Questionable change in risk and insurable interest
We often read about the consequences of certain actions by various Ombudsmen as a result of one small mishap. This shows that mistakes happen so easily and once again, this is a reminder for us to be extra vigilant.
In a recent determination the complainant, Michelle Collard sought the assistance of the Short Term Insurance Ombud (OSTI) after her insurer, Santam, repudiated a claim in respect of her motor vehicle which had been stolen.
The Ombud, after investigating the matter, concluded that the insurer did no wrong but that the broker was possibly to blame for the complainant’s loss. The matter was then outside their jurisdiction and they referred the complaint to the Financial Advisory and Intermediary Services (FAIS) Ombud.
Too little, too late
In December 2008, Collard purchased a new car – an Opel. At that time she also owned another car being a VW Citi Golf. This car was insured with Santam through the services of her broker, the respondents –Henry Grundling Makelaars (the first respondent) and Henry Grundling (the second respondent).
At the time of purchasing the Opel, the insurance policy in respect of the VW was still in force and effect that Collard had paid her premiums. When she purchased the Opel she intended to sell the VW. She called the respondents and insured her new car. At that time she also informed the second respondent that she was selling the VW but will keep the vehicle registered in her name till the vehicle was paid off.
She had agreed to terms with the purchaser. She gave the second respondent the purchaser’s details including the address where the car will be kept as well as the purchaser’s identity number. The second respondent informed Collard that the policy will be updated to include the new information and that she should continue to pay the premiums. Having been assured by the second respondent that her car was covered, Collard continued to pay the insurance premiums.
During September 2009, the VW was stolen whilst in the possession of the purchaser. The vehicle was parked in the latter’s yard from where it was stolen. The theft was reported to the police in Benoni and the vehicle was never recovered. Collard, through the first respondent, filed a claim against the policy for compensation for her lost vehicle.
A shocking revelation
After the claim was made, the insurer appointed an assessor. The assessor found that the vehicle had been sold and was stolen from the possession of the purchaser and not from Collard who, according to the insurer’s records, was in possession of the vehicle. The assessor raised the question of insurable interest and change in risk.
The policy this vehicle was insured on contained an exclusionary clause which stated that if the vehicle was sold or hired out for money, there will be no cover provided.
On 26 November 2009, and in writing, Collard was informed by the insurer that her claim had been rejected. The insurer relied on the terms and conditions of the policy which provided that in the event of a sale of the vehicle, cover will cease. It further transpired that the insurer was not aware that the vehicle had been sold. They were not informed of this by the respondents.
It takes one small thing
Bearing in mind the above factual background, Collard was dissatisfied with her insurer as well as her broker. In her complaint she states that at the time of change of insurance to cover the new driver, she was not informed of any issues.
She claims Santam accepted the policy changes and the premiums she was paying but at no time was she informed that her vehicle was not properly covered and that she believed was an “outstanding” member of Santam for many years with only one claim ever made.
She claims she did everything correctly and yet was not covered. She argues that Santam should have contacted her and she would have done whatever was necessary to ensure that her vehicle was properly insured.
Collard said she initially complained about Santam to OSTI. At that time she was not aware of the fact that her broker did not inform Santam of the changed circumstances around the sale of the vehicle. Santam only found out about the sale after the claim was made from the assessor’s report and not from the broker.
It was the short term insurance Ombud who informed Collard that the cause of the problem was the actions or lack thereof by her brokers. She concludes by claiming that she wants the full insured value of the vehicle to be paid to her. The value amounted to R15 200, less the excess.
Two sides to the story
On 18 October 2011 the Office sent an email to the respondents pointing out that Collard had made a full disclosure of all the circumstances regarding the vehicle to her broker. The respondents were then invited to make a reasonable offer to resolve the matter.
On the same day, there was a response from Liana Grundling who, in an email, stated the following: “Unfortunately I would not be able to assist in resolving this matter as the business that was dealing with this client, Henry Grundling Brokers, is no longer in operation.”
Collard informed the Office that the respondents did not stop operating. In fact the business is in operation and the son of the second respondent is in charge of the business.
We summarised the determination for you but you can download the original determination here and read more on the findings.
According to the FAIS Ombud, Collard lost her vehicle and was unable to make a successful claim against her insurance policy. This, according to the Office, was all as a result of the respondents’ conduct who, according to the Office, were unprofessional and negligent in providing financial services to the complainant.
The retail value of the vehicle was R14 200 which was subject to an excess of R3 000. The insurer would have paid an amount of R11 200. For reasons set out above the respondents are liable to pay Collard the amount of R11 200.
Editor’s Thoughts:
In raising the question of insurable interest and change in risk, the respondent confirmed that the policy would be updated to include the new information however, failed to inform the insurer. The insurer, on the other hand, was not aware that the vehicle had been sold. Was the Ombud right in holding the respondents liable? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]
Comments