FAIS Ombud takes on mantle of statutory Ombud and nails insurer in important ruling

In an important determination that is bound to shake insurers out of their comfort zone, believing that they are out of reach of the FAIS Ombud, he has invoked his mandate in terms of the FSOS Act in assuming jurisdiction over an insurer who did not belong to any recognised ombudscheme.

FAIS Ombud Charles Pillai made the ruling against Orange Insurance Limited in his capacity as Statutory Ombud in terms of the Financial Services Ombudschemes Act which empowers the Ombud for Financial Services Providers to act as a Statutory Ombud in certain cases.

The determination followed a complaint brought by Sabastian Chetty of Randburg against Orange Insurance Limited.

The Complainant claimed he had comprehensively insured his car, a 2008 Ford Focus, with the Respondent, Orange Insurance Limited, through his broker Guardian Finances.

The vehicle was involved in an accident on 12 December 2008 and complainant duly submitted a claim.

On 6 January 2009 the vehicle was assessed by a duly authorised assessor who concluded that the vehicle was a “write-off”. On 23 January 2009 the Respondent informed the Complainant that the vehicle was to be re-assessed by a different assessor. This assessor reported that the vehicle could be repaired.

Technostar Auto Body Repairers was authorised by the Respondent insurer to effect the necessary repairs. The repairs were done and despite numerous requests from Technostar, the Respondent had failed to make payment for the repairs.

Technostar had refused to release the repaired vehicle to the Complainant until the repair costs had been paid.

Complainant eventually complained to the FAIS Ombud on 12 February 2009.

The complaint was sent to the Respondent requesting it to resolve the matter with the Complainant within seven days. The matter was not resolved and the Respondent did not respond to the complaint.

A case manager in the office of the FAIS Ombud (acting as Statutory Ombud) contacted a director of Orange Insurance Limited, one Alvin Beiling, and explained to him the consequences of failure by the Respondent to respond to the complaint.

On 27 November 2009, Gary Campher, also a director of the Respondent, provided a rather

convoluted response which claimed that the claim in question was part of a forensic audit being conducted by the Financial Services Board (FSB) and a ruling on the matter was being awaited.

The Office of the Statutory Ombud responded by pointing out the different functions of the Financial Services Board and the FAIS Ombud and demanded a response to the complaint by no later than 4 December 2009.

In spite of the clear explanation to the Respondent that it was misconstruing the roles of the FSB and the FAIS and Statutory Ombuds, the Responded said it was engaged in a dispute with Fleetsure (Pty) Ltd and Zurich (an insurer) and was , therefore, not to be held liable for any outstanding claims.

In his determination, Pillai said the Respondent’s dispute had no bearing on the crisp issue at hand.

“Of cardinal importance is that the Respondent accepted liability for complainant’s damages and has not furnished this Office with any logical or acceptable explanation for its failure to honour its

undertaking to pay for the Complainant’s damages.

“Based on the facts at my disposal, I have no doubt that respondent is liable for complainant’s damages and the complaint should be upheld.”

The Respondent was ordered to pay R101949.60 for the cost of repairs to the motor vehicle; R2000 for the towing charges; and storage charge at the rate of R190 per day from 31 March 2009 to the date of release of the vehicle by Technostar to the Complainant.

The Statutory Ombud added he had received numerous other complaints against the Respondent. The vast majority were almost identical in substance, that is, the Respondent had failed to pay for its admitted liability for damage caused to the complainants’ vehicles as a result of accidents.

“This determination is, therefore, the first in a series that may follow against the Respondent,” the Ombud added.