had continued to deteriorate and that he was now incapable of any work. What we had to decide was whether he had met the policy definition of "total disability" in December 2001, when the firm had stopped paying his benefit.

The medical evidence that Mr B provided at that time suggested that there were some jobs involving only "light" duties that Mr B could undertake. In order to continue receiving benefits after the first 24 months, Mr B needed to meet the policy definition of "disabled" - "unable to perform any occupation". Since he did not satisfy these criteria, we concluded that the firm had been right to withdraw his benefits.

Although we did not uphold the complaint, the firm agreed to refund the premiums Mr B had paid after December 2001.

income protection - disability - policyholder disabled from original occupation but able to undertake part-time work - whether entitled to any benefit - method of calculation of benefit

Mr G, a self-employed butcher, developed disabling back pain and claimed under his income protection insurance policy. In December 1990, the firm accepted his claim and started paying him benefits.

By 1996, Mr G was still unable to work. The firm offered to make final settlement of the claim by paying him a lump sum of £167,376. Mr G did not accept the offer and he continued to receive monthly payments.

In 1999, the firm required Mr G to attend a "functional capacity" examination by a physiotherapist. She concluded that Mr G had not been exerting himself in the tests to his full ability, and that it was impossible to determine whether he was physically capable of returning to his former occupation. The firm had also obtained video evidence. On the basis of this and the test results, it stopped paying Mr G's benefits.

complaint upheld in part
We appointed an independent consultant orthopaedic surgeon to examine Mr G and to consider the video evidence. This showed Mr G playing golf, driving and gardening. The consultant concluded that Mr G was not fit to carry out the work of a butcher and was unemployable in that capacity. However he might be able to undertake some part-time work in a butcher's shop if it only involved - for example - serving customers and handling cash.

The policy definition of "disability" was very strict. Taken literally, it might mean that a policyholder's ability to carry out a minor administrative element of an otherwise physically demanding job would justify a firm's rejection of a claim. However, it is accepted market practice to treat someone as "disabled" if they are unable to perform the "material and substantial" duties of their ordinary occupation.

As a butcher, Mr G's main duties involved heavy physical work, with much bending and carrying. He spent most of the day on his feet. As well as preparing food, he had to lift heavy carcasses and to spend a considerable time standing behind the counter, serving customers.

When he first applied for the policy, Mr G had described his normal day's work as being split equally between "jointing" and "selling/serving" and the firm had insured him on this basis. The type of part-time work that the consultant had suggested he might be able to do was markedly different from this. Any difficulty Mr G might encounter in finding such work was not relevant to an assessment of his disability.

We accepted that Mr G was capable of performing some part-time work, but only in a limited and lower-skilled role. The duties involved would be materially different from his original occupation and less remunerative.

The policy did not deal clearly with this type of situation, but it did provide for the payment of a reduced benefit. We concluded that the firm should reinstate Mr G's claim and pay him benefits calculated at 66 percent of the full rate. It should also make him backdated payments at this reduced rate, plus interest, from the time when it had stopped his benefits.

critical illness - definition - angioplasty - whether claim invalid unless meeting strict definition of condition

Mr T took out life assurance to cover his £150,000 mortgage. The policy benefit was payable if he died or was diagnosed with a "critical illness". Some weeks after he took out the policy, he was diagnosed with atherosclerosis. He was advised to have balloon angioplasty to correct the narrowing of his arteries.

After Mr T submitted a claim for the policy benefit, the firm wrote to his consultant asking whether the blockage was "at least 70 percent in two or more coronary arteries". This was the policy definition of "angioplasty". The consultant confirmed that one artery was 95-99 percent blocked and another was 50 percent blocked. He said that this was a particularly serious and life-threatening condition and would have been fatal if left untreated.

Mr T was dismayed when the firm then wrote to him saying it would not pay the claim because it did not meet the terms of the policy.

complaint upheld
Insurers are, of course, entitled to decide what conditions they wish to cover. But they are obliged to make the terms of their policies clear to customers. Mr T had taken out a policy to cover him for critical illness. By any ordinary definition, he had experienced a critical illness that required urgent treatment. If his doctor had not performed balloon angioplasty, Mr T would have required bypass surgery, which would also have entitled him to claim under this policy.

Assessing the extent to which an artery is blocked is not an exact science. Firms should exercise caution in assessing cases on such a formulaic basis and should normally take account, instead, of the overall seriousness of the condition claimed for. Moreover, the firm's decision to pay benefit only to patients whose arteries were blocked by more than a specific percentage constituted an "onerous" policy condition, so the firm should have made this very clear in its literature.

We concluded that Mr T's condition was so serious that it was not appropriate for the firm to rely on a strict, formulaic interpretation of the policy. We required it to pay the maximum we can award, £100,000 plus interest, but we recommended that the firm should also pay the balance of the claim.

income protection - "income" - self-employed policyholder - benefit assessed on earnings - policyholder not informed of restriction - whether assessment of benefit a significant restriction - whether insurer liable to assess benefit on turnover not earnings

Mr C, a self-employed catering machine repairer, took out an insurance policy in 1993 through his bank. This would pay him a monthly income if he became too ill to work. The policy said it would provide a weekly income benefit of £90 if he suffered a disability that lasted more than 13 weeks.

However, when he submitted a claim in 1999, the insurer turned it down. It said it would not pay him anything, because his earnings were not high enough. It explained that the benefit payable under the policy was based on the amount of profit he made, not on his turnover. So, since Mr C had not made any profit in the previous year, the firm said he was not entitled to receive anything.

Mr C was very surprised to hear this. He said that the bank had not properly explained how the policy worked and that the examples it had shown him to illustrate the potential benefits of the policy had been misleading. The bank denied that its salesman had made any error in recommending the policy. And in response to Mr C's complaint that the bank had not told him that payment of benefit depended on his earnings, it said it was not part of the salesman's responsibility to go into such matters.

complaint upheld in part
The bank had plainly failed to ensure that the policy it sold to Mr C was suitable for his circumstances. It had also failed to draw his attention to the way in which benefits would be calculated. If the policy had been explained properly, he would never have bought it, since he could not have made a successful claim unless his earnings increased significantly. He could not have obtained a policy that calculated benefits on the basis of turnover, so we did not consider the insurer was liable to meet the claim.

However, since he would not have bought the policy if the bank had explained it properly to him, we decided that the bank had to:

  • reimburse Mr C the full cost of all the premiums he had paid, plus interest; and
  • pay him £250 compensation for distress and inconvenience.
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.