Delays in document processing can be costly
You can never predict when a motor vehicle accident might occur. If you’re lucky you can drive your car for years without serious incident; if not you can crash it within days of taking delivery. That’s what Sidney Pragasan Mannie (the complainant) discovered just four days after insuring a vehicle for his company Liberty Transport.
On 24 August 2006 Mannie met with Ms McKeown, an employee of APBCO Insurance Brokers (Pty) Ltd (the respondent). At this meeting he requested that his trucks and trailers, and two other vehicles be put on cover with immediate effect. McKeown indicated at this time that the vehicles had been covered by Heavy Commercial Vehicles Underwriting Managers (HCV). Subsequent to this meeting, on 31 August, one of the vehicles was involved in an accident. Mannie met with McKeown the day after, at which time the insurance application forms were completed, and he was assured that the vehicle was ‘on risk’.
First signs of a problem
The FAIS Ombud report shows that the complainant’s claim was subsequently repudiated. HCV ruled that “the truck was not insured at the time of the accident as HCV had not received a fully completed proposal and debit order form.” This was a requirement for HCV to initiate cover. In the month’s that followed, Mannie was forced to turn to multiple financial services Ombudsman for help. His initial complaint to the Short-Term Insurance Ombudsman (against HCV) was turned down, prompting him to complain about the financial services rendered by a director and employee of APBCO Durbanville. He took his case to the FAIS Ombud.
APBCO’s defence was summarily dismissed by the FAIS Ombud, Charles Pillai. They alleged that they’d made repeated attempts to get the insured to meet with them and complete the insurance proposal. However, the complainant’s statements largely contradicted this claim. The respondents also claimed that they believed the vehicle was on cover from HCV. Pillai disputed this claim too – noting that “HCV advised that they have had dealings with APBCO Durbanville since 2002 and have never gone on cover/risk without a fully completed proposal and debit form.”
Could the complainant be held liable for failing to take responsibility for the proper completion of the contract? “The Office as a matter of course expects that complainants assume a degree of responsibility for their affairs,” said Pillai. He concluded that there was not enough time between the conversation with the respondent and the date of the accident (from 24 to 31 August 2009) for Mannie to have become aware of any shortcomings in the arrangement.
Immediate cover
Vehicle owners take out insurance to cover the risk of road accidents or other damage to their vehicles. When they contact their insurance brokers to cover said vehicle, they expect the cover to take place from the minute the contact is made. To fulfil their obligations (in terms of fit and proper financial advice), APBCO would have had to advise their client that he was not covered until HCV had received a completed and signed insurance policy and debit order. They should also have made the necessary arrangements to obtain such documentation from the client. It’s imperative that the employees dealing with the client are aware of the unique requirements that insurers and underwriters might have in specific circumstances.
Where did the insurance broker go wrong? They advised their client that he was on cover, when clearly he was not. And they didn’t take steps to ensure the proposal forms and debit order were completed and forwarded to HCV in time. In the event the vehicle is not covered until completed insurance policy forms are presented (with a debit order instruction) then you should instruct your client not to use vehicle until this condition is met.
Complainant awarded damages
All that was left was for the FAIS Ombud to determine the extent of the complainant’s loss. Due to the fact that the vehicle had been stored in an open yard since the accident, Pillai ordered an independent loss adjustment service to assess the vehicle. At this time the damage to the vehicle (R118 184) exceeded 70% of the fair market value (R166 650), meaning the claim had to be settled on a total loss basis. In order to determine the ‘damages’ suffered by the complainant, Pillai proceeded as if the vehicle was insured. “Whilst HCV never assumed the risk, for the purposes of quantum it must be assumed that the contract came into being and that the normal terms and conditions applied,” he said.
After applying the ‘reasonable market value’ of the vehicle and adjusting for the standard 10% excess and a further 10% salvage for the vehicle being written off, the R166 650 reduces to R133 200. Pillai ordered APBCO to pay the complainant the sum of R133 200 including interest at the prescribed rate of 15.5% per annum.
Editor’s thoughts:
On the balance of evidence the FAIS Ombud’s decision to award damages against the respondent is fair. What we’d like to know is whether HCV’s approach to insurance cover is standard industry practice. Do all insurance underwriters only cover their clients once a completed and signed proposal form is received? Add your comments below, or send them to [email protected]
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