Whose fault is it?

22 May 2018 Myra Knoesen
Myra Knoesen, FAnews Journalist

Myra Knoesen, FAnews Journalist

In a recent determination by the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud), the complaint arises out of the rejection of the complainant’s claim for a stolen motor vehicle on the basis that the complainant had not complied with the minimum-security requirements.

The complainant is Mrs Karen Mandie Van der Merwe a sole proprietor who trades under the name and style Brother Roadside Assist.

The first respondent is Forum SA Trading, an authorised Financial Services Provider (FSP). The second respondent is Christo Jonker, an authorised representative and key individual of first respondent. The complainant dealt with second respondent who rendered financial services to her.The complaint

During July 2011, Van der Merwe requested a quotation from Jonker for a newly purchased vehicle (a Nissan Rollback), with a retail value of R450 000. On 16 August 2011, she sent an e-mail requesting that the vehicle be added to her existing policy with Jonker. 

Van der Merwe had confirmed that the vehicle had been fitted with a tracking device and had supplied Jonker with the Skytrax installation certificate as confirmation. 

On 10 May 2014, the Nissan Rollback was stolen, and a claim was duly submitted with the insurer Constantia Insurance. The claim was handled by Constantia Underwriting Agency t/a Hurriclaim, who informed Van der Merwe that they were unable to entertain the claim as the vehicle was not fitted with an early warning tracking unit, which was a policy requirement for vehicles with a value in excess of R350 000. 

Hurriclaim in rejecting the claim, referred to the ‘Vehicle Security Requirements’ endorsement under the motor section of the policy wording which states: “The insured warrants that all vehicles insured by this section will be fitted with an early warning tracking unit and which unit shall remain linked to a professional tracking company”. 

Van der Merwe was upset with the decision as Jonker had been in possession of the vehicle security certificate from Tracker confirming the installation of the Skytrax system, yet she had never been advised that the device did not comply with the minimum-security requirements. 

She wants to be compensated in full for the damage she believes she suffered as a result of Jonker’s negligence. 

A point to prove

Jonker’s reply was that Van der Merwe had already been in possession of a policy with Auto Trade Underwriters, who administer the policy on behalf of Constantia Insurance, when she met with him on 13 May 2011. A ‘Brokers Appointment’ was then signed which simply placed the existing policy under Jonker’ agency. There is no indication that any revision of the policy was undertaken at this point.

Jonker confirmed that the respondents had been provided with the Skytrax certificates for all the vehicles that had existed on the policy at that time. It must be noted that these certificates complied with the minimum security requirements, as all the vehicles insured at that time were under the value of R350 000, which is the level at which an early warning system is required.

The response confirms that a quotation for the Nissan Rollback was done on 18 July 2011 and that after having received an e-mail confirmation from Van der Merwe on 16 August 2011 this vehicle was added to the policy.

Jonker confirms that Van der Merwe had installed a Skytrax unit to the vehicle, and that it was provided with the instalment certificate as proof. Despite confirmation to the contrary, provided by Tracker, Jonker claims that Skytrax is an early warning system and, as a result, was satisfied that the Van der Merwe complied with the minimum security requirements.

The respondents then state that after the theft was reported it discovered that the Van der Merwe had changed the tracking systems on all the vehicles to a Tom-Tom system, which is more of a fleet management tool, (not too dissimilar, in fact, to the Skytrax system). Jonker claims not to have been advised of this change, and that it was because of this that the claim was unsuccessful and that the claim would have been successful had Van der Merwe remained with Skytrax.

Jonker also points to e-mail correspondence indicating that it would appear as though Tracker had erred in not installing the correct unit in Van der Merwe’s vehicle but this, according to the Office, still does not take away from Jonker’s duty to have made Van der Merwe aware of any and all material terms of the policy along with the consequences of failure to comply with the insurer’s requirements.

Jonker accepts responsibility for not having accurately recorded the advice provided to Van der Merwe in a more detailed record of advice. The respondents do however, maintain that the security requirements had been discussed with Van der Merwe as confirmed by it having been provided with the Skytrax installation certificate. Jonker claims he was not informed that Van der Merwe had changed the system or that Tracker had installed a different system to the one listed on the certificate. 

FAIS finds fault

The Office believes that whilst Jonker continues to find fault with the actions of Tracker and Van der Merwe’s failure to have informed him of the change in tracking units from a Skytrax to a TOM TOM, the essence of this matter the Office says, remains that Jonker had failed to adequately disclose to Van der Merwe the minimum security requirements, which required that there be an early warning system installed in the vehicle, which would not have been met by either of the Skytrax or TOM TOM units.

Based on the information provided in the recommendation, the Office finds the respondents liable to pay Van der Merwe’s claim. The respondents are ordered to pay Van der Merwe the amount of R355 785.

Editor’s Thoughts:
Considering Van der Merwe had already been in possession of a policy with Auto Trade Underwriters when she met with Jonker. Surely she should be held accountable for having known the minimum-security requirements set out before, which simply placed the existing policy under Jonker’s agency. Not to mention the fact that Van der Merwe had changed the system to the one listed on the certificate. She had a duty to disclose such material information. Even though Jonker accepts responsibility for not having accurately recorded the advice provided to Van der Merwe in a more detailed record of advice. This is a stark reminder of the importance of keeping a solid record of advice. Do you agree with the FAIS Ombud that he was in the wrong in this instance? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].



Added by Vanie Cattigan Randburg , 12 Jun 2018
My case which i took to the previous Ombudsman Ms Noluntu Bam in 2012: There was no Record of Advice why there was no Participation and Consent or signature from the Life Insured that i believed resulted in Non disclosure and subsequent repudiation of claim, although the non disclosure had no impact to cause of death. FAIS ruled in favour of FSP. Why now 2018 is ROD serious.
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Added by Roger Tinsley, 22 May 2018
It is so material to the Policy Cover that the Broker should have put in writing the Tracking Device requirements and ensured
the Client complied therewith, or confirmed
that the Tracking Device fitted was not satisfactory and Insurers would have the right to repudiate in the event of theft..

What puzzles me is that at the time of Theft the Vehicle was seemingly worth some R355000 based upon the compensation required to be paid which is only some R5000 above the R350000 requirement for an early warning system. It would then seem Insurers have been extremely harsh in repudiation,and perhaps a high mileage, a few scratches or an alternative valuation could have brought the Value down below the R350000 in any event. ( I am of course assuming the Policy wording in effect relates to value at the time of claim which is surely most Insurers wordings).

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Added by Paulo, 22 May 2018
Constantia, you do have the reputation for not paying claims. this is not a 1st.

Clearly, this is decision is handing power to the clients and keeping them uneducated and not responsible for their actions.

so sad, just blame others... so easy

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Added by Brian Lazar, 22 May 2018
Look at the responses to this decision, we can't all be wrong! This is an absurd outcome; the Broker did nothing wrong.
The increasing FAIS and Consumer Protection Act red-tape, absolves the client from any responsibility whatsoever and impacts negatively on the moral aspect, whereby savvy clients can resort to almost fraudulent tactics by dereliction of duty. FSP’s pay exorbitant compulsory fees to/for this “Office” to make such decisions. What's next for FSP's - Crystal ball training?

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Added by Paul, 22 May 2018
I rely on my broker to highlight special requirements .in this case different tracker due to value of the vehicle. If they do not, of what value are they to me? It appears from the info provided that even had the client not changed the tracking device, the claim would have been rejected.
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Added by Sunette, 22 May 2018
My agreement with my client's are: if i do no know about changes you are not covered. it is not the first time that the Fais Ombudsman is wrong in my opinion and also is it not the first time that Constantia insurers use any method possible to get out of a claim.
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Added by Rob, 22 May 2018
It would seem as though the Ombud now requires a broker to duplicate the entire policy wording and add this to the ROA in order to prove that all the material facts, benefits and exclusions were discussed with the client?
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Added by Shaheed, 22 May 2018
The more i read this outcome the more I realise the Ombud must have some mental condition to have arrived at this conclusion. The client and the insurance company gets away unscathed! WOW!!!
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Added by Shaheed, 22 May 2018
This is completely ridiculous!! How can liability shift the broker when the client did the material changes with the tracking company without informing the broker. That event would have triggered highlighting further disclosure. I hope Jonkers takes this up on Appeal!
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Added by Adolf, 22 May 2018
This is ridiculous! So the client has no obligation to read their policy schedule?

The client should have notified the broker of the change. As for the minimum requirements, it was noted in the schedule which the client is obliged to read.
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Added by Thobile Hlongwane, 22 May 2018
So unfair to the FSPs.
Does TCF now mean the client takes no responsibility and or accountability? How "more detailed" should a record of advice be to show that a client was made aware of all the requirements, terms and conditions?
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Added by Tim Jones, 22 May 2018
This is again evidence of the ombud overriding the basic law of contract! Both parties have a duty to keep the others informed of any changes made to the subject matter. If van Der Merwer had informed the broker and insurance company of her change of tracker system the insurer would have been able to assess wether it was compliant or not and advise accordingly.
It is unreasonable to expect the intermediary to have to reiterate every clause in an insurance policy. Where was the insurer in all of this? Do they not also have a responsibility to ensure that the tracker systems were compliant?
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Added by Kenny, 22 May 2018
So, the client and the insurance company have no responsibility?
Neither the tracking company - no moral obligation to advise client to update insurance due to change in product?

So, when van der merwe lodges a claim for the gutters falling off her roof. the advisor will have to pay as he didn't adequately inform her via a written record of the maintenance requirements in her policy!!!
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Added by Lucille Horn, 22 May 2018
Not to mention the responsibility of the client, where is the responsibility of the client!!!!
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Added by Dirk, 22 May 2018
This is ludicrous! The Office now requires an adviser to also be a technical adviser of the products required to safeguard the client's vehicle.
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