Cleves v Fortis Insurance Ltd No. DCCIV-00-1456

CLEVES v FORTIS INSURANCE LTD
[2003] SADC 10
Judge Anderson
Civil

The Plaintiff claims the balance of weekly payments said to be due pursuant to a policy of insurance entered into by him with VACC Insurance Company Ltd (“the Defendant”) on 12 April 1994 and subsequently extended.
It is not in issue that the Plaintiff and Defendant entered into a personal accident insurance policy on that day, or that it was subsequently varied by mutual agreement to include a cover for illness and by increasing the sum payable for incapacity due to accident or illness. Neither is it in dispute that, subsequently, the period of incapacity for which that sum was payable was increased from 52 weeks to 104 weeks. The premium was paid as required at all relevant times.
Mr Ryan of counsel appeared for the Plaintiff. Mr Harms of counsel appeared for the Defendant. He informed me that the counterclaim was no longer pursued and, accordingly, I order that it be dismissed.
There is a significant difference between the historical recollection of the Plaintiff and his principal witness, Mr Pratt, and the objective facts. It might be said that, except for their evidence about the initial contact with the Defendant’s agent, they are uncertain as to what occurred when. It is not exaggerating to say that the Plaintiff, apart from this one issue, is unable to recall in any detail at all his meetings with the Defendant’s agent or his medical advisors in the period 1991 until 1999.
In these circumstances, it is best to proceed by setting out the proved chronology so as to demonstrate the effect, if any, of the Plaintiff’s evidence.
At issue in the trial is whether the Plaintiff failed to disclose a prior condition known to him and relevant to whether the Defendant would accept the insurable risk: Section 21 Insurance Contracts Act 1984 (“the Act”). The Defendant says that it is entitled to refuse the claim pursuant to Section 28(3) of that Act for non‑disclosure.
I proceed on the basis that it is for the insurer to prove the alleged non‑disclosure. Should it fail to do so, then the Plaintiff is entitled to succeed on the facts as I have found them to exist.
At trial the Plaintiff was nearly 59 years of age. He is a qualified panel beater, but did not work at that job all his working life. From his evidence I accept that, after so doing in Mount Gambier for some years, he went to work in Queensland. He returned to Mount Gambier in the early 1980’s and was then unemployed for some time. He received unemployment benefits at that time. Thereafter, the evidence establishes that he worked as a general hand for Dairy Vale at Mount Gambier from 3 October 1986 until 11 February 1994, when he was retrenched.
Shortly thereafter, he established his panel beating and battery sales business in Mount Gambier. As a result of conversations with others in business, he decided to take out insurance. To this end he asked the representative of the Defendant in Mount Gambier to call on him. This occurred.
The Plaintiff said that the Defendant’s agent, Mr Tucker, called on him and they discussed what was needed. Thereafter, he said, Mr Tucker returned with a proposal and it was completed in the Plaintiff’s business premises in Mount Gambier. He said it was completed by Mr Tucker asking questions, which he answered, and Mr Tucker then filled in the proposal. Thereafter, the Plaintiff signed it.
Whilst there were several insurance covers effected at the outset and renewed from year to year, concern is restricted to the personal sickness and/or accident policy. A copy of the original proposal, dated 12 April 1994, is the exhibit P1, whilst the original is to be found in the exhibit D14, which is the Defendant’s office file for the Plaintiff’s business.
The Plaintiff said that when Mr Tucker attended upon him on 12 April 1994, his friend, Mr Pratt, was present. Mr Pratt and the Plaintiff had been friends for many years. They were both panel beaters and, at one time, Mr Pratt had taken over the Plaintiff’s father’s panel beating business. Whilst Mr Pratt could not say when it was that he attended the Plaintiff’s premises on the same day as Mr Tucker, he knew that it was after he retired from his work at CSR at Christmas 1993.
Mr Pratt confirmed the Plaintiff’s evidence that he was present when Mr Tucker asked the Plaintiff questions, which he answered, and completed the proposal, which the Plaintiff signed. He said that he had not met Mr Tucker before that day and the Plaintiff did not introduce them, but he came to know who Mr Tucker was because the Plaintiff said his name after he left. He subsequently saw him at least once in Mount Gambier, but never again at the Plaintiff’s premises. In Court, he positively identified Mr Tucker, who was present when Mr Pratt gave his evidence, as the person who was in the Plaintiff’s office when insurance was discussed. When cross‑examined about this, he confirmed his evidence‑in‑chief. He would not in the slightest allow that it was not Mr Tucker, notwithstanding that he did not otherwise know him. When it was put to him in cross-examination that Mr Tucker was not employed by the Defendant at this time, his response was “I don’t agree with you” (Tp132). When it was then suggested that a Mr Milford attended upon the Plaintiff as the Defendant’s area manager on 12 April 1994, Mr Pratt said, “No, definitely no” (Tp133). He went so far as to allow only that it was not Mr Tucker, “Unless the man is an identical twin of his” (Tp133).
The Plaintiff, having identified Mr Tucker as attending on him on this day, was quite certain when cross‑examined that it was he who attended. He had no recollection of the name of, or of, Mr Milford and could only remember Mr Tucker. He said he had a clear memory of Mr Tucker as the person to whom he spoke about his insurance and as the person who completed the proposal.
There is no doubt from the evidence of Mr Tucker, Mr Milford and the exhibit D15 - which is the Defendant’s offer of employment to Mr Tucker - that he did not commence employment with the Defendant until 1 December 1995. He was not at the Plaintiff’s business premises on 12 April 1994.
Mr Milford said that he was employed as the Defendant’s area manager in Mount Gambier from 9 June 1992 until 9 November 1995. He has identified the handwriting on the original of P1, except for the signature, as his. He also completed the commercial survey in relation to the Plaintiff’s request for insurance. This is a document then required by the Defendant for new clients. It appears in the exhibit D14.
Mr Milford said in evidence that he now had no recollection of attending on the Plaintiff on 12 April 1994 but, from the paperwork, was in no doubt that he did. He was also in Mount Gambier when this policy was renewed in 1995.
I am satisfied that the Plaintiff and Mr Pratt are wrong in their positive identification of Mr Tucker as being present at the Plaintiff’s business on 12 April 1994. I find that Mr Milford attended on that day and completed the commercial survey and the proposal, which the Plaintiff then signed.
The strength of the assuredness that it was Mr Tucker who was present, casts a pall over the remainder of the evidence of the Plaintiff and Mr Pratt. Each conceded on many occasions in their evidence that they were uncertain as to when this meeting occurred. Mr Pratt said it was after he had retired, but did not think it was as long ago as 1994. The Plaintiff was uncertain of when he commenced his business relative to his departure from Dairy Vale. In the course of his evidence‑in‑chief, he conceded, when being ask about when something occurred, that he was “.... hopeless with dates” (Tp39). He repeated this in answer to other questions.
In my view, no reliance is to be placed upon the evidence of either of these witnesses as to the occurrence of an event unless supported by other objective evidence. Of course, this adverse finding is of greater consequence for the evidence of the Plaintiff because of his continual involvement. Mr Pratt had no other part to play, apart from being present on 12 April 1994 and, again, he said, when the Plaintiff received the Defendant’s letter of 13 July 1998 (exhibit P4) refusing the claim.
The trial proceeded on the assumption that the operative treatment to his right knee, which the Plaintiff had in 1991, was such that disclosure was required. The Plaintiff asserts, supported by Mr Pratt, that that occurred. The Defendant denies that to be so.
It is apparent from the proposal that the Plaintiff disclosed to Mr Milford on 12 April 1994 that he suffered from diabetes and Mr Milford identified the note to that effect on the proposal in explanation of the affirmative answer to question 3(b) as being in his hand. He said that had he been told of any other relevant matter, he would have made a like note. From the absence of such a note he says that no further information was disclosed to him.
It is the Plaintiff’s case that this evidence is wrong and that the existence of a 1991 arthroscopy to his right knee was disclosed and discussed.
In stark contrast to the remainder of their evidence, both the Plaintiff and Mr Pratt have crystal clear memories of this disclosure and purport to recall some of the conversation verbatim.
I am satisfied that the Plaintiff consulted Mr McCusker, orthopaedic surgeon, on 4 February 1991 about long standing problems with his left elbow. In evidence, it was described as a “tennis elbow”. The Plaintiff attended Mr McCusker again on 17 February 1991 and the possibility of an arthroscopy of the elbow was discussed.
The Plaintiff said that thereafter, and before he left his employment with Dairy Vale in February 1994, this difficulty was spontaneously cleared after a small industrial accident which applied force to his elbow. Thereafter, despite 20 years of intermittent symptoms, he had no further difficulty with it. Consequently, it was not a matter which he revealed to the Defendant’s agent on 12 April 1994 in support to question 3(b) on the proposal.
That question is in these terms:
“3.    Does the insured:
(a)     .....
(b)Suffer from, or have ever suffered from - high blood pressure, heart disease, cancer, or any other major disease, accident or illness?
IF “YES”, GIVE DETAILS IN DISCLOSURE SECTION
(c)     .....”
Whilst this failure to disclose is established on the evidence, I am not of the view that it is of significance so as to be within the purview of this question.
There is a further allegation in paragraph 8.4A of the Defence that a condition called Grave’s Disease was not disclosed. From the evidence, I am not satisfied that the Plaintiff ever understood that he had this disease and therefore I am not satisfied that he failed to disclose it.
The medical evidence establishes that on 22 July 1991, the Plaintiff again consulted Mr McCusker. He complained of right knee symptoms on and off for 10 years. On 25 July 1991, Mr McCusker performed an arthroscopy on the Plaintiff’s right knee.
One week later, on 2 August 1991, the Plaintiff complained to Mr McCusker of knee pain. The Plaintiff said in evidence that he had some discomfort from the operation for about a week. After this time, the Plaintiff said that his right knee was ‘perfectly okay” (Tp21).
The Plaintiff said that in addition to mentioning his diabetes on 12 April 1994, he advised that he had had an arthroscopy in 1991. He said he was asked whether there were any ongoing problems and he replied “no, it was just a spur .... that Barney [Mr McCusker] had fixed up and I’d had no problems ever since ....” (Tp20). The Plaintiff said Mr McCusker had used the word “spur” in discussing the arthroscopy with him. In evidence, Mr McCusker said that he never used the word “spur” when describing the nature of joint deterioration to patients. However, Mr Girgis, orthopaedic surgeon, whom the Plaintiff saw for medico‑legal purposes in 1998, said in evidence that “spur” was a word he used in this context. There is no evidence that he used this word to the Plaintiff.
The Plaintiff said that when he told the Defendant’s agent that he had had no difficulties with his right knee since 1991, that person (whom he called Mr Tucker) said, if that was so the operation was not relevant. This is the Plaintiff’s explanation for why there is no disclosure about the 1991 arthroscopy in the proposal of 12 April 1994.
Mr Pratt said that his interest in the conversation of 12 April 1994 between the Plaintiff and the Defendant’s agent was aroused when he heard insurance being mentioned. Before then he said he did not know anything about the Plaintiff’s visitor. He was then involved with boiling the kettle and was reading a journal and not paying attention. He was within earshot because the area was small and all three were in it.
He said that he heard the Plaintiff make a frivolous remark about payout difficulties. The Plaintiff said he made such a remark. Mr Pratt then heard a question about prior illnesses or accidents. He said the Plaintiff told the Defendant’s agent that he had diabetes and that he had “a spur on the knee in 1991”, but that it had given him no more problems. He said that the agent then said that it was irrelevant as it had not caused trouble since.
Mr Pratt said he recalled this incident in detail because after the person he called Mr Tucker had departed, he and the Plaintiff had words. He said he was “extremely angry” with the Plaintiff (Tp126) for mentioning his knee injury. The Plaintiff also said that there had been this cross exchange between them at that time.
The medical evidence, which I prefer to that of the Plaintiff where there is a difference, establishes that he did have difficulties for longer than about a week after the 1991 arthroscopy.
Mr McCusker said in evidence that on 25 September 1991, two months after the arthroscopy, the Plaintiff reported knee pain whilst describing problems with twisting during his usual 10 hour working day. At that time, the Plaintiff reported to Mr McCusker that he had minimal improvement to his knee.
On this day, Mr McCusker reported on the arthroscopy to the Plaintiff’s general practitioner. On 4 October 1991, the medical records of his general practitioner (tag 1 within exhibit D11 - Mount Gambier Hospital Medical Records) indicate a discussion with the Plaintiff when an osteotomy was “mooted”. This was in accord with an alternative within Mr McCusker’s letter of 25 September 1991 (tag 6 to D11).
The Plaintiff had no recollection of such a complaint to Mr McCusker or such a discussion with his general practitioner. He denied any ongoing difficulty or that a subsequent procedure was discussed. Again, his recollection has let him down.
After the 1995 renewal of the Plaintiff’s insurance, Mr Tucker took over from Mr Milford. He was responsible for the 1996 renewal. Mr Tucker wrote to the Plaintiff on 11 April 1996 (D6) in this regard. The policy, as existing, was renewed and on 18 April 1996 (D10) the Plaintiff signed an undertaking to pay the premium by instalments.
Thereafter, it seems from Mr Tucker’s letter of 10 May 1996 to the Plaintiff (D7), that there were discussions concerning the extension of the policy to increase the benefit for total temporary disablement and to also include a cover for illness in addition to the existing accident cover.
The exhibit P7 is a With Compliments slip dated 14 May 1996. Mr Tucker has identified his writing on that slip. He has apparently answered the Plaintiff’s queries concerning renewal of such an extended policy were a claim to be made and as to whether or not medical or financial statements would be required to facilitate such an extension. Apart from the exhibit, he had no independent recollection of the event.
A further proposal was then completed and signed by the Plaintiff. It is dated 23 May 1996 (D9). The premium was paid and the policy was endorsed in terms of endorsement slip 12755, dated 30 May 1991 (in D14) showing both increase in benefit and extension to include illness.
The proposal form (D9), which I find was completed by the Plaintiff in his hand where highlighting and asterisks appear, did not reveal any pre‑existing illness or accident. I accept Mr Tucker’s evidence that he completed the proposal as best he could and marked with highlighter and asterisks the places for the Plaintiff to complete and sign, which he did.
The Plaintiff has a memory of this extension occurring, but is unable to say when. Neither was he able to recall how the renewal occurred or anything of substance about the negotiations leading up to it. He acknowledged completing the proposal and said he made no disclosure because he had previously told Mr Tucker about both his diabetes and his 1991 arthroscopy. Of course, Mr Tucker knew nothing of what had occurred in 1994.
There is a suggestion in the evidence of Mr Evans, who, in 1994, occupied a senior underwriting position with the Defendant, that because only accident cover was required, there need not be any disclosure and endorsement regarding any earlier event because a claim based upon the occurrence of an accident would not be affected by any such information. However, he went on to say that he had never seen such a procedure adopted and whether the cover was for only accident or also for sickness disclosure was required in order to determine if the policy would be written, and if so, whether there would be any exclusion. I prefer this alternative and find, based on his evidence, that that was the usual requirement.
At trial, he was no longer in the Defendant’s employ, but was still employed in the insurance industry in a risk assessment role.
The exhibit D14 establishes that in May 1997, the Plaintiff came to Mr Tucker with a quotation for like cover from the Defendant’s competitor, SGIC. He said he asked Mr Tucker whether the Defendant could match the SGIC offer. The Plaintiff could not recall when he made this approach, but recalled doing so. In evidence, he was confused as to whether it was before, after or at the time of the 1996 extensions.
The significant difference between this quotation and the existing cover was the period for which a disablement payment would be made. The Defendant’s policies of 1994 and 1996 were both for a period of 52 weeks, the Plaintiff having elected to not accept the available alternative period of 104 weeks. The SGIC offer was similar in terms and cost to the 1996 extension, except that it offered 104 weeks of cover.
Mr Tucker said that he matched that offer subject to the Plaintiff paying his premium by direct debit instalments, which he did. This scenario is supported by the appropriate documentation in D14. The endorsement slip 13923 is dated 10 July 1997 and notes the policy amendment from 12 April 1997. The Plaintiff’s claim is based upon this extended period.
On 5 November 1997, in the course of his self employment, the Plaintiff said he hurt his right knee. He saw his general practitioner on 11 November 1997 and mentioned his knee. He saw him again on 18 November 1997 about it. Thereafter, he saw Mr McCusker on 17 March 1998 and reported to him the cause in November 1997. The Plaintiff continued to seek specialist medical advice and on 4 February 1999, reported to Mr McCusker that he had ceased his business and wished to have a High Tibial Osteotomy on his knee. Mr McCusker undertook this procedure in March 1999. It was successful, but the Plaintiff has been unable to return to work.
The Plaintiff said that after he hurt his knee in November he continued to complete work, but was in great physical difficulty with his right knee. On 27 March 1998, he made a claim upon his sickness and accident policy (exhibit P2). Therein, he said that he was totally unable to work from 17 March 1998. This claim form was, in part, completed by Mr Tucker from his records and from answers given by the Plaintiff. In response to a question as to whether the Plaintiff had “ever suffered from this or a similar condition before?” Mr Tucker wrote “1991 scraping of right knee - full recovery” (P2 question 4(b)). Mr Tucker said that this was the first he knew of the Plaintiff’s 1991 injury. Of course, he is correct because the evidence has established that he was not present on 12 April 1994 and the Plaintiff agrees that he did not reveal anything on 23 May 1996 when the policy was extended.

Thereafter, the Defendant paid to the Plaintiff the sum of $18,804.72. On 13 July 1998 (exhibit P4), Mr Tucker wrote to the Plaintiff advising that the claim was to be refused and the payments previously made were in the nature of an ex‑gratia payment. He indicated that the refusal was based upon non‑disclosure of the 1991 arthroscopy.
Prior to this occurring, but after the Plaintiff’s claim was lodged, he was advised by Mr Tucker on 9 April 1998 that, from renewal on 12 April 1998, the right knee was excluded from cover.
I accept that the Plaintiff sustained injury on 5 November 1997 at work as he described and then undertook the medical consultations and procedures which I have set out.
I also accept that he finished work, notwithstanding that his business remained open, at least in name, on 17 March 1998. He was unable to be at all precise about these quite recent dates in his evidence. Neither was Mr Pratt, who said he was present when the advice in the letter of 13 July 1998 (P4) was received by the Plaintiff and who said that he then recalled in detail all that had occurred between he and the Plaintiff and the Plaintiff and Mr Tucker on 12 April 1994.
Section 28(3) of the Insurance Contracts Act 1984 places the onus on the Defendant to satisfy the Court that if there had been disclosure, either it would not have entered into the contract, or it would not have done so on the same terms: Mann Annotated Insurance Contracts Act, Third Edition, paragraph 28.30.3.
Mr Milford said that had he been made aware of the arthroscopy on 12 April 1994, even if the Plaintiff said he was no longer having difficulty and had not for some time, he would still endorse the proposal as he did when told of the Plaintiff’s diabetes. He said that had the Plaintiff revealed the true situation to him, he would have asked for a medical report to refer to the underwriting section of the Defendant in Adelaide, as his authority did not enable him to determine to accept such a risk.
When referred to Mr McCusker’s letter to the general practitioner of 25 September 1991 (D11 tag 6) which referred to the possibility of further operative intervention to the Plaintiff’s right knee, he said he would “99%” (Tp184) refer it on or simply say that the knee would not be covered. It was a matter of no policy or a policy with the knee excluded. He allowed for no other alternative.
Mr Tucker said that had he been made aware of the Plaintiff’s true condition in April 1996, he would have noted it on the proposal form in these terms “.... arthroscopy in 1991, full recovery .... no residual disability” (Tp212). He further said that had he known there was any possibility of future surgery, he would have excluded the knee. He also would have referred the whole question of cover to his underwriter in Adelaide to determine whether there would be cover at all had he seen the letter of 25 September 1991.
Mr Evans confirmed the importance of a medical report where a knee injury had been revealed, particularly where the proposed insured was involved in workshop activities in the motor industry. Having read Mr McCusker’s letter of 25 September 1991, he said that, as underwriting manager, he would exclude a person in the Plaintiff’s situation from cover for his right knee.
As I have indicated, the evidence given by the Plaintiff of his conversation on 12 April 1994 with the Defendant’s agent is the only part of his evidence where he is confident about what occurred. Otherwise, he was uncertain as to sequence, dates and even his income from his business. Mr Pratt was similarly certain only of the conversation on 12 April 1994 and that it was with Mr Tucker.
I am unable to be satisfied that there was the conversation on 12 April 1994 to which they depose. I prefer the evidence of the past and present employees of the Defendant, notwithstanding that Mr Milford has no memory, even though he was present, as to the practice which would have been adopted had the Plaintiff informed of his 1991 arthroscopy. I find that he did not do so. I do not accept his evidence unless it is otherwise objectively supported. I do not believe Mr Pratt was an honest witness. In my view, he was here to help his friend and because he does not like insurance companies.
I accept the evidence of Mr Milford, Mr Tucker and Mr Evans as to the standard practice of noting a disclosure on the proposal and of seeking further information. I find that had the Plaintiff disclosed his 1991 arthroscopy to Mr Milford on 12 April 1994, a note would have been made of it on the proposal and a medical report sought as to the state of the Plaintiff’s right knee. I find also that had the letter of 25 September 1991 then been revealed to the Defendant, at the very least, cover for the Plaintiff’s right knee would have been excluded, initially for the accident policy and, thereafter, for the extended policy.
The Defendant has satisfied the onus cast upon it by Section 28(3) of the Act and was entitled to refuse the Plaintiff’s claim.
In that circumstance, there must be judgment for the Defendant. I shall hear counsel as to the question of costs.

[2003] SADC 10

31 January 2003