Complacency is a sword of two edges
In a recent determination by the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud), the complaint arises out of a claim that was repudiated on the basis that the complainant had not complied with a material condition in the policy.
This determination stands out because it shows that every time a person points a finger in scorn there are three remaining fingers pointing right back at him. We summarised the determination for you but you can download the original determination here.
Factual background
Jacques Du Toit, the complainant, obtained short-term cover in respect of his house and motor vehicle through Barrington Insurance Brokers, the first respondent, who acted as Du Toit’s broker.
The policy was initially obtained from Compass Insurance. A requirement of the Compass policy was for the insured vehicle to be fitted with a tracking device. Du Toit complied with this requirement and fitted an approved tracking device to his vehicle.
During December 2009, Compass informed Barrington Insurance Brokers that it would no longer provide cover for vehicles valued over R300 000. This resulted in the broker having to find cover with another insurer.
According to the broker, the best cover for Du Toit’s vehicle was with Execuline Motor Underwriting Managers. As of 1 December 2009, Du Toit’s policy was transferred to Execuline.
Unfortunate events
On 14 September 2012, after the policy was renewed twice, Du Toit’s vehicle was stolen from the car park at Chris Hani Baragwanath Hospital. The tracking company was notified but failed to recover the car. The tracking device was later found discarded by the thieves.
Du Toit submitted the claim to his broker. The insurer repudiated the claim on the basis that Du Toit had not complied with a material condition in the policy; the tracking device fitted to the vehicle did not comply with the requirements of the insurer as stated in the policy document.
It is not in dispute that Du Toit’s vehicle was fitted with a device. However, it is also not disputed that the device was inadequate in terms of the Execuline policy. This policy stipulated that the requirement was for the installation of a dual tracking unit. This was not fitted to Du Toit’s vehicle.
The complaint
Both parties made comprehensive written submissions to the Office and also provided all the relevant documentation, including all correspondence between the parties.
Du Toit submits that he was never informed of the transfer of cover to Execuline, nor did he give his broker permission to transfer the policy. He claims that his broker and the second respondent, John Frayne (hereafter both collectively referred to as the respondents) were negligent in failing to inform him of the requirement of the tracking device. Nevertheless, it is not in dispute that the Execuline policy was in place and Du Toit paid the monthly premiums.
The respondents disagreed with Du Toit and pointed out that he was aware of the tracking requirement and the latter neglected to comply. The respondents deny any responsibility for Du Toit’s loss.
Finger pointing
Du Toit summarised his complaint against the respondents as follows:
“I was never informed of the reason for the transfer of my policy from Compass to Execuline in December 2009. Barrington never requested my consent to transfer the policy to Execuline. Barrington claims to have communicated the tracking device requirements to me via e-mail on 19 April 2010 (which is in any event five months after the transfer of the policy to Execuline). I never received any such communication from them. Despite the fact that Barrington did not receive a response to the alleged e-mail communication, Barrington failed to follow up with me, either telephonically or via post, regarding the non-compliance with the requirements of the Execuline policy for a period of almost three years. During this three year period I was under the impression that my vehicle was comprehensively covered. Despite the non-compliance with the tracking requirements my policy was renewed twice by Barrington (during 2010 and 2011), without Barrington ever attempting to inform me of the non-compliance with the tracking device requirements which eventually led to the rejection of my claim.”
The respondents, and in particular the second respondent filed a comprehensive response to the complaint; which can be summarised as follows:
“Compass was no longer providing cover and announced this decision during the festive period when people were away on holiday. They had to ensure that clients were not left without cover and arranged cover through Execuline. Policy documents were delivered to Du Toit with instructions for him to read and consider the terms and conditions of the policy; and correspondence pointed to the requirement of tracking devices to which he had to comply. Du Toit either did not read the documents or neglected to comply with the required installation of dual tracking devices. He was aware that there was a different insurer as the policy document was delivered to him and the debit order on his account for the premiums was changed. We complied with the FAIS Act and Code and were not negligent in providing complainant with financial services.”
Worrying matters
The Ombud highlights that the respondents can provide no evidence in which they specifically draw Du Toit’s attention to the fact that Execuline’s requirements for a tracking device were different from the requirement in the Compass policy, nor did they attempt to explain why this was different to the Compass policy.
The respondents, says the Ombud, merely relied on the policy document, having expected Du Toit to have read the policy and understand it. It is undisputed that Du Toit did not forward proof of compliance. The undisputed facts, according to the Ombud, tell us that the respondents were aware that Du Toit did not comply with the Execuline requirements and simply failed to follow up. The respondents, says the Ombud, do not explain why the first communication about the tracking device happened five months after the policy was issued. Nor is there any explanation as to why there was no follow-up over a period of two years when no proof of compliance was received and even after the policy was renewed twice.
In determining the matter, the FAIS Ombud concludes that the respondents failed to communicate material changes of the policy requirements to Du Toit and made no attempt to do so. Such conduct resulted in the repudiation of complainant’s claim and subsequent loss occasioned by the theft of the insured vehicle. The respondents are ordered to pay Du Toit the amount of R249 700.
Editor’s Thoughts:
Looking at this issue one can easily say that the complainant was to blame due to the fact that he did not comply. However, when we consider the requirements for FSPs in terms of the FAIS Act you cannot help but think what the respondents were thinking. Had they carefully followed protocol and ensured the right measures were in place, all this would have been avoided. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]
Comments
The correspondence from the broker should have been more concise.
All consumer legislation favours the consumer with the burden of proof on the supplier therefore it's simple ensure that your communication is clear so that there can be no misunderstanding, ensure it's done on time, and make sure as a supplier you have an audit trail i.e. get delivered and read receipts from emails sent. Report Abuse
Yes, they should have followed up.
But NO? the client HAD ABSOLUTELY NO responsibility to read through his document and make sure that he understands what he is paying for???
No, it is much easier NOT to read and then blame anyone and everyone else.
Question 1:
Explain to me, what is the use of a policy schedule then?
Why would any human of sound mind then opt to read and use time and make an effort to read and understand the document, if he can avoid all the effort AND be rewarded for his "not studying the document", by having his claim paid out by anyone (intermediary / brokerage / insurer) as long as it is not himself that has to pay for his nonchalant behaviour?
Why do we then still have schedules?
Why are we then supposed to send it to clients, just so that they can ignore it and after a claim comes up, say and do anything to suit their specific situation? It's an exercise in futility.
We should rather organise workshops and get all our clients together and train them on their policies. They should pay for the food that we serve them and our time for training them. Then only those who attended the workshops and passed the compulsory exams are allowed to continue with their policies with us.
Or am I being ridiculous now?
I don’t think that I am any more ridiculous than anyone who thinks that any society can move forward, by spoon-feeding and babying people into being rewarded for not taking responsibility for their own actions.
Ignorance is not supposed to be a defence.
I am all for complete declaration of material facts, be blow me over with a leaf blower: How more comprehensive than a schedule can you get.
Question 2: Where does the responsibility of the client starts to ensure that he knows what he is paying for every single month?
Question 3:
I have been in the insurance industry for 19 years now, and another question remains: You cannot convince me that ABSOLUTELY NOTHING changed in the three years since 2009 in the client’s life. Did he EVER request a review of his policy in lieu of any changed circumstances, or is the intermediary also required to be clairvoyant these days?… He should know exactly of all the possible factors that the client might or might not encounter and be there ready with a document to sign to make everything right, again so that the client has no responsibility.
It is not stated whether annual reviews were done, but even then, would the tracker issue come up? I cannot answer that. Maybe it would have if the client took some time and read the schedule. Report Abuse