FAIS Ombud blocks leave to appeal
In January this year, we reported on a FAIS Ombud ruling in which SA Home Loans (Pty) Ltd was ordered to pay the outstanding balance on the home loan of a policyholder. Mrs Saroja Naidoo had lodged the case with the Ombud as the surviving spouse and joint insured on a bond protection policy.
"Shoddy service and minimal advice"
SA Home Loans refused to pay the claim against the policy due to an exclusion clause. This clause stated that the policy would not pay in the first two years if the insureds death was due to a pre-existing medical condition. Mr Naidoo's death was due to such a condition.
The FAIS Ombud ruled against SA Home Loans on the grounds that the company had failed to properly disclose the exclusion to both joint insured on the policy. The initial ruling in favour of Mrs Naidoo ordered SA Home Loans to pay the outstanding amount on Mrs Naidoos home loan. In summing up his judgement at the time, FAIS Ombud Mr Charles Pillai said:
"Clearly the disclosures relating to the exclusion was not properly communicated to Complainant [Mrs Naidoo]. Critically no communication was mad to the deceased [Mr Naidoo] who, as the first Assured on the policy was a party to the contract. The disclosures made to the complainant were in any event, not provided in plain language, created uncertainty and was certainly not comprehensive enough. Additionally, it was confusing and misleading.
"It is clear that Complainant has and continues to suffer financial loss, as a result of the failure on the part of the Respondent [SA Home Loans] to render a financial service compliant with the FAIS Act."
Policy wording cannot replace proper disclosure
SA Home Loans sought leave to appeal based on information they felt had been ignored by Pillai at the initial hearing. In their view, the wording in the policy document should have been considered as part of the evidence.
The covering letter sent with the policy document urged the Naidoos to "xamine the policy carefully to ensure that your personal information is correct and that you fully understand the terms and conditions and benefits that are provided by the policy." SA Home Loans contended that the Ombud should have considered the telephone conversation in conjunction with the policy document and policy covering letter when making the ruling. This combination of correspondence, in their view, constituted sufficient communication with regards the policy exclusions to the defendant.
Pillai refused right to appeal, refuting the new line of reasoning with: "No value or purpose will be served if providers were to rely on apparent clarity and unambiguity of terms in a policy document, whilst completely ignoring or merely paying lip service to the requirement to make proper disclosures to the appropriate parties, prior to the conclusion of the contract."
This might seem like a hard stance - but it makes sense if the sales transaction is concluded prior to the policy document being available for scrutiny.
No reason to reconsider the case
Pillai determined that there was nothing in the new argument offered by SA Home Loans which would cause the Board of Appeal to come to a different conclusion. He also suggested that SA Home Loans had failed to appreciate the reason for the Ombuds initial ruling. Pillai noted that "the Respondent [did] not appreciate the focus of the inquiry which was clearly on the manner in which the financial services were rendered to the deceased and the Complainant."
As such, the FAIS Ombud denied SA Home Loans' request for an appeal.
Editor's thoughts:
Most regulatory bodies in South Africa offer some form of appeal system to allow their rulings to be challenged. The FAIS Ombud is no different in this regard. Do you think the Ombud is too hasty to deny leave to appeal - or should leave to appeal only be granted where a different outcome is likely? Send your comments to [email protected].
