A complaint was received against the insurer in respect of a claim rejected by the insurer due to fraud on the part of the insured.
The insured’s complaint appeared to involve a claim alleged to have been inflated or tainted with fraud. The fundamental principle which was applied by this office was that the insurer must shoulder its responsibility to indemnify the insured for the loss of/or damage suffered as a result of the peril covered by the policy.
The report of the insurer’s assessor was reviewed and it was evident from this report that the insured suffered a burglary at his residence although the insurer’s assessor felt some unease regarding the loss and more specifically the items claimed for. The assessor thereafter, apparently on his own initiative and without regard to the provisions of the Policyholder Protection Rules, caused a layered voice analysis (LVA) test to be carried out on the insured with specific emphasis on certain items.
The test indicated deception relating to almost every item that the assessor had a concern with. A meeting was later held with the insured and the assessor at which time it was alleged that the insured’s wife admitted to discovering, shortly after the loss, that the IBM laptop and Canon SLR digital camera with a bag and memory stick were in fact never stolen. When asked why she had not corrected the claim when she had an opportunity to do so, the explanation given by the insured was that “she was greedy and since the items had already been added to the claim, was hoping that she would be paid out extra”.
In terms of Rule 5.1 of the Policyholder Protection Rules promulgated in terms of Section 55 of the Short-term Insurance Act, 1998, any provision in a policy of insurance which provides, expressly or by implication, for the following is void:
a) that in connection with any claim made under the policy, the policyholder may be obliged to undergo a polygraph, lie detector or truth verification, or any other similar test or procedure which is furnished or made available by the insurer or any other person in terms of an arrangement with the insurer and which is conducted under the control of the insurer or such other person;
b) for an inducement of any nature for a policyholder to voluntarily agree to undergo a test or procedure envisaged in paragraph (a) of this rule where the policyholder submits a claim under the policy;
c) that where the policyholder voluntarily agrees to undergo a test or procedure envisaged in paragraph (a) of this rule where the policyholder submits a claim under the policy and the policyholder fails to pass such test, the claim will be rejected or the policy will be void merely as a result of such failure to pass the test or the procedure.
The assessor drew an inference arising out of the layered voice analysis (LVA) test carried out on the insured which was totally void, inadmissible and of no standing as per the above provisions of the Policyholder Protection Rules.
A settlement proposal was therefore made by this office as follows: the items that were in fact not stolen amounted to 15.82% of the entire claim as per assessor’s report. The total amount of claim was assessed in the sum of R126 274.65. After removing the items that should not have been included, the claim was reduced to the sum of R106 242.62. As a mark of disapproval for the conduct of the insured, it was further proposed that a penalty be imposed on the insured with a further 15%, which amounted to R15 936.40, and brought the whole claim down to R90 306.26. It was the view of this office that the proposed outcome would be fair and equitable and in line with the provisions of the Conventional Penalties Act.
The insurer was asked whether they would be prepared to make an offer of settlement to the insured as per the above settlement proposal or whether this matter would require resolution by means of a Formal Ruling made by this office.
The insurer argued that in this matter there was a clear fraud which had lead to a forfeiture of the claim. The insurer was not prepared to settle the claim as per settlement proposal made by this office. The insurer invited the office to make a Formal Ruling on the matter.
A Final Ruling was made and the insurer was directed to indemnify the insured and ordered to pay the claim with interest at the rate of 15.5% per annum from the date that the complaint was sent to the insurer. The claim has not yet been settled by the insurer and a meeting was held with the insurer wherein they were advised that this office would not review the Final Ruling that had already been made as the office was functus officio. We await confirmation from the insurer that the complainant’s claim will be settled as per the Final Ruling.
The insured filed a complaint with the Ombudsman concerning the rejection of a claim for theft of a TLB (tractor loader backhoe) machine. The insurer declined liability for the claim on the grounds that there was no insurable interest as this item belonged to the bank and that the insured could never have acquired beneficial ownership. The insurer further rejected the claim on the grounds of the insured not having taken due care and precaution in minimizing the loss.
The insured purchased a TLB machine from a company. After taking delivery of the machine, the insured contacted his insurance broker and requested that the machine be added to his policy.
A new client had approached the insured to hire the TLB machine for a day. A deposit was paid to the insured to cover the hiring cost. The insured delivered the machine as requested. At the close of business that day the operator called the insured requesting that the machine be left on site as the hirer had requested that they continue to use the machine on the following Monday. The insured communicated with the new client who confirmed the request and who informed the insured that over the weekend the machine would be kept under lock and key at the local councilor’s house. The machine was locked by the operator who departed with the key.
On the morning of that Monday the insured’s operator informed the insured that the machine had been stolen. The matter was reported to the police immediately and a claim was intimated with the insured’s broker. The insured was subsequently requested to submit a copy of the contract entered into with the hirer as well as a quotation for the replacement of the machine. A loss adjustor was appointed by the insurer’s underwriting managers to investigate the matter. The insured was later informed by the insurer’s investigator that it had been discovered that the machine in question was owned by the bank and that the previous seller still owed monies on the machine and that they would have to settle the bank first. The insured later learned that the seller had been placed in liquidation.
The insured then received a letter of rejection from the insurer’s underwriting managers, declining liability for the claim on the grounds that there was no insurable interest as this item of plant actually belonged to the bank and the insured could never have acquired beneficial ownership.
It was further contended in the letter of rejection that it was also the responsibility of the insured to ensure that all the information provided at the time of insuring the item of plant was true and correct and that failing to disclose that there was a problem in obtaining the logbook as proper proof of ownership amounted to non-disclosure. The third ground advanced for the rejection of liability was that the insured was negligent in the manner in which he had hired out this item.
The insured’s complaint was submitted to the insurer for formal response. The insurer furnished an opinion by their attorneys.
It was raised therein that it was established during the insurer’s investigations, that the machine was registered in the name of the bank as title holder and the seller as the registered owner. When the machine was purchased by the insured he was advised by the seller’s employee that the machine was fully paid for and that they were awaiting a log book from the bank.
A further issue noted was that the insured had subsequently lodged an application in the High Court for an order against the seller and the bank directing that the log book for the machine be handed over to the insured. The bank, on the other hand, had instituted legal proceedings against the seller for the payment of the balance of the outstanding purchase price in terms of the finance agreement concluded between them and the seller for the return of the machine to the bank.
It was contended by the insurer’s representatives that “it is quite apparent from the aforementioned that on no basis whatsoever will the insured ever acquire beneficial ownership of the machine” for a variety of reasons but, principally, as even if the insured had in fact purchased the machine from the seller, the insured would still not have been able to become the beneficial owner of the machine as he had no right to claim ownership of the machine from the bank. The insurer’s representatives, however, conceded that there was no doubt that if in fact the insured’s version of events was correct, then he would have immediately upon paying the second cheque have been entitled to the logbook of the machine.
The insured had difficulty in obtaining the logbook. The insurer submitted that the problem should, at that stage, have been disclosed to the insurer and it was maintained that the policy was a monthly one renewable every month and that an obligation rested on the insured on the renewal of a policy to make disclosures of material facts at the time of such renewal. Furthermore this non-disclosure would entitle the insurer to void the policy from inception whereupon the premiums paid by the insured would be refunded to the insured. It was also contended that the mistake of fact between the insured and the insurer that he was the owner or bonafide possessor of the machine would also have lead to the voidance of the agreement of insurance and repayment of the premiums from the date of inception of the policy.
The Ombudsman noted that the insurer’s representatives did not make any attempt to analyze or explore the entitlement of a bonafide possessor to ensure goods under its control, or even whether, had there been no insurable interest in the machine, how this may have impacted upon the insurer’s liability to indemnify the insured for the loss.
Under reasonable precaution the attorneys for the insurer then raised the ground that when the insured hired the machine out he had no details whatsoever of the customer except knowing that a person, who identified himself on the telephone , was hiring the machine. The attorneys alleged that the insured took no precautions.
The Ombudsman noted that no attempt was made to lay down a factual basis to substantiate the rejection reason that the insured had acted with reckless disregard to the safety of the item nor were the stipulations of policy in this regard referred to. Further, that no reference was also made to the applicable law concerning the exercise of due care and precaution in the context of a contract of insurance.
The insurer contended that the insured had no claim to the machine “other than a claim to possess it against the world at large except the true owner”. The insurer’s representatives further stated that if the machine were to be recovered then the insurer would not be entitled to the salvage.
The insured replied to the insurer’s response by saying that he was never advised that the machine was fully paid for by the seller’s employer but was led to believe by the seller that the money paid, that is the purchase price, “would be used to settle any finance still outstanding on the machine and the logbook would then be forthcoming”. He advised the Ombudsman that the application for delivery of the logbook had been granted by the High Court and the insured was accordingly vested with all the elements of ownership. He also advised that the seller, when realising that he had sold something that was not his to sell and that he had committed a fraud, attempted to make up a story claiming that the sale agreement was not for the amount as signed for in full and final settlement but was now for a higher amount. The seller had agreed to hand over the logbook which was not consistent with the insured not having paid for the machine in full.
The insured was led to believe that the seller was the owner of the machine and had been instructed to make out the cheques to that entity. The machine was also purchased from the premises of the seller. The insured stated that in the plant hire business machines were hired out in the manner followed in this instance. This type of machine, due to its size and difficulty to operate, was often left parked on the side of a road whilst under hire. They were also capable of being locked as would a motor vehicle. He had been advised by his operator that the machine had been parked in a residence and was behind a locked gate. The insured maintained he had throughout acted with reasonable precaution and had certainly not acted recklessly.
The Ombudsman, in relation to the alleged lack of due care and precaution on the part of the insured, referred the insurer to the principles laid down in the case of CC Designing cc vs Santam Insurance Company 1999 (4) SA 199 CPD.
The Ombudsman stated that indemnity insurance indemnifies the policy holder for losses suffered as a result of perils covered by the policy. As indemnity contracts are governed by the indemnity principal an insured can only recover what he actually lost. The policy holder must show that the loss had been incurred and he was only entitled to be compensated for that loss and no more.
The Ombudsman said that the issue, in considering the defense of a lack of insurable interest, was not whether the insured acquired, or could ever have acquired, beneficial ownership in the narrow legal sense in relation to the TLB machine, but rather whether the insured was the bonafide possessor and as such had an insurable interest in the machine.
The Ombudsman also said that the issue of whether there was insurable interest in the subject matter at risk merely required that the interest existed at the time of the loss; an insurable interest may also arise subsequent to the contract’s conclusion.
The Ombudsman’s view was that there was no doubt that the insured was the bonafide possessor.
The Ombudsman found that the insured had lost his use and enjoyment of the machine in question and the value of that loss was represented by the cost of replacing the machine which he had lost. The Ombudsman said that the insured’s possession of the machine was disturbed by an unlawful act of theft and the insured was entitled to be compensated for that loss. He further stated that it mattered not whether he was the common law owner of the machine in question, or whether he would have been entitled to have asserted any rights of ownership as against the bank.
The Ombudsman was unable to find any evidence of a lack of due care and precaution on the part of the insured, or evidence of recklessness or foreseeability of harm that was intentionally disregarded, as contended for on behalf of the insurer. The Ombudsman noted that wherever the insurer relied upon non-compliance on the part of the insured with any term or condition contained in the policy of insurance that it carried the risk of establishing the alleged breach or non-compliance. Furthermore, in the terms of the principles of fairness and equity applied by the Ombudsman, the insurer was also under an obligation to establish that any such non-compliance was material to the loss and that the insurer had been prejudiced thereby.
In the circumstances the Ombudsman found no merit in the reasons advanced by the insurer for the rejection of liability of the insured’s claim and made a ruling in favour of the insured for the insurer to indemnify the insured for the loss suffered rising out of the theft of the TLB machine and for the insurer to pay the insured interest on the value of the equipment stolen calculated at the rate of 15.5% per annum to date of payment.
A complaint was received against the insurer in respect of a stolen vehicle claim which was rejected due to the complainant’s failure to comply with the security requirements, being a tracking device.
In his Application for Assistance, the complainant stated that on 05 May 2010 his wife was hijacked whilst driving the insured vehicle. The perpetrators held his wife hostage whilst attempting to locate the tracking device and once the tracking device had been located and disposed of, the complainant’s wife was released. The complainant advised that at the inception of the policy the vehicle did have a tracking device, however, the tracking device was deactivated as the policy only required tracking devices on vehicles valued at R250 000.00 or more. As the value of the insured vehicle was R202 000.00, the complainant did not consider the tracking device to be a requirement for cover and therefore deactivated the tracking device in order to save the subscription costs. Further, the complainant stated that the even if the tracking device was activated, this would not have assisted the insurer in recovering the vehicle as the tracking device had been disposed of shortly after the hijacking.
In accordance with the procedure followed by this office, the insurer was asked to furnish us with their comprehensive response to the complaint. Despite numerous reminders, both telephonically and in writing, the insurer failed to respond. Due to the insurer’s failure to respond timeously, a Provisional Ruling was made against the insurer. The matter was then discussed at a meeting held with the insurer and the insurer still failed to furnish us with their comprehensive response. The Provisional Ruling was therefore made a Final Ruling and the insurer was ordered to pay the claim with interest at the rate of 15.5% per annum from the date that the complaint was sent to the insurer. The claim was accordingly settled by the insurer.
The office of the Ombudsman was approached by the complainant in respect of a rejection by the insurer for a claim under his personal accident policy. In brief, the complainant underwent a surgical procedure for the removal of a cataract and an implant of a new lens in his left eye. The eye became infected and as a result of this infection he lost the sight in one eye.
The complainant approached the insurer for compensation in terms of his policy and the insurer then informed the complainant that, in terms of the definition of an insured event, the bodily injury needed to be caused by violent, accidental, external and visible means.
They indicated that the procedure that was done was not accidental. The reasons were that the washing of the eye is an integral part of the procedure and same cannot be considered accidental. In short, the injury was caused by the surgical procedure which, albeit being violent, external and visible in nature, could hardly be said to be accidental.
The insurer further argued that a personal accident policy is designed for disability as may be caused by, among others, violent and accidental means, both of which must be present for the benefits to accrue to the policyholder. The policy is not meant to cover all disability, irrespective of the cause thereof. In all instances where violent or accidental means are missing, the loss will fall outside of the policy.
Our office reminded the insurer that were they allege that a claim falls within the ambit of an exclusion or an exception to the cover provided by the policy, the onus is on them to establish this as a fact and on the balance of probability.
In the present instance, their letter of rejection clearly stated that the alleged infection and loss of sight was a deliberate surgical procedure and, as such, not accidental as required by the policy.
The Ombudsman’s office informed the insurer that we did not believe that they had established that it was the cataract removal operation, which the insured underwent, which caused the infection to the insured’s eye and the later resultant loss of vision. We based this submission on the fact that the ophthalmologist stated in his report that it was an uneventful right cataract extraction and intraocular lens implant and that everything went well during the operation. They further stated that, in relation to the infection which the insured developed, they were not sure what the cause of this was and that the doctor could not determine any bacterial growth.
The doctor, however, later concluded that the infection was compatible with a toxic anterior-segment syndrome due to chemicals used during the operation. We informed the insurer that this was, however, merely a theory and had not been established as the cause of the infection which the insured had developed and the origin of the infection remained unknown.
The insurer advised that the insured bore the onus of bringing the claim within the ambit of the insuring clause and had to do this on a balance of probabilities. Their contention was that this had not been done.
In order to arrive at a conclusion that the loss of vision was accidental, within the insuring clause, one would first have a probable cause of the loss of vision without which it would be a stretch to simply arrive at a conclusion that it was caused externally. The insurer further submitted that the view that the loss of sight is attributed to chemicals later introduced into the eye which caused the infection is clearly stated to be an assumption. They were of the view that an assumption cannot be translated into a probability and as a result they did not believe that the loss had been brought within the ambit of the insuring clause and that the onus still rested with the insured.
Our office then advised that the insured is not to prove a negative. By definition, the loss of sight in a person’s eye would, in the absence of a deliberate infliction of injury, be considered to be accidental in nature. Furthermore, it is not the means that must be accidental but rather the result.
The event insured against in a personal accident contract is an accident and this, in turn, requires that there must be an appropriate causal relationship between the accident and the injury. However, as has been pointed out in a variety of cases as the word ‘accident’ is primarily intended to exclude the operation of natural causes, the precise ambit of the word is unclear and it is accepted that the term simply means an unlooked-for mishap or untoward event which is not expected or designed.
An accident is consequently an occurrence or event of a fortuitous nature and the very essence of an accident is that its occurrence is not intended by its victim. The conduct of a third party, intentional or otherwise, or the occurrence of any other fortuitous event can be seen as an accident if the occurrence of the event was not foreseen by the victim.
In the present matter, it is quite clear that the insured, as the victim, did not intend the consequence of loss of vision to result from the surgery which he underwent. If the cause of the loss of vision is, as seemed to be suggested, based upon the information furnished by the surgeon, to be ‘toxic anterior-segment syndrome due to chemicals used during the operation’, the result of the use of the chemical would clearly fall within the ambit of an accident.
In our view the peril insured against, in terms of the policy, was ‘the total and irrecoverable loss of all sight in one or both eyes’. This condition prima facie had been fulfilled. The insurer had a liability to indemnify the insured as provided for by the policy. If the insurer sought to avoid this liability by reason of any other provision in the policy, they bore the onus of establishing that they were absolved from indemnifying the insured by reasons of the provisions relied upon. Having regard to the aforegoing our office was of the view that the insurer was liable to compensate the insured in terms of the policy provisions.
The insurer then agreed to the submissions made by our office and settled the claim in terms of the policy for the full benefit.
The insured purchased a BMW which was comprehensively insured. In April 2008 the insured vehicle was involved in a collision and later declared a write off. A claim was submitted to the comprehensive insurer as well as the credit shortfall insurer.
The comprehensive insurer assessed the market value of the insured vehicle to be R620 000 and the insured was made an offer on this figure less the applicable excesses. The insured had purchased the vehicle for R950 000. The insured’s credit shortfall insurer rejected the value placed on the vehicle by the comprehensive insurer for the purposes of assessing the insured’s shortfall claim.
The insured approached the Office of the Ombudsman for Short Term Insurance who then took up the matter with the comprehensive insurer. It appeared that the method of indemnification provided by this insurer was the market value on the date of loss.
The insured vehicle, which was a 2006 model, had a retail value of R792 200 as at the date of loss which figure was consistent with the new list price in 2008 of R864 000 according to the Auto Dealer’s guide, being the industry standard for determining the values of vehicles.
The comprehensive insurer however did not follow the Auto Dealer’s guide and instead considered similar vehicles being offered on the market and determined that the insured vehicle could be replaced at a cost of R620 000. The comprehensive insurer submitted to the Ombudsman a circular dated the 10th of June 2010 which was sent to all their brokers advising them of the proposed new method of determining the market value of vehicles at date of loss with the intention of reducing reliance on the Auto Dealer’s guide.
The Ombudsman for Short Term Insurance advised the comprehensive insurer that their method of determination of the market value was out of keeping with the industry norms and standards, was potentially highly prejudicial to insured persons and would only lead to differing practices being followed in the industry which would result in uncertainty, confusion and unnecessary disputes being created.
The Ombudsman advised further that it was imperative that there be uniformity in approach within the industry to the methodology to be employed in determining the indemnification to be provided to the insured in the event of a loss. He advised that the methodology was especially important as it would affect the calculation of the credit shortfall.
The Ombudsman for Short term Insurance conceded that an insurer was, as a general rule, entitled to elect whether to repair, replace or settle on a cash in lieu basis however once an insurer had elected to indemnify through a particular method they were stuck with that method and may not later change that election to the detriment of the insured.
The Ombudsman advised that once an insurer had elected to indemnify on a cash in lieu basis it could not rely upon the cost of replacement as representing the measure of indemnification. The comprehensive insurer disagreed with the Ombudsman and advised that they would not change their view which necessitated the Ombudsman to issue a formal ruling against them.
The insurer was ordered to recalculate the settlement to the insured following the industry standard, which was the Auto Dealer’s guide, and, further, that interest was to be paid to the insured at the rate of 15.5% per annum as from the 09th of April 2009.
After further deliberation the insurer agreed to abide by the findings of the Ombudsman.
The complainant submitted a claim for damage to his vehicle sustained during an accident. The damaged vehicle was assessed by the insurer and authorisation was given to an approved repairer to repair the vehicle; the repairer was elected by the insurer.
Subsequent to the repair of the vehicle it was given back to the complainant. The complainant was not satisfied with the repair work done on the vehicle. According to him not all the accident related damages had been repaired and some of the repair work done was substandard. Although the vehicle was returned to the same panel beater the complainant remained dissatisfied with the quality of workmanship and the fact that not all the damage had been repaired. Following this the insured vehicle was returned to the same panel beater on numerous occasions, however, the complainant remained dissatisfied with the repair work. This office conducted various meetings with the insurer regarding the matter and subsequently another two assessors were appointed to assess the condition of the vehicle. Both these assessors concurred with the complainant that the vehicle had not been repaired properly.
Subsequent to this the complainant moved from Durban to Bronkhorstspruit and as he was still dissatisfied with the repairs he took the vehicle to the AA for a report. From the report it was clear that the vehicle was not repaired properly and some of the accident damage had not been repaired at all. The report from the AA concluded that the vehicle should be treated as a write-off as it was uneconomical to reinstate to its original pre-accident condition. It stated that the structural integrity of the vehicle had been compromised hence the conclusion reached. This office had another meeting with the insurance company were it was agreed to appoint yet another independent assessor to assess the condition of the vehicle. This assessment took place in Bronkhorstspruit. The conclusion reached by the fourth assessor was that the complainant should be paid out and it was suggested that he keep the salvage.
Finding of The Ombudsman
Based on the information before this office it was suggested to the insurer that they should adhere to the recommendation made in the fourth assessment as it was clear from the available information that the vehicle was not economically repairable. It was subsequently agreed by the insurer to indemnify the complainant by settling the claim on cash in lieu basis and that the complainant keep the salvage.
The complainant accepted this proposal and the claim was subsequently settled on this basis.
It is important to note that were an insurer elects to reinstate as a form of indemnification, it remains responsible for the actions of its appointed repairer who acts as an agent of the insurer. This was pointed out to the insurer who accepted the stance of this office.
The complainant was the owner of a luxury high performance motor vehicle which he had comprehensively insured. On a fateful evening during a rainstorm the complainant, there and then, driving the insured vehicle on a motorway, collided with a bridge and a total loss of the vehicle was incurred.
A claim was intimated by the complainant with the insurer and the insurer duly appointed an investigator to investigate the facts related to the loss incurred. At some stage during the investigation the investigator encouraged the complainant to state that his approximate speed at the time directly preceding the loss was 160km/h. The statement was provided by the complainant on the promise of the investigator that the claim settlement would be expedited should the complainant provide such a statement. The claim was however promptly rejected by the insurer on the basis that the complainant failed to display necessary caution and take all reasonable steps to prevent the loss from occurring. This is generally referred to as a “due care” clause in a contract of insurance.
Following the rejection of the claim, the complainant informed the insurer that he had at all relevant times indicated to the investigator that he was not aware of the exact speed that he was travelling, but that he estimated it at 110km/h. He further indicated that the investigator referred to the extent of damages to the insured vehicle and concluded that the vehicle could not have been travelling at anything less than 150km/h.
Notwithstanding the above, the insurer persisted in their rejection of the claim and the matter was referred to the office of The Ombudsman for Short-Term Insurance (hereinafter referred to as “the OSTI”) by the complainant.
THE OSTI’S VIEW:
The OSTI found that the investigator appointed by the insurer had no objective manner in which to determine what the approximate speed of the complainant’s vehicle was at the time directly preceding the accident. Furthermore, the complainant’s actions, if it was indeed true that he travelled at 160km/h, constituted negligence on the part of the complainant and negligence is covered in terms of the policy. The duty on the complainant to exercise due care and precaution was not to be equated with the absence of negligence as this would defeat a substantial part of the indemnification given to the insured by a comprehensive motor vehicle policy, which is in the nature of an all risk policy. It simply required that the complainant did not act reckless. This entails that the complainant not deliberately court danger, the existence of which he should be aware of, safe in the knowledge that he was insured against such risk and that he is not consequently indifferent to the outcome. These requirements are as expounded in the matter of Santam Ltd vs CC Designing CC 1999 (4) SA199 (CPD). The OSTI was of the view that the insurer did not prove recklessness and as negligence was covered in terms of the policy the claim should be settled.
The insurer refused to accept the view of the OSTI and a formal ruling was made by the Ombudsman directing the insurer to indemnify the complainant, which was later complied with by the insurer.
The complainant submitted two claims to the insurer claiming damage that was caused to his vehicle. The damage in respect of the first claim was caused whilst the vehicle was parked in a parking lot. The complainant advised that he attended a movie on this day at the shopping centre. Upon his return his brother noticed glass fragments lying in front of the vehicle on the left hand side. They discovered that the left front head light and indicator glass had been smashed. The complainant did not consider the damage to be of a serious nature and drove the vehicle home.
The damage caused to the vehicle in the second claim was due to an attempted hijacking of the vehicle subsequent to which the complainant lost control of the vehicle, veered off the road over a pavement and into nearby bushes. In this attempted hijacking the complainant was struck in his face by an object through the driver’s window which was hurled at him by the culprits attempting to steal the vehicle. It was in this sequence of events that the complainant lost control of the vehicle. After the complainant regained consciousness he noticed an object next to him which he believed to have been the object that struck him.
Having processed both the aforementioned claims, the insurer declined liability by indicating that in the processing of, especially, the second incident, it came to light that the complainant failed to advise the insurer of previously being convicted of driving a vehicle whilst being under the influence of liquor. The insurer also referred to the general conditions contained in the policy relating to material misrepresentation. It, furthermore, appeared from the documentation submitted by the insurer that circumstantial evidence indicated that the complainant appeared to be under the influence of liquor during the second incident. Essentially the insurer averred that the complainant’s version of the events did not correspond with the information so obtained by the independent witnesses deliberated with subsequent to the loss.
Finding of the Ombudsman
In matters where the insurer seeks to rely upon an exclusion as contained in the policy wording as a basis to reject a claim the onus falls on the insurer to prove that the loss falls within the ambit of the exclusion. Furthermore, where the insurer relies upon an alleged non-disclosure or misrepresentation the insurer must prove that the information in question was not disclosed to the insurer at inception of the policy. Such information has to be material as required in terms of Section 53(1)(b) of the Short-term Insurance Act. This section requires that before any alleged non-disclosure or misrepresentation on the part of the policy holder can be relied upon by the insurer, it must be determined that such information was material to the assessment of the risk. In addition, the remedy of an insurer seeking to rely on the aforementioned is to void the policy from inception and not decline liability for a claim.
In the current matter the insurer made unsupported allegations that the complainant failed to disclose or represent the true state of facts at inception of the risk. The insurer failed to prove this as an objective fact and did not seek voidance of the policy from inception. Therefore the insurer’s conduct is not consistent with an election to void a policy from inception based on material non-disclosure or misrepresentation. The insurer could not produce any evidence that the complainant materially misrepresented that he was previously convicted.
In addition the insurer persisted that the complainant was under the influence at the time of the second accident. The insurer’s case in this instance was, however, solely based on circumstantial evidence and inference. Conversely put, there was no direct evidence indicating that the insured was under the influence of alcohol at the time of the accident. Cases based on circumstantial evidence are to be approached with caution and circumspection. Care must be taken to distinguish between conjecture and speculation, on the one hand, and legitimate inference on the other.
When relying on inference the balancing of probabilities comes into play. In the current matter the question was thus whether the insurer had objectively established on reliable evidence that the complainant was under the influence of alcohol. In the opinion of the Ombudsman the insurer had failed to discharge such onus. The insurer could not establish any objective, reliable and factual evidence as set out by the witnesses from which could be inferred that the complainant was under the influence of alcohol at the time of loss.
In light of the above the insurer retracted the reason/s for the rejection of the claim and settled the claim in full.
The complainant lodged a complaint with this office following difficulties he experienced in pursuing a claim in terms of a travel insurance policy.
The complainant was injured in an accident in December 2001 whilst overseas and submitted claim documents together with documents supporting that medical treatment had been received together with an invoice which confirmed payment for the medical attention.
Insurer’s advised that there have been a number of doubtful claims received from travellers to East European countries, and unless and until the complainant can produce evidence giving the source of the finance, like the purchase of travellers cheques, then no further attention will be given to the claim.
It is one thing asking for documents to support the claimed amount, but to suggest that the insured produces proof of where he got the finance goes beyond the point of reasonableness. It is contended that the claim is fraudulent, yet despite having been given the opportunity to let this office have proof of a fraud, nothing tangible has been received.
The impression which is gained is that little or no underwriting is done at the point of sale of the policy, and an attempt is made to underwrite at the time of the loss.
No supportable information has been provided to uphold the Insurer’s decision to decline this claim, and a ruling was therefore made in terms of Schedule 5 of the Association Agreement to settle this claim.
The complainant alleges that when she took out the Insurance, she pointed out to Insurers that she was travelling to the U.S.A. to visit her daughter, and she was assured at the time that she was fully covered if she was delayed for any reason.
Whilst the complainant was with her daughter in U.S.A., the complainant’s two-year old granddaughter suddenly became ill and required major surgery. Whilst the parents of the two-year old granddaughter had to stay at the hospital, the complainant had to look after her three-year old granddaughter. Both her granddaughters are profoundly deaf.
The complainant’s daughter telephoned Insurers to advise of complainant’s delayed return from the U.S.A. and she was informed that complainant was covered by the Insurance. Complainant went ahead and changed her departure .
Insurers later repudiated the claim on the basis that the grandchild was not resident in South Africa. The Policy Schedule and Summary of Benefits did not set out the Terms and Conditions of the cover. It is not acceptable to state that “the Master Policy is available at travel agents or any of the Insurer’s offices”.
A ruling was therefore made against the Insurer in terms of the provisions of Schedule 5 of the Association Agreement.
The complainant alleged that she was not informed nor did she receive any documentation that the cover was subject to excess. She then lodged a claim and was advised that this amount was below the excess.
This office requested Insurers to provide confirmation that the complainant was in possession of documentation setting out the full terms and conditions of the policy and in particular the application of excess.
Despite correspondence to and meetings with Insurers, the required information was not received, it must therefore be accepted that the complainant is entitled to be compensated without the application of excess.
A claim lodged in terms of the Curtailment benefit of the policy following delays as a result of the September 11 events in the U.S.A was declined.
The master policy contains an exclusion as stated by Insurers, this was not set out in the brochure headed “All you need to know about Travel Insurance”, furnished to the Insured.
No reference to the exclusion on which the declinature is based could be found. The complainant cannot be faulted for believing that cover is in place, particularly when cognizance is taken of the contents of the brochure furnished to the complainant.
A ruling was therefore made in terms of the provisions of Schedule 5 of the Association Agreement to settle this claim.
The complainant lodged a complaint with this office following difficulties she experienced in pursuing a claim in terms of a Travel Insurance Policy.
The complainant has free cover as per her Credit Card purchases of air tickets as well as the Optional Added Benefit. The Application form handed to the complainant indicates that cover exists for persons up to the age of 75 years. During the telephone conversation when the Optional Added Benefit Policy was acquired, the complainant did advise Insurers that her husband was aged 70 years. The complainant was not advised as to any additional limitations of cover. The documentation furnished to her makes reference to a Master Policy, which she has not had sight of and which despite her requests, she has still not received.
During the Easter weekend the complainant’s husband travelled to the UK. The Optional Added Benefit cover was obtained subsequent to his flight and Insurers were made aware of the fact that the complainant’s husband had already flown to the UK.
Shortly thereafter, the complainant was telephonically advised that her husband had been admitted to hospital after having suffered a mild Myocardial Infarct. The Insurer was contacted and advised of the claim. The complainant further indicated that she would have to travel to the UK and enquired as to whether this would qualify as an “Emergency Travel situation” as set out in the document furnished to her by Insurers. Insurers indicated that the complainant’s travel to the UK would fall to be covered as an Emergency Travel situation.
Insurers later repudiated the claim on the basis of the husband’s alleged pre-existing condition. The documents furnished to the complainant make no reference to any Exclusions for pre-existing conditions. The only reference is to the fact that cover is subject to the Terms and Conditions Exceptions as fully as described in the Master Policy document, of which the complainant was never furnished a copy.
The complainant’s claim is not for the medical expenses as a result of her husband having been hospitalised, but only in respect of the Emergency Travel situation benefit, when she was required to the travel to the UK to attend to her husband.
Thus far, no supportable information has been provided to uphold the Insurer’s decision to decline the claim, and I a ruling was therefore made in terms of Schedule 5 of the Association Agreement, that you the claim be settled .
Motor vehicle insurance – Insured’s vehicle stolen – Repudiation based on no insurable interest – The insured was a bona fide possessor of a stolen vehicle.
It was accepted by the insurance company that their insured innocently purchased a vehicle that was already stolen. The insurer argued that that being the case no insurable interest in the vehicle existed. The insurer was referred to the unreported judgments of Foster vs Mutual & Federal Insurance Company Limited, case number 3239/95. It was pointed out to the insurer that the learned Judge on similar facts held that a bona fide possessor would have an insurable interest. It was also pointed out to the insurance company that they might have difficulty in proving on a balance of probabilities that the vehicle was in fact stolen prior to the inception of the policy.
The Ombudsman initially only made a ruling on the merits of the matter leaving the quantum to be negotiated between insured and insurance company. It was however suggested that the market value could be reduced as the true owner may at any time have appropriated the vehicle. It was suggested that a fair settlement should be two thirds of the market value.
After further discussion the insurance company accepted this view and the claim was duly settled.
This matter was also raised in the matter of Pienaar v Guardian National , where on similar facts the court held the insured to have an insurable interest in such vehicle . The Ombudsman’s office adopts the view that Insured’s in such circumstances do have an insurable interest, provided that they are in fact bona fide possessors. If it becomes apparent that the insured is not in fact bona fide, or that he in fact purchased the item knowing it to be stolen, then the insured could not be said to have insurable interest in such property.
As regards quantum, in both of the abovementioned cases the issue of quantum had been agreed to by the parties and the matters had proceeded on the merits only. Differing propositions suggest that
The crucial question in respect of insurable interest remains: has the insured suffered a loss?, does he stand lose something of economic value in the event of the insured item being lost or damaged? , does he stand to lose something of an appreciable commercial value? These matters ultimately have to be decided on their individual merits.
The complainant lodged a complaint with this office following difficulties he experienced in pursuing a claim in terms of a Travel Insurance Policy.
The complainant was in France on a scholarship when he was informed of his mother’s death in South Africa. He telephoned Insurers in Johannesburg and enquired whether he would be covered should he wish to return to South Africa for the funeral with his family, consisting of his wife and two children, He was led to believe that he would be covered. He duly flew to South Africa with his wife and two children. Whilst in South Africa he again telephoned Insurers to obtain clarification whether he would be covered should he take his whole family back to France with him. Again he was advised that this expense would be covered under the Travel Policy.
Notwithstanding the Provisions of Section 47 of the Short-Term Insurance Act No. 53 of 1998, the complainant was never given a copy of the full Policy document. Repeated attempts were made to resolve the complainant’s claim.
A ruling was therefore made in terms of Schedule 5 of the Association Agreement that the complainant’s claim, being the cost of four one-way tickets from France to South Africa, be settled.
The complainant lodged a complaint with this office following difficulties he experienced in pursuing a claim in terms of a Travel Insurance Policy.
The complainant never received a Master Policy wording, only a brochure. The brochure advised the complainant that if he purchased an airline ticket with his Credit Card, he would receive automatic Travel Insurance including cover for flight delays. The brochure makes no mention of a 24-hour period that should lapse before the benefits become payable. A copy of the Master Policy wording was never sent to the complainant, despite the Provisions of Section 47 of the Short-Term Insurance Act No. 53 of 1998.
As a result of a delayed flight, the complainant forfeited five theatre tickets for a Show in London. The complainant also had to take a taxi which would otherwise not have been necessary, as The Travel Agent would have met the complainant at the Airport.
Repeated attempts were made to resolve the matter amicably with the Insurer, but to no avail.
A ruling was therefore made in terms of Schedule 5 of the Association Agreement, that the claim be settled.
Cellphone insurance – Repudiation of claim on ground of failure to take proper care of the instrument – Cellphone left temporarily on table in restaurant occupied by friends of insured
A policy insuring cellphone amongst others against loss by theft excluded the insurer’s liability if ‘the insured failed to take proper care’ of the instrument. The insured and two friends were dining in a restaurant. The insured left the table temporarily to answer a call of nature, leaving his cellphone on the table. On his return the instrument had vanished. The insurer repudiated liability.
Applying the principles and referring to the decisions in Formal Ruling No. 1 , (as contained in Newsletter 1 of 2003), the Ombudsman held that the duty to take proper care had not been breached by the insured, and formally recommended that the insurer should pay the claim.
The repudiation by the Insurer on the grounds of a failure to take proper care leaves the Insurer in the position where it has to discharge the onus of proving not only that the insured should have foreseen the possibility of damage or loss occurring in the manner that it did, but also that the insured having such knowledge and appreciating the fact that in the event of such loss his / her insurance policy would cover such loss, and nevertheless proceeded, requires proof by the insurer almost tantamount to intention on the part of the insurer . Not only is this a very difficult onus to discharge, but scrutiny of the case authorities in this respect reveal that a court is only likely to uphold the repudiation of such a claim in only very exceptional circumstances.
Motor insurance contract providing for refund of excess and reinstatement of ‘no claim bonus’ where motor accident not due to any fault of insured – Insured to provide ‘complete and absolute proof’ of absence of such fault – Meaning of expression
A motor-vehicle insurance contract contained the following clause:
In the event of a motor vehicle accident provided the Insured provides complete and absolute proof that the driver was totally free of negligence without contribution to the cause of the accident, then the application of the No Claim Bonus shall not be effected and the FIRST AMOUNT PAYABLE shall not be payable by the Insured’.
The Insurer repudiated a claim for a refund of an excess and for reinstatement of the bonus where the insured could not provide an admission of liability by the other motorist or a sworn affidavit by an independent third party not a passenger in either vehicle. The insured provided an affidavit by himself supported by an affidavit by a passenger in his vehicle. In addition, the other party failed to defend civil proceedings instituted by the insurer under subrogation rights claiming damages, and a default judgement was obtained.
The Ombudsman held these facts constituted ‘complete and absolute proof’ of the absence of negligence, and formally recommended the refund of the excess and the reinstatement of the ‘no claim bonus’.
Surely it could not have been the intention of the parties that in order for the Insured to be entitled to a refund of the excess and reinstatement of the no claim bonus , that the insured should meet what is in effect an onus of proof to the Insurer which is not only more stringent and demanding than the civil standard of onus of proof ( ie . on a balance of probabilities ) , but also more demanding that the criminal onus which requires proof beyond a reasonable doubt . Lawyers , parties to litigation have enough difficulties satisfying these onuses and to expect of an insured who in the majority of cases are laymen to meet such an onus is in our view “Mission Impossible .”
Travel insurance – Emergency dental treatment during travel – Repudiation by insurer on the ground that the teeth were not ‘sound natural teeth’, the teeth treated having been previously filled
The insured claimed under a travel insurance policy for emergency medical and related expenses which included ‘the reasonable cost of medical emergency dental treatment to sound natural teeth’ and also other treatment given and authorised by a member of the medical profession.
During the trip, the insured required emergency dental treatment to her teeth but the insurer repudiated the claim on the ground that the teeth were not sound or natural because they had had previous fillings. The insurer relied on the definition of the words ‘sound’ and ‘natural’ in the Chambers Dictionary, quoting ‘sound’ as meaning ‘safe, whole, uninjured, unimpaired, in good condition, healthy, wholesome and natural, and pertaining to, produced by, or according to nature, finished by, or based on nature…, not the work of man…, not interfered with by man’.
The Ombudsman expressed the view that a tooth, which had been filled and thereby restored into proper and healthy condition, fell within the definition of ‘sound’ and quoted by Chambers Dictionary. In regard to ‘natural’ he referred to the new Oxford Dictionary for the view that one of principle meanings of ‘natural’ is the opposite of ‘artificial’, and that a natural tooth which had been repaired and restored to sound condition, even by the hand of man, did not lose its natural character. After debate, the insurer accepted the Ombudsman’s recommendation.
Insurers often advise in these sort of circumstances that this was not the risk / property intended to be insured / underwritten . If this is the case the policy wording should spell out sufficiently clearly as to exactly what is covered, and what is excluded . Any doubt in interpreting the policy terms and provisions , has to be interpreted in favour of the insured in accordance with the contra proferentem rule.
Policy requiring vehicle to be equipped with a certain type of immobiliser – Insured submitting certificate by manufacturer as to immobiliser fitted to broker appointed as ‘werwings-agent’ or canvassing agent to the insurer, and obtaining confirmation that certificate is in order – Insurer subsequently repudiating claim on ground that immobiliser not the model required and that broker not authorised to give assurances on its behalf.
In taking out comprehensive motor-vehicle insurance, the insured dealt with a broker who also acted as ‘werwingsagent’ or canvassing agent for the insurer. The broker issued the policy on behalf of the insurer after completion of the proposal form. A certificate by the manufacturer as to the details of the immobiliser fitted to the vehicle was confirmed in writing by the broker as complying with the policy specification. The insurer repudiated a subsequent claim arising from the theft of the vehicle some months later on the grounds that the immobiliser did not in fact comply with the policy specifications, and it submitted to the Ombudsman a copy of the agreement under which the broker was appointed as ‘werwingsagent’ and which specifically prohibited the agent amongst other things from making any representations which bound the insurer. It submitted that in any event the broker was the insured’s agent.
The Ombudsman held that the normal rule that the broker was the agent of the insured did not apply in the case where the broker had specifically been appointed as the insurer’s agent; that the insured could not be expected to be aware of any limitations to the agent’s authority contained in the agreement with the insurer; and therefore that the written confirmation by the agent in regard to the adequacy of immobiliser bound the insurer.
The insurer complied with a formal recommendation by the Ombudsman that the claim be met.
Commonly the insurance practice of late would involve inter alia the following parties to an insurance contract:
INSURER UNDERWRITING MANAGER CLAIMS / POLICY ADMINISTRATOR SUB-BROKER BROKER INSURED
To the above the following has to be added: collecting agent, coverholder , canvassing agent etc. This when added to the fact that a large number of “brokers” appear to act with two (2) hats simultaneously i.e. as agent for the insured and agent for the Insurer , and the fact that a large proportion of the complainants to this office are not able to identify accurately the actual insurer / underwriter , or in fact to distinguish between who is the broker and who the Insurer is . This has been addressed to a certain extent by the Policyholder Holder Protection rules , and the regulations thereto , but has not removed all uncertainty in the minds of the (unsuspecting?) insured as to who the actual insurer is , who acts as his agent , or the insurer’s agent and where such “ broker” acts as both his and the insurer’s agent .
Proportionate refund of premium for comprehensive motor-vehicle policy paid annually in advance – Whether any portion of the premium is refundable by the insurer if the vehicle insured is completed destroyed prior to the end of the insurance period.
The insured claimed he was entitled to a refund of one half of an annual premium paid in advance where, after six months, the vehicle insured had been completely destroyed in an insurable event. The insurer contended that in the absence of any specific provision in the policy, the insured was not entitled to any refund. The insurer had agreed to hold the vehicle covered for a specific period, and the insured had paid a premium for that specific period, so the question of when any actual total loss took place during that period, was irrelevant.
The Ombudsman upheld the insurer’s view, pointing out that many comprehensive policies issued contained residual cover (for example, when the insured was driving another vehicle). This ruling was in accordance with a ruling some years ago by the British Short-term Insurance Ombudsman in similar circumstances, but the British Ombudsman mentioned that there was a very frequent practice amongst insurers that if the insured took out insurance for another vehicle with the same insurer, the insurer immediately gives credit for the period outstanding on the original policy. The Ombudsman approved of this practice. He noted, though, that the position might be different if, after the happening of the event and the payment of the claim, the insurer took steps to cancel the policy.
It must be borne in mind that insurers in furnishing annual policies do so at a discounted rate , hence the benefit to the insured . But this does not then mean that should the subject matter of the insurance , eg the motor vehicle insured be a total loss , or is stolen or hijacked during the period of insurance , that the insured be entitled to a refund of premium for the remaining period of the insurance policy after the loss .
Comprehensive motor vehicle insurance – Repudiation by insurer of claim on basis that insured’s negligent driving which resulted in damage to the insured vehicle, constituted a breach of a term requiring the insured to exercise reasonable precautions to maintain the safety of the vehicle.
The insured tried to negotiate a freeway offramp at too high a speed in wet weather conditions and this resulted in damage to his insured vehicle. The insurer repudiated the insured’s claim, alleging that by driving negligently, the insured was in breach of a clause in the policy which provided that ‘[t]he Insured and/or any person enjoying cover under any section of the policy must exercise all reasonable precaution to maintain the safety of the property and to prevent loss, damage and accident’.
In debate the Ombudsman referred to the South African cases of Nathan NO v Accident Guarantee Corporation Limited (1959 (1) SA 65 (N)) and Paterson v Aegis Insurance Company Limited (1989 (3) SA 478 ©) and to the statement contained in Gordon & Getz on the South African Law of Insurance 4 ed (1993) at 183 that ‘one of the objects of insurance [is] to protect the insured from loss due to his own or his servants negligence…even if such negligence constitutes a crime’. Reference was also made to the comments of Lord Denning in Marles v Philip Trant & Sons Ltd (No 2)  1 All ER 651 (CA)).
The Ombudsman made a formal recommendation that since the interpretation of the clause in the way suggested by the insurer frustrates one of the major purposes of the insurance cover, it was not applicable in the circumstances of this case.
Whilst the insurance contract does certainly afford cover for the insured for loss due to his own or his servant’s negligence , this must be distinguished from circumstances where the claim is rejected as a result of the insured having been convicted of reckless and negligent driving , or circumstances where the claim is rejected as a result of for example the insured vehicle’s tyre / s being in an unroadworthy condition and the condition of the tyres playing a material part in the causing of the collision .
These are specific exclusions in the policy wording requiring different consideration on the merits of each individual matter . Furthermore it must be borne in mind that when the Ombudsman does consider a ruling , the following will be taken into account :
Comprehensive motor-vehicle insurance – Avoidance of contract for breach – No prejudice to insurer from breach – Waiver by Insurer of right to avoid contract.
By virtue of a clause obliging the insured, within fourteen days of inception of the policy, to furnish the insurer with a certificate to the effect that the insured vehicle in question was equipped with an approved immobiliser, the insurer could avoid theft cover on the policy in question. The insured had the vehicle equipped with the required immobiliser, obtained the required immoboliser certificate from the dealer and arranged for it to be sent to the insurer. The Insurer allegedly did not receive the certificate within the required time but continued to accept premiums in terms of the policy from the date when the certificate should have been supplied.
Subsequently, when the insured vehicle was stolen, the insurer refused to accept the insured’s claim and avoided the policy on the ground that the immobiliser certificate had not been furnished with the required period, although it was in fact furnished when the insured submitted his claim and although it was not in dispute that the vehicle was equipped with the immobiliser at the time of the theft.
The Ombudsman made a formal recommendation that the claim should be met because there was no prejudice to the insurer whatsoever, and in addition to that because the insurer had waived its rights to rely on a technicality of this nature by continuing to accept monthly premiums and not advising the insured that the certificate had not been received within the required period.
It is common practice for most Insurers to require of new client’s that certificates proving the vehicle’s compliance with security requirements be furnished within a specified period.
However very little or no steps appear to be taken to draw the Insured’s attention to the consequences of his failure to comply within the stipulated period. Furthermore upon expiration of the stipulated period , and the insured having not complied , very few Insurers/Intermediaries appear to notify the Insured of the non-compliance and the effect that it has on his/her policy . In most complaints of this nature the premiums continue to be deducted, or remain unaltered.