In this judgment the life insurer had rejected the life insured’s claim for an indemnity both on the basis that the insurance cover had expired on 30 November 2015 and that there was no evidence that the insured had become totally and permanently unable to perform his work as at that date, alternatively if the insured’s condition had become permanent by then the insured was nevertheless justified in rejecting the claim because the insurer had to satisfied regrading permanence by that date.

On the evidence the court was satisfied that on a balance of probabilities the insured suffered from post-traumatic stress disorder and unspecified bipolar mood disorder.  Such improvements in the insured’s condition that may have been achieved by the application of appropriate techniques of treatment and care had already taken place and despite that treatment and care the insured’s condition rendered him totally and permanently unable to resume his occupation as a stockbroker.

The insured accepted that for his claim to succeed the evidence had to show that he had permanently lost his capacity to work as a stockbroker on or before 30 November 2015 when his policy with the insurer expired.

The court said that there was plainly a difference between the fact of a condition and the evidence necessary to establish the facts.  While nobody could have identified the permanency of the insured’s condition on 30 November 2015, it was clear on the evidence before the court that the condition was in fact permanent as at that date even if the evidence necessary to establish that permanence only subsequently had come to light.

The court found that the insured was incapacitated on 30 November 2015 and had remained incapacitated since then.

The insured was accordingly “totally and permanently unable” to perform as a stockbroker by 30 November 2015.

The insurer’s alternative argument was that, even if on the evidence the insured was “totally and permanently unable” before his policy with the insurer expired, the question was not whether or not as a fact the insured had become permanently incapacitated by that date but whether the insurer had unreasonably concluded that he had not.  The insurer relied on the policy text providing that the insurer would pay out a capital sum “once it is established to the satisfaction of the insurer that the life insured is totally and permanently unable” to work as a stockbroker.

The parties were in agreement that the text as parsed meant that the insured had to establish facts that would satisfy a “reasonable insurer in the position of the insurer of the insured’s total and permanent inability to perform the plaintiff’s nominated occupation as a stockbroker due to sickness, injury, disease or surgery.”

The insurer referred to the judgment of Southern Life Association Limited v Miller 2005 JDR 0042 (SCA) where the court found on the particular policy terms that the question was not whether the claimant was actually incapacitated but whether the insurer’s opinion to the contrary was reasonable.  And if it is, then the insurer is justified in rejecting the claim.

The court said however that the reasonable insurer test can only be applied where justified by the text of a particular policy.  The text must be read as a whole in the light of the circumstances in which the policy was taken out.

The court distinguished the wording in the case from that of the Miller judgment.  Although the relevant clause stated that the insurer would pay out on being satisfied of the insured’s incapacity, that clause had to be read in the context of the policy as a whole.   Clause 6.1.1 of the policy described the Capital Benefit as one which pays “a capital amount in the event of the insured being medically impaired to a degree that he is unlikely to be able to generate an income.”  The court said that that language is objective.  The benefit accrues at the point that impairment comes into existence.   The entitlement to the benefit does not depend upon the insurer forming any particular opinion.

The court said that there will in most cases inevitably be a lag between the onset of the permanent incapacity and the point at which anyone can say that the incapacity is permanent.  The text in the policy recognised that by drawing a distinction between the onset of the incapacity and proof to the insurer’s satisfaction that the incapacity is permanent.

The court said that it followed that the insurer’s liability under the policy was triggered at the point that the insured’s inability to perform as a stockbroker objectively became permanent.  But the duty to pay out on the policy was only triggered once the insurer could be reasonably satisfied thereafter that the insured’s condition had become permanent.  That is once there were facts in existence that would have satisfied a reasonable insurer that the insured’s incapacity had become permanent.

The court said that the latter occurred in April 2019 when the relevant treating expert formed the view that there was no realistic prospect of significant improvement in the insured’s condition.   In order to assess whether the insured’s condition was permanent the insurer had to have regard to evidence generated well after the policy expired.  Closing the door to that evidence when it rejected the claim was “plainly unreasonable”.