WONG CHI MAN v. AMERICAN INTERNATIONAL ASSURANCE CO LTD

DCCJ 1873/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1873 OF 2005

____________

____________

DECISION

1.  Wong (the Plaintiff) was insured under a hospitalisation income insurance policy issued by AIA (the Defendant).  In 2002, Wong was admitted to the hospital.  He was discharged in March 2003.  Wong filed claim for the policy benefits which AIA disputes.  Hence this action.  There has been much delay in this action until Wong applies for summary determination of this case under O.14A of the Rules of the District Court.

2.  Though both parties have filed affidavits, they agree that the relevant facts are not in dispute and this case may be disposed of by determining the proper construction of the terms of the policy.

THE FACTS

3.  The policy is called Mediguard Hospital Income Policy.  Wong took out the policy with AIA in 2001.  While the policy was in force, Wong was admitted to the hospital on 23 October 2002 for essentially right leg bone fracture.  Wong has undergone operations and been transferred to a rehabilitation centre.  He was discharged from the hospital on 25 March 2003.  During the 153 days between admission and discharge, Wong has taken intermittent home leave on 37 days.

4.  Section II of the policy contains the benefits provisions.  It provides that while the policy is in force, AIA shall provide the benefits of the policy when the insured is hospitalised due to a covered illness or covered injury on the recommendation of a Registered Medical Practitioner, etc. subject to the provisions, conditions and limitations contained in the policy or any endorsement.  Wong’s condition and consequential hospitalisation were covered by the policy.

5.  The various benefits under the policy that Wong claims in this action include (1) Daily Hospital Income Benefit, (2) Long Term Hospitalisation Benefit and (3) Surgical Expenses Reimbursement Benefit.  At this hearing, Mr Szeto for Wong confirmed that Wong would abandon his claim for the last of these benefits.

6.  In the premises, relevant to the present determination are the following provisions of Section II:

         “DAILY HOSPITAL INCOME BENEFIT

The Company shall pay the Daily Hospital Income Benefits for each day during which the Insured is confined in a Hospital up to a maximum of seven hundred and thirty (730) days in respect of the Same Confinement.”                                                 (Clause 1)

“LONG TERM HOSPITALISATION BENEFIT

When the Insured shall be hospitalised for more than thirty (30) days for the Same Confinement, an additional indemnity equal to the Long Term Hospitalisation Benefits shall be paid commencing from the thirty-first (31^st) day of hospitalisation and subject to the maximum of seven hundred (700) days in respect of the Same Confinement.”                                                            (Clause 2)

7.  Confinement and Same Confinement are defined under Section I of the policy.

“Confinement means admission in a Hospital for a minimum period of six (6) hours upon the recommendation of a Registered Medical Practitioner and continuously stay in a Hospital prior to the Insured’s discharge.  Confinement shall be evidenced by a daily room / room & board charge by the Hospital and under no circumstances shall the Company pay for more than one (1) day of the Daily Hospital Income Benefit for each day of Confinement.”

                                                                                   (Clause 12)

“Same Confinement means that if two (2) or more Confinements are due to the same or related Injury or illness, or to any complications arising therefrom, such Confinements shall be regarded as one (1) Confinement if each of them is not separated by more than ninety (90) days from the paid or payable Confinement which immediately precedes it.  This rule shall be observed in determining the limit of the benefits.”                                                                (Clause 13)

8.  Wong filed his claim for the daily and the long-term benefits for the 153 days between admission and discharge.  Eventually upon demand of Wong’s solicitors, AIA paid out a total sum of HK$12,000 to Wong.  According to its letter in June 2004 detailing such payment, the payment represented the claim reimbursement to Wong but only for the days between 23 October and 5 November 2002 as well as between 14 March and 24 March 2003.  There was also no payment of long-term benefits.

9.  In its subsequent letter in November 2004, AIA explained that:

“Due to the fact that Mr Wong’s confinement did not fulfil the definition of “Confinement” or “confined in a Hospital” as stated in the policy contract, his claim can be reasonably declined.  However, as a gesture of goodwill, we have offered ex-gratia settlements to Mr Wong for his confinement between the periods of October 23, 2002 to November 5, 2002 and March 14, 2003 to March 25, 2003……” (emphasis added)

10.  AIA is apparently taking issue about the 37 days of intermittent home leave that Wong took and his once transfer to the rehabilitation centre during the 153 days between his admission and discharge.  In any event, Mr Lam for AIA argued that Wong should not be entitled to the benefits at all.

THE QUESTION

11.  Wong asks for this question (paragraph 1 of the summons) to be determined:

“Whether the definition of “Confinement” as set out in the policy …… precludes AIA from paying the Daily Hospital Income Benefit …… and Long Term Hospitalisation Benefit …… to the Plaintiff under the Policy when the Plaintiff had taken home leave during his hospitalisation period of 153 days from 23 October 2002 to 25 March 2003.”

         If not, Wong asks for judgment.  Otherwise, he asks that his claim be dismissed.

DISCUSSION

12.  This is a question of construction.  The general rules of construction of the policy do not differ substantially from those of any written commercial document.  To begin with, words should be construed in their ordinary and popular sense.  They have meanings that an ordinary person of normal intelligence would place on it in the light of the relevant circumstances.  This is usually how to gives effect to the intention of the parties.  Where it is evident that parties were intending to effect a contract of insurance of a particular kind, the court will not favour a construction which would defeat this intention or make it substantially ineffective.  The strict literal meaning of the words in dispute would not be used if it would defeat the commercial objective of the policy.  Mr Szeto for Wong referred to Goo, Insurance Law and Practice in Hong Kong at 6-3 & 6-4, which contains a convenient summary of these established principles.

13.  For the policy benefits, one looks at Section II.  Section II, clause 1 provides that AIA shall pay the daily benefit “for each day during which the Insured is confined in” a Hospital.  Clause 2 provides that AIA shall pay the long-term benefit commencing on the 31^st day of “hospitalisation”.  I also note that clause 3 provides for the Intensive Care Unit Benefit.  Exactly like the wordings of clause 1 (re the daily benefit), an additional indemnity shall be paid for “each day during which the Insured is confined in” an Intensive Care Unit (ICU).

14.  AIA argues that by taking the home leave or as a result of the transfer to the rehabilitation centre, Wong has not continuously stayed in “a Hospital”.  Therefore Wong’s hospitalisation did not constitute Confinement as defined in Section I, clause 12.  If AIA’s construction is correct, whether the insured is “confined in” the hospital on a particular day (for the purpose of Section II, clause 1) would somehow depend on whether he is confined on any other day between his admission and discharge (as defined in Section I, clause 12).

15.  I do not agree with AIA.  While clause 12 defines Confinement in terms of a period of continuous stay from admission to discharge, admission for not less than 6 hours, which is evidenced by a daily room or room & board charge by the hospital, already amounts to one day of Confinement (in the hospital).  Pursuant to Section II, this entitles the insured to the benefit for the day, though the insured may be discharged days or months afterwards.  The entitlements to the benefits under Section II do not arise only upon proof of Confinement as a period of continuous stay between admission and discharge.

16.  Reading clauses 12 and 13 together, one would also see the need to define Confinement in terms of a period between admission and discharge.  Clause 13 effectively provides for the situation of multiple admission and discharge due to the same or related covered injury or illness or to any complications arising from it.  If these multiple admissions and discharges are less than 90 days apart, such periods shall be regarded as the Same Confinement for the purpose of determining the limit of the benefits under Section II.  This ensures that the benefits for such multiple admissions (under clauses 1 and 2) or multiple stays in the ICU (under clause 3) due to the same illness or injury shall be subject to a single limit respectively.

17.  But in the present case, confinement continuously in “a Hospital” between admission and discharge is actually proved for the purpose of Section I, clause 12.  The insured is expected to prove each day of Confinement by the daily room or room & board charge by the hospital since admission until discharge.  The fact was that the hospital did charge Wong, and Wong did pay, such charges as an in-patient for each of the 153 days of hospitalisation period.  Notwithstanding the home leave and the transfer, Wong was never discharged by the hospital until 25 March 2003.

18.  I can of course see the concern of AIA.  An insured might be admitted, stayed for a couple of days in the hospital and then took months of home leave or was transferred from time to time until the day when he was discharged.  However, this concern is addressed by the intervention of a Registered Medical Practitioner and the Hospital, both defined by AIA in the policy.  The documents show that a patient needs to apply to the hospital for home leave.  Potentially absurd situation is not shown to be more real than hypothetical.  But even in the worst scenario, AIA must abide by the terms that they designed.

19.  I can also see the concern of the insured.  According to AIA’s construction, an insured that might be properly admitted and hospitalised for months would lose all his entitlements upon taking one day of home leave or being transferred, though permitted or even arranged by a Registered Medical Practitioner and/or the hospital.  Mr Lam for AIA referred to Insurance Law and Practice in Hong Kong (above) at 6-4 and submitted where the words used are clear and precise and only one interpretation is possible, the courts will generally give that interpretation, notwithstanding it may produce a harsh result to the insured.  I have no problem with this statement but I do not accept that AIA’s construction is indeed the only possible construction in this case.  In my view, it is AIA’s construction that runs counter to the policy’s objective of providing hospitalisation income benefit.  This offends the canons of construction explained earlier.

20.  In my judgment, Wong is entitled to his claim the policy benefit for each day of Confinement since his admission until his discharge, notwithstanding the intermittent home leave.

ORDER

21.  The question in paragraph 1 of the summons (above) is answered in the negative.  It follows that judgment is entered against AIA for the sum of HK$126,000.

22.  As mentioned above, there has been much delay in this action.  Legal aid was granted in May 2004.  The action was commenced in April 2005; yet the statement of claim was filed in February 2006.  Since the close of pleadings in March 2006, nothing has happened until notice of intention to proceed was filed in July 2007.  AIA should not be made to bear interest during the periods between the date of writ and the statement of claim as well as between the close of pleading and the notice of intention to proceed.  Subject to that, the judgment sum shall carry interest at 1% above HSBC prime rate from the date of writ to today and thereafter at the judgment rate until payment.

23.  I make a nisi order that Wong shall have costs of the action, including this application and any costs reserved.  Costs shall be taxed, if not agreed.  I certify the engagement of counsel.  Wong’s own costs shall be subject to legal aid taxation.

Representation: