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Dismantling the roadworthiness repudiation

06 October 2011 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

I love reading The Ombudsman’s Briefcase, the official newsletter of the Ombudsman for Short-term Insurance (OSTI), which arrives in my inbox every quarter. And because many of FAnews’ subscribers are stakeholders in the short-term insurance industry I immediately rush to the section titled Ombudsman Advice: Case Studies. Each case study shares a story of an insured’s “battle” with an insurer – along with the outcome – and some sage words of advice. A thorough knowledge of previous OSTI findings is useful to the insured, the short-term insurance broker and the insurer alike, as it serves as a reference for how similar cases might be decided.

In the third issue of 2011 the OSTI shared three rather detailed case studies… The first was an aviation case, which I will hold over for another newsletter. Likewise the third case which deals with “cleaning up” post-accident debris. It is the second case study that has wider appeal as it deals with the rejection of a motor vehicle accident claim on the grounds of the roadworthiness – or lack thereof – of the insured’s vehicle. The insurer rejected liability for the claim on the grounds that the insured had failed in the obligation to “maintain the vehicle in an efficient and roadworthy condition”. More on that later – let’s first look at the background to the case...

Some work required

The insured in this case purchased a 1956 Mercedes Benz 220S motor vehicle from a classic car enthusiast. In order to register the vehicle in his name, the insured had to put the vehicle through its roadworthy test – a process he kicked off on the day he purchased the vehicle by taking it to a garage for a service. Some 10 days later he took the car to the same garage for a more detailed inspection with an eye to getting it through the roadworthy. Anyone who has purchased a vehicle of this vintage will know there are plenty of “niggles” that need fixing. The Ombudsman notes: “The insured attended to the replacement of certain simple components on the vehicle and also [took it to] an auto electrician for the repair of an open circuit to the ignition wiring.”

Three weeks after he purchased the vehicle, the insured took it to the roadworthy centre, where four additional faults were picked up. These had to be taken care of before the certificate could be issued. The OSTI is quick to point out that these defects were mostly electrical in nature – though the rubbers on the front sway bar were found to have been worn out too. A couple more trips to the garage ensued… Some of the replacement parts had to be ordered in from Germany, but the required repairs were eventually carried out. The vehicle was returned to the owner with the message that it was in “good order” and ready to re-take the roadworthy. And that’s when disaster struck.

Brake failure on a 55-year old car: Who would have thought?

On the day the insured received his vehicle back from the garage he was involved in an accident in the street outside his home. The vehicles brakes “failed” and the insured collided with a parked motor vehicle at all of 20km/h. Our story begins after the insured jumped through the usual hoops to lodge a claim for damages with his insurer. As mentioned in the opening paragraph the insurer was unhappy that the vehicle was not roadworthy at the time of the accident, and repudiated the claim. They backed up their decision by pointing to a provision in the policy that required that every insured vehicle “meet the requirements for roadworthiness as set out in the Road Traffic Act or any replacement statute” failing which “all benefits under this policy in respect of any claim shall be forfeited.”

That’s quite a harsh clause – and judging by the state of South Africa’s car pool a clause of this nature would invalidate just about every motor accident insurance claim ever made! The insurer contended that this claim arose in its entirety from the mechanical failure (un-roadworthiness) of the vehicle’s braking system. Even the insurer’s assessor – who found the vehicle to be generally in good condition – suggested the collision was due to “wear and tear” and “to mechanical failure”. Upon claim rejection the inevitable back and forth between insured and insurer – and eventually the OSTI – took place...

The insured got the ball rolling by having the braking system assessed. “It was determined that there was no pressure in the brake system and that the brake fluid container had run dry as a result of a leak in the master cylinder on the braking system,” observes the OSTI. There are no computer warning lights in this vehicle, so the insured had no prior knowledge of the defect. In stating his case the insured pointed out that neither the service centre (garage) nor vehicle testing centre had found any problems with the braking system. He also said the he hadn’t experienced any problems while driving the vehicle.

Enter the Ombudsman

The OSTI was approached after the insurer and insured failed to resolve the matter. And he had to haul out the “big stick” to finalise the matter. The insurer only capitulated, paying out the insured, after the Ombudsman made a provisional ruling!

What did the Ombudsman say? He started by informing the insurer that the obligation on the part of the insured to maintain a motor vehicle in an “efficient and roadworthy condition” was not an absolute one… What is expected is that the vehicle owner takes reasonable care of the vehicle maintenance. And – as with most short-term policies – mere negligence on the part of the insured is not sufficient to refute the claim. The insurer had to prove “recklessness or actual knowledge on the part of the insured of the fact that the vehicle was not in a roadworthy condition!”

“The exclusion on which the insurer relied would only apply where the insured had failed to take steps to avoid the obvious, but the obligation did not operate where the insured had no knowledge of hidden defects and could not have known of their existence,” he continued. After addressing aspects of the brake failure in-depth, the Ombudsman drew attention to the decision of Pretorius v. Aetna Insurance Company Limited 1960 (4) SA 74 (W). In this judgment the court held that the insured “satisfies the condition and acts reasonably if he takes steps to maintain his car in an efficient condition at any time prior to it being in an actually inefficient condition.”

Due care taken, therefore no fault!

In conclusion, the Ombudsman noted: “The insured had, from the moment he purchased the vehicle, taken steps to have the vehicle checked over for any defects or faults which were required to be rectified and to have the vehicle put through the roadworthy test so that he could register the vehicle in his name.” He provisionally ruled that the insurer had failed to discharge the onus which rested upon it of establishing that the insured had failed to comply with the terms of the exception relied upon by it for the rejection of liability. And the insurer met its obligations.

Editor’s thoughts: I’ve spent quite some time “hanging out” at my brother’s auto repair shop and I’m often horrified at the state of vehicles in everyday use… Then again, one need only kick the tyres on a few cars at the local grocer to find vehicles with tyre wear way in excess of the legal limit! Have you experienced problems with motor vehicle accident claims due to poor vehicle maintenance? Please add your comment below, or send it to gareth@fanews.co.za

Comments

Added by Ingrid, 08 Oct 2011
Bosh! If you want to drive around in old vintage cars, stick to vintage car rallies where everyone knows the odds and manages them accordingly.
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Added by Perseus, 07 Oct 2011
This sounds like one of those insurers who will take on the risk, accept the premiums and if or when a claim arises they will underwrite the original application, checking histories and looking for any reason not to pay. Every industry has its bottom-feeders I guess. The public come second when claims staff are rewarded for successfully declining claims. That's why we need the OSTI.
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