Two case studies to drive by

It is your lucky day… In this newsletter, instead of going into mind-numbing detail on the only determination issued by the Ombudsman for Short-term Insurance (OSTI) against non-life insurers in 2022, this writer will rather summarise two of the 10 more useful case studies. The pearls of wisdom contained in these case studies, which are nicely ensconced in the combined Ombudsman for Long-term Insurance (OLTI) and OSTI Annual Report 2023, will stand you and your commercial and personal lines clients in good stead when claiming against their insurance policies, especially if alcohol or recklessness is involved.

You should know by now not to mix drink with driving

The first case study selected for this newsletter deals with an insured driving under the influence of alcohol. And this writer’s guess is that alcohol consumption, or at least the suspicion of alcohol consumption, is a factor in many, many of South Africa’s motor vehicle accident and / or damages claims. “The complaint related to the decision by the insurer to reject the claim on the basis that the insured was driving under the influence of alcohol at the time of the accident,” writes Assistant Ombudsman, Abri Venter. “The dispute was whether the insured was under the influence of alcohol at the time of the accident and whether the insurer had sufficient evidence to reject the claim on that basis”. 

This ‘sufficient evidence’ requirement can be a major obstacle for insurers and contributes a sense of invincibility among insureds, who push the proverbial envelope because they know how difficult it can be for the insurer to prove their rejection reason. Hold on… We are getting ahead of the story. In this case, the insured rear-ended another vehicle causing damage to both the insured’s vehicle and that of a third party. The insurer rejected the claim on two points: first, “that the insured was driving under the influence of alcohol at the time of the accident” and second, that the insured had not been forthcoming with the true facts when making the claim. As already hinted at, it is up to the insurer to prove the facts that it relies on to reject a claim. 

“The insured argued that a criminal case for driving under the influence of alcohol had been opened but withdrawn by the prosecutor [and] that this meant there was insufficient evidence to prove that the insured was driving under the influence for the insurer to uphold the rejection,” writes Venter. The insurer stood its ground, perhaps realising that there is some flexibility in the ‘onus of proof’ burden. In rejecting the claim, the insurer told the insured that the burden of proof civil matters “was one of a balance of probabilities, which is less onerous than in criminal cases”. They added that the fact that a criminal case was withdrawn would have had no bearing on the civil case. 

Factual evidence trumps the blood test malarky

It is quite useful to consider the policy exclusion on which the insurer relied to reject the claim, which held that the insurer was not liable for “loss or damage as a result of the insured being under the influence of alcohol, drugs or any other substance not prescribed by a registered medical professional”. According to Venter, this exclusion “did not require the insurer to only consider a blood result indicating that the insured was driving with a blood alcohol level in excess of the maximum allowed in legislation”. Although the insurer still had to prove that the insured was driving whilst under the influence of alcohol it could rely on factual evidence, such as witness testimony and documentary evidence. It only had to support its repudiation on a balance of probabilities. 

“Having considered the evidence of this specific matter, OSTI satisfied itself that the insurer had made out a prima facie case, supported by independent witness evidence, that on a balance of probabilities the insured was driving under the influence of alcohol at the time of the accident and that it influenced the insured’s driving ability, especially having regard to the way in which the accident had occurred,” concluded Venter. It is a lengthy sentence appropriate for the weight ‘drink driving’ matter. The OSTI was also unhappy about the misrepresentations made by the insured, “which [would have] provided another basis for the insurer to decline the claim”. No surprises in this matter: the OSTI upheld the insurer’s decision to decline the claim. 

Take care with reasonable precautions exclusion

Today’s second case study involves a commonly used exclusion. “The insured’s motor vehicle accident claim was rejected by the insurer on the basis that the driver at the time of the accident had failed to take due care and precaution to prevent or minimise the loss,” writes Assistant Ombudsman, Elizabeth Haworth. In short, the insured’s employee saw a stationary truck in the middle of the road, and despite this ‘obstacle’ being 70-100 metres away was unable to avoid a collision. An assessor determined that the driver had been on the road for 22 continuous hours, with only 2.5 hours of rest in that period. 

“The insurer was of the view that the accident would have been avoided had the driver been alert and kept a proper lookout,” writes Haworth. Furthermore, the insurer said the driver should have foreseen that driving for such an extended period was reckless and risky. All facts considered, the insurer rejected the claims on the grounds of recklessness, or what insurance stakeholders call the reasonable precautions exclusion. Herewith the three bullets, or bullet points rather, that the OSTI ‘fired’ to shoot down the insurer’s repudiation: 

• First, the reasonable precautions exclusion does not preclude a claim by the insured where the driver drove negligently at the time of the collision.
• Second, an insurer can only rely on the reasonable precautions exclusion to reject a claim if the driver is guilty of reckless driving in the legal sense, in other words that he deliberately or intentionally caused the collision.
• An insurer has to show ‘on a balance of probabilities’ that the driver was reckless in relation to the collision. 

Another insurer step-down, likely reluctantly

“The OSTI found that the insurer had failed to discharge its onus of proof and should therefore settle the claim; and the insurer agreed to abide by the decision,” concluded Haworth, having first shared some pertinent comment from the judgment in Santam Ltd v CC Designing CC [1998] 4 All SA 70 (C) 82. And thus, another insurer stumped up for a loss that could likely have been avoided if all South African insureds just behaved themselves… 

PS, in case you were wondering, the only formal ruling made by the OSTI against an insurer dealt with the late notification of a claim against an insurer… A technical summary of the matter spans four pages in the OLTI and OSTI Annual Report, alongside two photographs of clay pots in the making. 

Writer’s thoughts:

Are you as intrigued as I by how many insurance claims are paid for accidents that are avoidable. The sense is that if insureds were more accountable / responsible we could halve motor vehicle accidents, deaths and insurance claims… Your thoughts? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].

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