In August 2017, Keith was diagnosed with a heart condition. A few months later he took out a loan and paid for a repayment waiver. If Keith could not pay his loan instalments because he died, or became terminally ill or disabled, the lender would waive his requirement to make repayments.
Keith was then scheduled for surgery in relation to his heart condition, in February 2018. This was to be a routine surgery, commonly performed for his condition. However, during the surgery there were major complications and Keith effectively died on the operating table, but was revived. As a result, Keith suffered brain damage, chronic mental health and other health issues making him disabled and unable to work and pay his loan.
Keith contacted the lender about activating the repayment waiver. The lender said that the repayment waiver contract contained an exclusion clause meaning the lender did not have to waive Keith’s requirement to pay the loan. Keith did not agree with the lender’s decision and brought his complaint to FSCL.
Keith said he should have the benefit of the repayment waiver. He was now disabled, could not work, and could not pay his loan.
The lender said that the cause of Keith’s disablement was his heart condition which was a pre-existing medical condition (PEMC). The repayment waiver contract excluded claims if disablement was directly or indirectly caused or contributed to by a PEMC. The definition of a PEMC included a medical condition for which someone has sought or received medical advice or treatment, before entering into the repayment waiver contract.
What caused Keith’s disablement?
We looked at the chain of events/circumstances leading to Keith becoming disabled. Keith was diagnosed with the heart condition, had what was supposed to be a routine surgery, and then during that surgery something went unexpectedly and drastically wrong, causing Keith to become disabled.
We said that the ‘proximate’ or ‘dominant’ cause of Keith’s disablement was the medical misadventure during the surgery. Keith’s PEMC was not the proximate cause of his disablement because in normal circumstances, a person with Keith’s condition would have undergone the routine surgery and would never have become disabled.
What did the repayment waiver contract say?
We then analysed the repayment waiver contract’s wording. When analysing an exclusion clause in a contract, the doctrine of proximate cause needs to be considered. The doctrine says that a benefit can only be excluded, if the exclusion clause excludes the event or circumstance that has caused the claim.
In other words, if the repayment waiver contract had said the lender would not pay Keith’s loan if his disablement was caused by a PEMC, we would have said the lender had to pay the balance of Keith’s loan. This is because we had decided the proximate cause of Keith’s disablement was not his PEMC. The proximate cause of his disablement was the medical misadventure, and the exclusion clause did not exclude claims (proximately) caused by medical misadventure.
However, the repayment waiver contract was worded differently. It included the words ‘if disablement was directly or indirectly caused or contributed to by a PEMC’. These words had the effect of ruling out the doctrine of proximate cause. Because Keith’s PEMC (his heart condition), was in the chain of causation leading to his disablement, the lender did not have to pay the balance of his loan.
We wrote to Keith and explained the doctrine of proximate cause and how it applied to his case. Although disappointed, Keith understood that his claim could not succeed, and thanked us for our time and effort in investigating his complaint.
Insights for consumers and participants
The doctrine of proximate cause can be a complex legal concept for both consumers and participants to understand and correctly apply. If you are unsure about whether a claim should be declined, it always pays to refer your complaint or your customer to FSCL, so we can carry out a full analysis of the contract’s wording in relation to the facts of the case.