In what is a rare win for an insurer in recent times, the Gauteng High Court’s judgment in Musa v King Price Insurance Co on 9 May highlights the importance of insureds abiding by their claims-cooperation obligations.
The court’s decision will provide some welcomed relief to insurers that frequently encounter uncooperative insureds and serve as a caution to insureds who seek to obstruct an insurer’s access to information and documentation required to verify a claim.
Zandisiwe Musa submitted a motor claim to King Price following a collision in April 2020.
During the claim verification process, King Price’s assessor placed Musa on terms to provide consent to access his cellphone beacons and billing records, which he did not do, even after an extension.
Consequently, King Price rejected the claim and cancelled the policy. It relied on a breach of General Condition 5 of the policy, which reads similarly to other such conditions in the market and required Musa to:
- Provide King Price with true and complete information;
- Provide King Price with all information and documentation that King Price asks for and to do so within the time frame set by King Price;
- Provide King Price with any relevant documents required to validate claims; and
- Comply with King Price’s instructions and requests as and when required.
Musa filed a complaint with the Ombudsman for Short-term Insurance, who confirmed King Price’s rejection and cancellation, prompting Musa to apply to the court for relief.
Musa did not challenge the rejection and cancellation but sought a declaratory order directing King Price to, among other things, determine the insured value of his vehicle at the time of loss and to pay that value to him in terms of the policy.
In the circumstances, the court had to decide whether Musa could claim specific performance on the cancelled policy.
King Price argued that the application was fatally flawed, given that Musa had not requested the review and setting aside of its decision to reject the claim.
The court referred to Taljaard v Sentrale Raad Vir Kooperatiewe Assuransie BPK 1974 (2) SA 450 (A) and Commercial Union Assurance Company of South Africa Ltd v KwaZulu Finance and Investment Corporation and Another 1995 (3) SA 751 (A), which found that an insurer bears the onus of proving the decision upon which it relies.
Despite the formulation of Musa’s prayers, the court proceeded on the basis that the crux of the issue between the parties, and what it had to decide, was whether the claim was correctly rejected.
Although the court did not specify which portion of General Condition 5 was breached on the facts, it broadly found that Musa failed to provide information and assistance as required in terms of the policy and thus breached it, which entitled King Price to accept Musa’s breach, cancel the policy and reject the claim.
The court did not expressly deal with Musa’s arguments on why he did not provide the required consent, namely that the information sought was not reasonable and King Price failed to furnish an undertaking to safeguard his personal information. It would seem, by implication, that the court did not afford any value to these arguments.
Terms such as those involved in this case are often considered vital because of the importance of the duties created by them, and an insurer is, as the court correctly found, entitled to rely on their breach.
Although we accept that an insurer can reject the claim tainted by the breach, there has in the past been some debate about whether the policy can be cancelled (which the court found it can).
Insurers that intend to rely on these types of terms should ensure a clear paper trail evidencing the insured’s breach.
Given the court’s decision, it did not need to consider Musa’s request for King Price to determine the value of the vehicle at the time of loss. In our view, this relief would have been incompetent, as the onus is on an insured to prove its loss, rather than an insurer.
The full judgment can be accessed here.
Ina Iyer is a partner and Mokone Finger is an associate at Clyde & Co.
This article was first published by Clyde & Co.
Disclaimer: The views expressed in this article are those of the writers and are not necessarily shared by Moonstone Information Refinery or its sister companies.