There is more to conveying changes in material terms to clients than simply dropping them a note to that effect.
The Khoza determination by the FAIS Ombud provides guidelines in this regard.
The complainant took out “Journey Traveller” insurance for R30 000 with the respondent on 25 March 2009. This policy provided cover if she was involved in an accident and admitted to hospital through the casualty or trauma ward and remained in hospital for more than 24 hours. As the complainant commutes to work, using taxis, she believed that she needed such cover.
On 9 January 2010, the complainant was traveling in a taxi when it rolled over. The accident was a very serious one. Two fellow passengers died on the scene and complainant was trapped in the wreckage for almost an hour. She was in pain and had to wait for the fire department to arrive. The police and paramedics were unable to remove her from the taxi. The fire fighters succeeded in cutting her out of the wreck with specialised equipment.
She was duly admitted to hospital where she spent 4 days, and was discharged on 13 January 2010.
On 23 February 2010, the complainant filled out a claim form and submitted it to respondent. On the 13th April 2010 the respondent, in writing, rejected complainant’s claim. The letter states:
“We regret to inform you that your claim has been repudiated.
According to hospital reports you were admitted for observation and cannot be deemed as life-threatening.”
Despite further representations by the complainant, the respondent refused to pay the claim and stood by its repudiation.
She laid a complaint with the Short-term Ombud, who was unable to get a response from the insurer, and referred the matter to the FAIS Ombud.
The Ombud requested the parties to attempt settling the dispute. The respondent made two offers of R15 000 and R20 000 to the complainant, both of which were rejected, and the matter was then referred for determination.
The original policy document contained two important clauses:
- Accident: Accident means an unexpected event which leads to the insured requiring an emergency admission into a hospital for the purpose of a medical or surgical procedure.
- Insured Event: An insured event is an unexpected illness, disease or accident suffered by the Insured, which results in the insured being admitted to a hospital via an emergency unit and having to spend a minimum of 24 consecutive hours in hospital as a result of that emergency event.
A third excerpt from the contract stated:
Amendment of Policy: Notwithstanding anything to the contrary herein, BIU reserves the right, by giving the insured at least four months written notice, to amend this policy at any time in whole or in part. BIU and the insured may agree to amend this policy at any other time or times than already provided herein.”
The two clauses noted above were changed later to read:
Accident: Accident means an unexpected acute life-threatening event, which leads to the Insured requiring an emergency admission into a hospital for the purpose of a medical or surgical procedure (this does not include observation/s).
Insured Event: An insured event is an unexpected acute, life-
threatening event, illness, disease or accident suffered by the Insured, which results in the Insured being admitted to a hospital via an emergency/trauma unit and being required to spend a minimum of three consecutive days in a high care or ICU ward, or in a general ward in conjunction with emergency theatre time, as a result of such event.” (changes underlined).
The amended definitions formed the basis for the respondent’s rejection of the claim.
In response to a question from the Ombud as to how the notice of the amendment was conveyed to the complainant, the respondent said:
“The updated terms and conditions are communicated via the South African postal service, and were sent to the complainant prior to 2010. Please take notice that it is up to complainant to inform us of any change of personal information, such as address.”
The Ombud noted that, according to the FAIS Act and the General code of conduct, the insurer is obliged to keep the insured informed of material changes to the policy so that the insured may make an informed decision as to whether or not to accept the amendments and continue with the policy.
According to the Ombud, the respondent failed to furnish it with a copy of the notice to amend, nor is there any proof that complainant responded approving the amendment.
In the premises, this Office finds that, on a balance of probabilities, respondent failed to prove that it complied with paragraph 5.3 of the rules of the policy. It therefore follows that this Office cannot place any weight on the amended policy relied on by the respondent. This Office finds that the (original) policy delivered to the complainant was, at all material times, valid and binding on the parties.
The respondent was ordered to pay the complainant an amount of R30 000 plus interest at the rate of 10.25% per annum from the 9th February 2010 (being one month after the insured event) to date of payment.
Please click here to download the Khoza determination.