A very important recent judgment clarifies the issue of what a client has to disclose after effecting insurance.
The Mercury reports as follows:
“Two years ago Pietermaritzburg High Court Judge, Piet Koen, ruled that Outsurance’s repudiation of Sherwin Jerrier’s claim for R600 000 for the damage to his Audi R8 Quattro after an accident in 2010 was correct. But in a ruling yesterday three appeal judges disagreed and, failing any further appeals, Outsurance will now have to pay him for the damages to his vehicle, as well as his legal costs.”
The initial repudiation was based on the fact that Jerrier did not disclose two previous accidents for which he never claimed. This was based on a clause in his contract which states:
“You need to … inform us immediately of any changes to your circumstances that may influence whether we give you cover, the conditions of cover or the premium we charge … this includes incidents for which you do not want to claim but which may result in a claim in the future.” This needed to be done within 30 days of such incidents happening.
Jerrier disclosed details of the two previous incidents to the claims handler when submitting his R600 000 claim.
The Mercury continues:
“When the Koen judgment was handed down, lawyers warned of the ramifications for everyone, cautioning that consumers carefully read the fine print and report “every little supermarket trolley ‘ding’ to insurers.”
“At the time, a joint statement issued by the National Treasury, the South African Insurance Association (SAIA) and the Financial Services Board said the judgment would not affect how the industry usually dealt with claims. It said insurance companies undertook not to reject motor car claims on the grounds that customers did not report minor incidences (incidents that were not material to the assessment of insurance risk).”
“Jerrier, assisted by advocates Maurice Pillemer and Ryan Naidu, took the matter on appeal to the Natal Provincial Division and yesterday Judge Mahendra Chetty, with Judges Rashid Vahed and Thoba Poyo-Dlwati concurring, said the policy in question did not stipulate any ongoing duty to report “incidents” which, because of their triviality, an insured person had sorted out himself.”
“And even if it did, this obligation was not set out in any particularity and would result in a “flood of information on entirely irrelevant events” creating general confusion and uncertainty among clients.”
“Outsurance, the judges said, was the “self-proclaimed leader” in the market and “prided itself” on saving consumers money by offering premiums based on the exclusion of brokers. “It proclaims to ‘say it simply… there is no fine print’ and ‘this is a plain language document … there are no hidden surprises’.”
“Unfortunately it would appear that the wording of the policy is not as simple as it seems … and there is uncertainty as to what was expected of an insured person who may not want to lodge a claim in the hope of preserving his bonus.”
Jerrier had testified that he did not claim for the first two incidents because he believed the claims would be less than his R20 000 excess and he would lose his bonus.
The judges said Outsurance, in its branding, “you always get something out”, suggested that this bonus was what set it apart from other companies because “you are rewarded for not claiming”.
“It is therefore not surprising that, in light of the benefits of not submitting a claim and which in any event fell within the confines of the excess he would have to pay, he did not submit a claim.”
“The manner in which the policy is designed positively discourages clients from claiming.”
“Regarding any “change of circumstances”, the judges said unlike other policies, Outsurance policies were not subject to annual renewal or annual risk assessment.”
“There were no specifics regarding these circumstances and the policy indicated that it related to the insured person’s ability to continue paying premiums so that ‘good risk clients do not subsidise bad risk clients’.”