In March 2021, a woman from the Eastern Cape was the victim of an attempted hijacking at her residence. An incident that left her seriously injured and unable to continue working. To mitigate the resulting financial hardship, she turned to her salary protection policy with Liberty Group Limited, expecting the insurer to provide support during her recovery. Instead, her claim was denied, triggering a lengthy legal dispute that eventually made its way to the High Court.
The case raised critical questions about insurance disclosure requirements, the responsibilities of both parties, and the limits of fairness in contractual relationships.
Dispute Over Disclosure
The claimant, identified in court proceedings as M.D.L., challenged Liberty’s repudiation of her claim, arguing that the insurer had breached the Policyholder Protection Rules (PPRs) under the Long-Term Insurance Act. She alleged that the insurer failed to provide adequate reasons for rejecting her claim and unfairly cancelled the policy based on health information that, in her view, had already been disclosed in earlier insurance applications.
Liberty defended its position by stating that the non-disclosure of material medical history at the time of entering into the current policy rendered the contract void ab initio. The company asserted that it was entitled to rely solely on the information provided during the most recent telephonic underwriting process, and not any past disclosures tied to prior policies.
High Court Decision
The court ultimately sided with Liberty. It found that the insurer had acted lawfully and fairly, and had met the requirements set out in Rule 17.6.3 of the PPRs. The repudiation letter issued by Liberty was found to be clear, detailed, and sufficiently reasoned, enabling the claimant to understand and respond to the decision.
Furthermore, the court upheld the cancellation of the policy, affirming that insurers are not obligated to reference or consider disclosures from previous policies when assessing new applications. Each policy is assessed independently, and policyholders are responsible for making full and accurate disclosures during every application process.
Key Legal Issues Considered
A major point of contention was the applicant’s belief that her prior disclosure of medical conditions such as depression and anxiety should have been factored in. She also argued that these conditions were irrelevant to a claim arising from a physical injury.
However, the court avoided delving into the materiality of these conditions. Instead, it focused on the contractual basis of the policy and the duty of disclosure owed by the applicant. It reinforced the position that non-disclosure of material information, regardless of perceived relevance, can justify policy repudiation.
Implications for Insurers
The judgment reinforces the importance of:
- Complying with procedural obligations under the PPRs;
- Communicating decisions clearly and thoroughly;
- Ensuring that repudiation letters include sufficient detail to inform the policyholder of their rights and grounds for dispute.
Liberty’s attention to procedural clarity was a decisive factor in its legal victory.
Takeaways for Policyholders
This ruling also serves as a cautionary reminder for consumers. Even if past applications with the same insurer included relevant health disclosures, one cannot assume that such information carries over to new policies. Every application is assessed afresh, and failure to disclose material facts, intentionally or otherwise, can lead to policy cancellation and loss of coverage.
Balancing Legal Rights and Public Trust
Beyond the legal findings, the case highlights broader concerns around fairness, transparency, and the reputational risks insurers face when claims are denied, particularly in traumatic contexts. While policy terms must be enforced, insurers must also manage the delicate balance between strict compliance and maintaining public trust.
Final Thoughts
The case of M.D.L. v Liberty Group Limited illustrates the complexities of underwriting and claims management in the South African insurance landscape. Both insurers and policyholders have responsibilities, and clear, honest communication is vital to the relationship.
By prioritising clarity, compliance, and mutual accountability, the insurance industry can ensure that policies serve their intended purpose, to provide meaningful financial support in times of crisis.
