FAIS Ombud denies leave to appeal its ‘good citizen warranty’ ruling
In what must go down as the longest press release ever, the FAIS Ombudsman recently informed the financial services industry of its decision to refuse leave to appeal its determination in the so-called ‘good citizen warranty’ complaint. FAnews Online covered the determination in some detail in November 2008; but we’ll provide a quick refresher before discussing the merits of the subsequent request for appeal dismissal.
On 28 October 2008, FAIS Ombudsman Charles Pillai ruled on a case previously heard by industry peer, the Ombudsman for Short-Term Insurance. The case involved one Melishree Maduray (the complainant) who had insured her vehicle for R146 000 on a Renasa-underwritten Skysure insurance policy (with Action Plan Management as her broker) on 1 June 2006. Two months later, on 31 July 2006, Maduray was involved in an accident which rendered the vehicle a write off. She claimed that she was travelling at approximately 120kmp/h when she was forced to swerve for an animal and rolled the vehicle. The insurer repudiated the claim based on data from the Skytrax vehicle tracking system that showed the vehicle speed at the time of the accident was 161kmp/h. This contravened the so-called good citizen clause contained in the insurance policy.
Unlike his peer – who dismissed the case in favour of the respondent – Pillai determined in favour of Maduray and ordered registered financial services provider Action Plan Management (the first respondent) and insurer Renasa Insurance Company (the second respondent) to jointly pay R109 345 (with interest calculated back to August 2006) in compensation. The FAIS Ombudsman determination was made on the grounds of inadequate or improper advice from both insurer and insurance broker and does not, as such, constitute a reversal of the Short-Term Ombudsman decision.
Neither respondent happy with the finding
Needless to say the respondents weren’t happy with Pillai’s decision, wasting little time in separately requesting an appeal hearing. The respondents “reserved the right to challenge – if they were advised or elected to – the constitutionality of the processes envisaged in the FAIS Act (alternatively the Financial Services Board Act) in regard to the determination of complaints and appeals pursuant thereto.” Could we see a court battle looming?
Let’s first find out why they were unhappy with the ‘Round 1’ decision. Action Plan Management got the ball rolling. They say the evidence considered by the Ombudsman in reaching his decision on the “stark factual dispute” before him would never stand up in a court of law. In their view the Ombudsman should have referred the matter to the courts as “a more appropriate forum to deal with the complaint.” They are unhappy that the case was decided on the grounds that “the probabilities favoured the complainant” and argue that even if such conditions proved true, the extent of their liability was in question.
Renasa’s major concern with the determination was the Ombudsman’s assumed jurisdiction in the matter. They note: “The Ombudsman had assumed jurisdiction despite a ruling given by the Ombudsman for Short-Term Insurance to the effect that the insurer could not be faulted in its decision.” Renasa raised a number of additional concerns with the Ombudsman’s findings. They said there was no way Pillai could conclude that the complainant “was not aware of the good citizen warranty,” nor was there evidence to support the conclusion that “the insurer had assumed responsibility to advise the complainant of said warranty.” Renasa also asked how their failure to “inform the complainant of the good citizen warranty caused her loss.” They questioned the Ombudsman’s conclusion that the good citizen warrant was “repugnant on the basis of equity” and whether the Ombudsman had “the jurisdiction to inquire into the validity or otherwise of the good citizen warranty” in the first place. And finally, they asked how the FAIS Ombudsman could rule against them when the case was initially brought against the first respondent.
The FAIS Ombudsman gets the first and last world
Given the sheer weight of criticism directed at the initial determination you’d think the FAIS Ombudsman would consider the respondents’ concerns and agree to an appeal hearing. But that’s not going to happen. In what’s becoming a rather familiar pattern the FAIS Ombudsman confirmed that it was the first and final word on dispute resolution in the financial services space. It concludes: “For the reasons stated, the Ombudsman is of the view that there are no reasonable prospects the Appeal Board would come to a different conclusion. The application for leave to appeal is accordingly refused.”
Industry participants should read the above in conjunction with the rather draconian opening statement from the abovementioned press release: “On the basis of the FAIS Ombudsman’s statutorily-decreed humanistic approach to complaints resolution which takes into account fairness and equitability…” While we appreciate their noble humanitarian stance we doubt it will be long before the FAIS Ombudsman finds himself facing a challenge in the country’s courts. If that happens we could see any number of his previous determinations put under the spotlight.
Editor’s thoughts:
We were surprised when the FAIS Ombudsman ruled for the complainant in the original determination – and concerned when the respondent’s leave to appeal was so easily turned down. What do you think will happen if the respondents in the above matter challenge the FAIS Ombudsman’s decision in court? Add your comment below, or send to [email protected]
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