FAIS Ombud warns brokers not to place cover without proper documentation

The FAIS Ombud has sent a clear message that brokers who provide insurance cover without the requisite forms or records only place themselves at risk in the event of a claim.

Charles Pillai, the Ombud for Financial Services Providers, ruled that the Respondent, APBCO Versekeringsmakelaars (Pty) Ltd, of Durbanville, Western Cape, must be held liable for compensation when the underwriting company Heavy Commercial Vehicle Underwriting Managers (Pty) Ltd (‘HCV’) repudiated a claim.

The Complainant, Sidney Pragasan Mannie of Liberty Transport, complained to the FAIS Ombud after HCV refused to settle a claim for damages in an accident involving one of his trucks.

Complainant said the claim was repudiated as a result of APBCO not following proper procedures as outlined by HCV that it would only go on risk upon receipt of duly completed proposal and debit order forms.

The Complainant said on 24 August 2006 he met with a Ms McKeowan and asked that his trucks and trailers be put on cover. He claimed Ms McKeowan confirmed that the vehicles had been covered by HCV.

On 31 August 2006, one of the vehicles was involved in an accident. Ms McKeown met with Complainant the next day (1 September 2006) and completed the insurance application forms. Ms McKeown once again confirmed to Complainant that the vehicle was “on risk”.

However, after submitting the claim for the truck accident, HCV repudiated it on the basis that the truck was not insured at the time of the accident as HCV had not received fully completed proposal and debit order forms.

Not satisfied with HCV’s decision, the Complainant forwarded this matter to the Ombudsman for short term insurance and after his ruling in favour of HCV, lodged a complaint with the FAIS Ombud against his broker, APBCO, for not ensuring that his vehicle was insured.

In its response to the FAIS Ombud, the Respondent did not deny that the Complainant was advised that his truck was insured through HCV but denied that APBCO did not follow proper procedures.

Mr De Witt stated HCV had telephonically confirmed that the Complainant was covered. He further alleged that the Complainant was partially to blame as he deliberately delayed the process by repeatedly not making himself available to sign the necessary forms.

Mr De Witt insisted that had the insurer not agreed to the request for temporary cover, they would not have confirmed to the Complainant that he was covered but would have approached an alternative insurer.

He also said several calls had been made to Complainant about filling the necessary forms and alleged that Ms McKeowan had even gone as far as to leave a proposal form for the Complainant to sign at a certain dealership but he did not arrive as agreed.

The Complainant maintained the broker did not at any time state that cover was subject to a completed proposal form nor was any attempt made from 24 August 2006 until the accident on 31 August 2006 to fill in the proposal form.

He said Ms McKeowan had made several appointments to meet with him to fill the proposal forms but did not keep the appointments.

In investigating whether HCV had agreed to hold cover for the Complainant as stated by APBCO, the FAIS Ombud found that HCV had had dealings with APBCO since 2002 and had never gone on risk without a fully completed proposal and debit forms.

Only four hours before the accident, HCV had once again reiterated in an email to APBCO that the client “was not on cover” until they had received all the outstanding documentation.

The FAIS Ombud found that on basis of evidence before him, it appeared standard practice for HCV to only go on cover upon receipt of the fully completed proposal and debit order forms.

The required documentation was only received by HCV on 4 September 2006, some 11 days after the request for cover was made and four days after the accident. The accident itself was only reported on 6 September 2006.

“There is no evidence before me to suggest that there was a variation of HCV’s standard method of dealing with respondent.

“As this appears to have been the first instance of the Respondent (Ms McKeowan) requesting interim cover from HCV this ought to have been followed up with a written confirmation by the Respondent.

“The FAIS Act requires that the financial services provider render financial services honestly, with due skill, care and diligence.

“Not ensuring that written confirmation was provided in respect of complainant’s cover, particularly in an instance such as this where the respondent had not conducted business in this manner before, is clearly a contravention of the FAIS Act,” the FAIS Ombud said.

The FAIS Ombud also said there was no evidence that the Complainant had been negligent in that he did not make himself available to sign the application forms.

He added the Respondent did not have any evidence in support of the contention that complainant was advised that the forms had to be completed as soon as possible or that the complainant delayed in attending to sign them.

“It is clear from the investigations of this office that HCV never agreed to go on risk for the Complainant either temporarily or otherwise unless a duly completed proposal form and a debit order form were provided.

“It was incumbent on APBCO to ensure that the proposal and debit authorisation forms were timeously completed and submitted to HCV in order to secure the cover.

“Therefore, it is clear that APBCO acted negligently in the rendering of the financial service, which negligence resulted in financial prejudice i.e. the repudiation of complainant’s claim by HCV.”

The Respondent was ordered to pay the Complainant the sum of R133200 as compensation for the total loss of the vehicle.

Click here to read the full determination (PDF file 74kb)