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AA Mutual Life Assurance Association Ltd v Singh (384/89) [1991] ZASCA 67; 1991 (3) SA 514 (AD); [1991] 4 All SA 737 (AD) (28 May 1991)

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CG CASE NO: 384/89

IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)

In the matter between:
A A MUTUAL LIFE ASSURANCE ASSOCIATION LTD Appellant
and
RAMPAL SINGH Respondent

CORAM: JOUBERT, VIVIER, EKSTEEN, FRIEDMAN JJA et PREISS AJA

HEARD ON: 8 MAY 1991

DELIVERED: 28 MAY 1991

JUDGMENT FRIEDMAN JA

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Pursuant to a proposal form signed by one Neelevathi Singh (Neelevathi) on 3 February 1986, a policy of insurance was issued by the A A Mutual Life Assurance Association Limited (the company) on 13 February 1986.The insurance was described in the schedule to the policy as: "Vitasave - pure endowment with life cover." The sum assured was R30 000,00 and the period of the policy was ten years. The premium was R312,00 per month. In the proposal form Neelevathi nominated her husband Rampal Singh (the respondent in this appeal) as the beneficiary under the policy to be issued. Neelevathi died on 23 March 1986. The company repudiated liability. The respondent then brought an action in the Durban and Coast Local Division wherein he claimed payment of the sum assured. He obtained judgment in his favour. With the leave of the court a quo (Thirion J) the company now appeals against that judgment.

The proposal form signed by Neelevathi contains
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a declaration in section Q reading as follows:

"I, in my capacity as the life to be assured/applicant, declare and warrant that at the date of this application I am actively employed in my usual occupation and that all statements and answers which have been, or may be, made or given in or in connection with this application are true and complete and shall form the basis of the policy. I understand that any misstatement or non-disclosure which materially affects the assessment of the risk under the policy issued by the AA Mutual Life pursuant to this proposal may render such policy void. I agree to accept the standard policy wording of the AA Mutual Life for the type of assurance applied for. I confirm that this assurance is introduced to the AA Mutual Life by the introducer referred to in section D (even if I have other assurances introduced by anyone else). I further irrevocably authorise any doctor, or any other person who may be in possession of, or may hereafter acquire, any information concerning my health to disclose such information to the AA Mutual Life and I agree that this authority shall not be terminated by my death."

The policy was issued "subject to the correct and

complete information having been furnished by the owner
and the life assured ...".

In its plea the company alleged that at the
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time when she signed the proposal form, Neelevathi was, to her knowledge, suffering from cancer. She was moreover not actively employed in her usual occupation. These facts were, so it was alleged, material to be known by the company and were concealed with the intention of inducing the company to enter into the policy. When Neelevathi signed the proposal form she was in fact suffering from cervical cancer. Despite the fact that there was no direct evidence that she was aware of her condition, the trial court found that she probably was. In my view that finding was justified and for the purposes of this judgment I will assume that it was correct. She failed to disclose this fact to the company.

The allegation that Neelevathi was not actively
employed in her usual occupation was denied in the
replication filed on respondent's behalf. In the
proposal form Neelevathi described her occupation as
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"dressmaker" and under the section requiring "full

details of work performed", she stated:

"Housewife/dressmaker; also in family business. Husband is a transport operator."

The evidence disclosed that despite the fact that she was
suffering from cancer, she was able to attend to her
housekeeping duties and to assist her husband with his
transport business. The court a quo found that she was
able to lead a normal life and that there was no merit in
the company's defence that she had been untruthful in
describing her usual occupation. This finding was, quite
correctly, not disputed before this Court. It is
accordingly unnecessary to say anything further about it.

In a replication to the company's plea of non-

disclosure, two contentions were raised. The first was
that the company had waived its right to be.given medical

information. The second was that the company was
estopped from denying that Neelevathi was excused from

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furnishing any information which she would have been bound to furnish had the proposal been for a normal non-life policy. The court a quo found for the respondent on the basis of estoppel.
The policy in question, which was called a Vitasave Life Policy, was introduced by the company in 1985 in order to overcome a difficulty created by an amendment to the Sixth Schedule to the Income Tax Act, 1962. Prior to that amendment the proceeds of a pure endowment policy. i.e. a policy which contained no life cover and which had enured for ten years, were not taxable in the hands of the insured. In terms of the amendment, if an endowment policy with premiums of more than R1 500,00 per annum did not include lif e cover amounting to at least eight times the annual premium, the proceeds of the policy would, on maturity, be taxable in .. the hands of the recipient. The Vitasave Life Policy was aimed at overcoming this problem. In so-called

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"Marketing Notes" issued by the company explaining the

advantages of this policy, it was stated:

"Our new VITASAVE LIFE is now available to solve the problems caused earlier this year by the new Sixth Schedule legislation. In terms of this legislation, restraints were placed on the sale of pure endowments. Plans with premiums of over R1 500 p.a. now have to include life cover of 8. times the annual premium and this means that lengthy calculations need to be made at the point of sale in order to arrive at the exact amount of cover required."

The Marketing Notes continued as follows:

"Our new plan automatically incorporates the life cover required in terms of this legislation; with no more worries as to whether the plan conforms to the 6th Schedule or not.
AND NOW FOR THE BEST NEWS...
'Free Cover' limits are available up to R40 000 sum assured (i.e. premiums of R5 000 p.a. or R416 p.m.) for ages at entry up to 45 NB.
Up to R30 000 sum assured (i.e. premiums of R3

750 p.a. or R312 p.m. ) is available free of

medical evidence for ages at entry between 46
NB and 60 NB.

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This means that you simply complete the application as if it was a normal non-life Vitasave, no medical questions whatsoever."
One of the witnesses who testified on behalf of

the company was Mrs Catherine Littleton who was employed
by the company as a "broker consultant". Her duties

involved promoting the company's "products" i.e. its
policies, amongst the various insurance brokers with a
view to persuading them tq obtain business for the
company in preference to its competitors. In the course
of marketing the Vitasave Life Policy, she explained its
advantages to one Mudanjeeth Seebrun (Seebrun) who was
employed as an insurance consultant by West City Brokers.
She also gave Seebrun a copy of the Marketing Notes. She
explained to him that the Vitasave Life Policy was an

"investment policy" which included the required amount of

life cover "free of medical evidence", to avoid the
problem created by the amendment tp the Income Tax Act.

She also explained to Seebrun that although the company

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was not looking for people with serious health problems, applicants fit enough to lead a normal life and actively employed in their usual occupations, would qualify as potential clients.
Armed with this information, Seebrun approached Neelevathi. Her name had been given to him by a client of his who had told him that Neelevathi was not in the best of health. He asked her no medical questions; in the light of the information he had received from Mrs Littleton, he regarded such questions as unnecessary. During the course of the discussion which preceded the signing of the proposal form, Neelevathi herself raised the question of her health and pointed out that she had not been well recently. Seebrun stopped her, stating that she did not have to disclose anything about her health as "this is a 10 years investment and a free life cover of R30 000".

Seebrun completed Neelevathi's proposal form
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himself. It is common cause that the company did not at the time have proposal forms designed specifically for its Vitasave Life Policy. The company accordingly utilised proposal forms which were intended for life policies. It was such a proposal form that Neelevathi was required to complete. According to Skinner, the national regional administration manager of the company, this has now been changed: a special proposal form is now used for the Vitasave Life Policy.
At the top of the proposal form which Neelevathi signed, three types of insurance are mentioned, namely Policy of Guaranteed Acceptance, Life Assurance and Retirement Annuity. There is a tick next to the words "Policy of Guaranteed Acceptance" but it is common cause that the proposal completed by Neelevathi was not for such a policy.

Section M, which was not completed when Neelevathi signed the proposal form, contains the

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following questions:

"1. Have you sought medical advice during the past 5 years in connection with any symptom or condition, or been a patient in a hospital or nursing home, or undergone any medical examination (including ECG, X-ray examination or specialised laboratory tests)? If 'YES', state why, when and with what results. 2. Do you have or have you ever had trouble with, or disorder of:

2.1your heart or circulation (e.g. blood pressure, chest pains, heart murmur, palpitations, rheumatic fever or blood vessel disorders, stroke, etc)?
2.2ycur lungs (e.g. persistent cough, shortness of breath, tuberculosis, asthma, bronchitis, etc)?
2.3your digestive system and liver (e.g. indigestion, ulcers, bleeding from the bowel, hepatitis, gall stones, etc)?
2.4your kidneys, bladder or reproductive organs (e.g. stones, infections, venereal disease, bilharzia, etc)?
2.5your nervous system (e.g. concussion, unconsciousness, paralysis, fits, blackouts, depressive or anxiety states, persistent headaches, etc)?
2.6your eyes (excluding errors of refraction), ears, nose or throat (e.g. deafness, ear discharge, etc)?
2.7 your skeleton, joints or muscles

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(e.g. rheumatism, arthritis, back or neck trouble, gout etc)?

2.8Your glands or blood (e.g. diabetes, thyroid, spleen, bleeding disorders or leukaemia etc)?
2.9growths (e.g. cancer, or tumour of any kind etc)?
3. Is there, or has there been anything at all relating to your health (e.g. ailments, diseases, injuries, operations, physical abnormalities, pregnancy), your habits, your activities, your living and working conditions which could affect the risk of the assurance proposed and which has not been divulged above?

Section J deals with the proposer's height and mass.
Section K deals with the proposer's smoking habits and
alcoholic liquor intake. Sections J, K and M are all
marked "N/A" (not applicable). Seebrun stated in
evidence that it was Mrs Littleton who had written N/A
across these sections, as he had omitted to complete them
when the form was signed. Mrs Littleton testified that

she did not know who had written N/A against these
sections. She accepted, however, that it was quite

possible that someohe in the company had done so. It is

13

unnecessary. for the purposes of this judgment, to
consider who in fact wrote N/A against those sections.
Suff ice it to say that it was neither Neelevathi nor
Seebrun, but someone in the company.

There is a note which precedes section H which

reads:

"1. If this application is for a policy of guaranteed acceptance or without life cover, mark sections H to N "NOT APPLICABLE". 2. It is important to disclose illnesses or conditions however trivial."

Section H reguires the name of the proposer's doctor to
be furnished. This section was left blank.
Significantly, Mrs Littleton testified that if this had
been a policy with no life cover, there would have been
no need for medical questions to be completed and that

the Vitasave Life Policy "was to be completed as if it
were a non-medical - a non-life policy".

The main argument advanced in this Court by
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counsel for the company was that despite the fact that medical questions need not have been answered, the form in which section Q was drafted, reguired a proposer to disclose any facts which were material to the risk that the company was being asked to undertake. There was accordingly, so it was contended, an obligation on Neelevathi to have disclosed that she was suffering from cancer and that she had been receiving treatment for her condition. Her failure to do so, it was argued, was a breach of section Q which entitled the company to repudiate liability.
It is common cause that the proposal form which Neelevathi signed was not an appropriate one for the Vitasave Life Policy. It is also common cause that, despite the fact that the proposal form contained questions in section M relating to the proposer's health, a proposer was not required to answer those questions. Mrs Littleton was asked:

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"Now when you were dealing with people not in the best of health or sub-standard lives, was there anything extra that he (i.e. Seebrun) was told he had to obtain concerning their health? Or was the no-medical questions required applicable irrespective?"

Her reply was:

"Well, as per the marketing note, the

application had to be completed as if it were a

non-medical - I mean a non-life application
form."

Her evidence on what questions were applicable continues
as follows:

"Mr Seebrum gave evidence that when the form
was handed to you, those sections had been left
blank but hadn't been struck out and marked
'N/A' and that was done not necessarily by you
but by somebcdy within the company, the
insurance company, is that likely? — That is

quite possible.

And that was because the company regarded the
medical questions as not being applicable? --

Correct.

THIRION J What do you mean by applicable? —
If this had been a policy with no life cover at
all, the medical questions would then not (be)

needed to be completed.

Well, they would then be quite irrelevant, not
so? — And this happened to be the same. It
was to be completed as if it were a non-medical
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- a non-life proposal.

Well, did you regard them as irrelevant or simply as not required? -- Not required, not irrelevant but not required as per the special structure of this type of policy, the nature of this particular policy."

What the company was interested to know was

whether the applicant was able to lead a normal life and

to continue with his or her usual occupation. The

Marketing Notes make it clear that for ages between 45

and 60 (Neelevathi was 55) insurance up to R30 000,00 was

available "free of medical evidence". The premium of

R312,00 per month was exceptionally high for life
, insurance. The normal premium for life cover of R30

000,00 would have been of the order of R45,00 per month.

This underlines the fact that the policy was in effect an

investment policy and that the life cover was included

merely as a selling point in order to overcome the

difficulty caused by the amendment to the Income Tax Act.

Skinner testified as follows:

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"Mr Skinner, the marketing notes towards the bottom of the page referred to amounts for insurance which are available, free of medical evidence, and it also refers to no medical questions whatsoever. Can you comment on that please? -- Yes. Well, as I understood it from our head office, the policy was essentially a pure endowment policy. It was never the intention of the company to market this product as a life assurance policy purely for life cover. The premium itself would be exorbitant for pure life cover."

Asked to comment on section Q, Skinner stated:

"It was introduced into our application form
purely to ensure that we were taking on clients

who were physically able to work.

How did you determine it from the declaration,
that the person was able to work? -- Well they
do state that they are actively employed in

their usual occupation.

THIRION J That's not all that you ask there,
you ask a great deal more than that. So why do
you say it is purely to ensure that they were
able to work? -- Also to warrant or to declare

that they have answered truthfully.
Whatever questions they had to answer?
Correct."

In the light of what had been conveyed to him

by Mrs Littleton Seebrun, as he was entitled to do in the
circumstances, explained to Neelevathi that it was not

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necessary for her to answer any medical questions when she completed the proposal form.
Section Q cannot be regarded in isolation. It must be read in the light of the questions which preceded it. As far as a proposer's medical history is concerned, there were no questions that were required to be answered; on the contrary, Neelevathi was told by Seebrun that the company did not wish to know anything about her health. In the light of that background, the company must be taken to have waived whatever right it might otherwise have had to require the proposer to disclose details of her state of health.
The questions put by an insurer in a proposal form may enlarge or limit a proposer's duty of disclosure as the guestions may, depending on the circumstances, serve to define the limits of what is material. In JOEL v LAW UNION AND CROWN INSURANCE COMPANY [1908] 2 KB 863 at 878 VAUGHAN-WILLIAMS, LJ said:

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"I think also that the insurance office may, by the requisitions for information of a specific sort which it makes of the proposer, relieve him partially from the obligation to disclose by an election to make inquiries as to certain facts material to the risk to be insured against itself."

Dealing with that statement DE VILLIERS JA in COLONIAL
INDUSTRIES LTD v PROVINCIAL INSURANCE CO LTD 1922 AD 33
at 41 said the following:

"It will be observed that the proposition is cautiously worded and so framed no objection can be taken to it. For from the frame and import of a particular question a Court might be able to draw the inference that the insurers must be taken to have waived their right to obtain the information contended for. But it is going top far to say that the questions in every case def ine the limits of what is material."

In MacGILLIVRAY AND PARKINGTON on Insurance Law 8th Ed,

it is pointed out in paragraph 645 that-

"It is possible that the form of the questions asked may make the applicant's duty more strict. The applicant may well be reminded by a particular question that the general duty of disclosure enjoins him to state material facts in his possession relating to the subject-

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matter of the guestion but outside its ambit".

The authors go on to state in paragraph 646:

"It is more likely, however, that the questions asked will limit the duty of disclosure, in that, if questions are asked on particular subjects and the answers to them are warranted, it may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or on matters kindred to the subject matter of the questions. ... Whether or not such waiver is present depends on a true construction of the proposal form, the test being, would a reasonable man reading the proposal form be justified in thinking that the insurer had restricted his right to receive all material information, and consented to the omission of the particular information in issue.?"

The corresponding passage in the previous edition of
MacGILLIVRAY AND PARKINGTON on Insurance Law was quoted
with approval in HAIR v THE PRUDENTIAL ASSURANCE CO LTD

(QBD) [1983] 2 Lloyd's Rep 667 at 673. In HAIR'S case
the proposal form signed by the applicant contained a

statement reading as follows:

"I wish to insure as above with the Prudential Assurance Company Limited in the usual form for this class of insurance and warrant that all

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the information entered above is true and complete and that nothing materially affecting the risk has been concealed."

Dealing with that statement WOOLF J said:

"Reading that sentence as a whole, coming as it does at the end of the proposal form, it appears to me that it is reasonable to regard the question as requiring the proposer to make it clear that he or she has given a true and complete answer to the questions which appear above, and, what is more, that the proposer has not failed to disclose anything materially affecting the risk with regard to matters on which he is being questioned. I am bound to say, that, if it was intended that an assured should answer matters even though he is not being questioned about them, I would expect a dif ferent form of statement from the one to which I have just made reference. I would have expected something to be said which clearly indicated to a proposer that, although they had not been asked any specific guestion about the matter, if there was something which was relevant to the risk which they knew of, but which was not covered by the guestions, they should still deal with it, and leave a space for them to do so."

See also LITTLEJOHN v NORWICH UNION FIRE INSURANCE
SOCIETY 1905 TH 374 where the issue was whether a
company was entitled to repudiate a fire policy because .

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the insured had, in the proposal form, failed to disclose
that his wife was the owner of the goods insured.
Wessels J stated, at 383:

"If then the proposer has been asked no direct guestion about the ownership of the property it must be considered that the insurance company has not required that information as a condition precedent to the validity of the policy. The proposal form contains all that the insurer reguires to knów preliminary to issuing a policy, and if guestions therein are honestly answered and a policy issued the insurer cannot afterwards say that the insured has not sufficiently declared his interest in the goods or property which he has insured. It must be considered under such circumstances that the insurer has waived the necessity of reguiring fuller information about the nature of the interest of the insured in the property."

Section Q commences with a declaration and

warranty that the proposer is "actively employed in my
usual occupation". The proposal form contains guestions

relating to the applicant's occupation and requires full
details of his or her work performance. These guestions
would have alerted a proposer to the fact that the

23

company attached importance to his or her occupation and work performance. There could thus be said to be an obligation on a proposer to disclose material facts relevant thereto, despite not having been asked specific questions. However, as far as the remainder of section Q is concerned, the position is different. Having regard to the fact that the company did not require medical questions to be answered, a reasonable person reading the proposal form would be justified in thinking that the remainder of section Q referred only to those matters on which the applicant was required to answer questions. As the applicant was not required to answer any medical questions, the company must be taken to have waived its right to require information as to her state of health to be given in the proposal form. The company cannot therefore rely on the declaration in section Q as a ground for contending that the proposer failed to disclose material information.

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Nor, in my view, does the statement that "It is important to disclose illnesses or conditions however trivial", which precedes section H, assist the company. That statement as well as the authorisation in section Q to doctors to disclose information to the company concerning the proposer's health, must be read in the context of the proposal form as a whole which does not require medical questions to be answered. Once it is made clear to the proposer that no medical questions need be answered - and this was indeed made clear to Neelevathi by Seebrun on Mrs Littleton's instruction -neither the statement which precedes section H nor the authorisation to doctors in section Q, would convey to a reasonable person reading the proposal form that he or she was expected, because of section Q, to inform the company of facts pertaining to his or her state of health, which might otherwise have been material.

For these reasons the company must be taken to
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have waived its right to have information as to Neelevathi's health disclosed. In the circumstances it is unnecessary to consider the question of estoppel. The appeal is dismissed with costs.

G FRIEDMAN JA

CONCUR:

JOUBERT JA VIVIER JA EKSTEEN JA PREISS AJA