Broker must cough up as he cannot show proof of advice

Despite claiming he had informed the client that his insured vehicle must be fitted with Vesa-approved security devices, a broker’s inability to provide voice-logging proof of such advice has landed him in trouble with the FAIS Ombud.

Christopher Mortimer and Insurance for You Brokers CC, which he represented, were both held liable by Charles Pillai (pictured), the Ombud for Financial Services Providers, for Complainant Busani Mathebula’s loss of R45 000 when his car was stolen.

Mathebula’s insurer, Santam Limited, rejected a claim regarding a motor vehicle theft on the grounds that security requirements in respect of the immobiliser and gear-lock of the insured motor vehicle had not been met; and no Vesa certificate could be provided by the insured.

Mathebula complained to the FAIS Ombud that at the time the policy was sold to him he had not been informed by the First Respondent, Insurance for You Brokers CC, about the requirement of a Vesa certificate or that one would be required at claims stage.

Mortimer, on behalf of the First Respondent, informed the FAIS Ombud that the sale of the policy had been concluded telephonically and that the security requirements had, therefore, been conveyed in that manner.

Mortimer, however, was unable to provide the Office of the FAIS Ombud with the record or tape of the voice logging. The explanation given at the time was that the system had allegedly experienced technical problems which had resulted in the voice recordings being damaged.

Since the First Respondent was unable to prove that the requirement for a Vesa certificate had been conveyed to the complainant, the FAIS Ombud initially formally recommended in terms of the FAIS Act that the First Respondent resolve the complaint by compensating the complainant for his loss by paying him the sum of R45 000.

Mortimer, however informed the FAIS Ombud that he had sold the business assets of the First respondent to Goldex Risk Insurers which had bought the business’s “book”. He further stated that since he was no longer involved in the business, there was no point in sending the recommendation to him as there was “nothing I can do about it”.

The FAIS Ombud was informed by Goldex Risk Insurers that when it had purchased the “book” from Mortimer in October 2006, it had done so with an express exclusion regarding the liabilities.

In the determination, the Ombud said Mortimer was relying on voice recordings which he was unable to provide as he alleged that these do exist but are damaged.

In the terms of the General Code governing financial services providers, “a direct marketer shall be obliged to record all telephone conversations with clients in the course of direct marketing and must have appropriate procedures and systems in place to store and retrieve such recordings”.

The First Respondent’s compliance officer, Jack Hurter, informed the FAIS Ombud in a letter dated 28 November 2005, that during January 2005, First Respondent experienced technical problems with its voice logging system which affected eight clients. Mathebula was one of the affected clients, he said.

After the problem was discovered, it was apparently fixed and the affected clients were called to re-record the lost information.

The policy incepted on 28 January 2005 and the theft occurred on 23 February 2005 – just over three weeks later. According to Santam, the complainant lodged his claim on 23 February, 2005. In May 2005 Mathebula was informed by the insurer that his claim was rejected.

“It was only when Mathebula submitted a claim that he was asked to provide proof that the security devices were Vesa approved.

He contacted Mortimer who alleged that he had a voice recording to prove that he had told Mathebula about the Vesa requirement. The next day he informed Mathebula that the tape was damaged.

“If Hurter’s explanation is to be accepted, then the question arises why Mortimer did not immediately tell complainant when the latter called him, that the tape was damaged, the problem had thereafter been rectified, and that they were re-collecting information from the affected clients including complainant.

“He appears to have discovered that the tape was faulty only when retrieving it in an attempt to prove to Mathebula that he had been told of the Vesa requirement.

“Mortimer’s version of the facts as well as that of Hurter, which is at best hearsay as he must have obtained it from the Respondents, falls to be rejected as being highly improbable,” the Ombud said.

The Respondents were held jointly and severally liable for the complainant’s loss of R45 000.

Click here to read the full determination (PDF File 104kb)