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Late complaint to OSTI

25 April 2023 Myra Knoesen

We summed up some case studies from the Ombudsman for Short Term Insurance’s (OSTI) briefcase, which we thought would be interesting for our readers.

The case studies focus on common time limitations in insurance policies and how they may affect not only a client’s claim but also the client’s recourse if he or she is not satisfied with the outcome of the claim. 

CASE STUDY 1: Insured’s complaint time-barred

The insured’s claim for the theft of items from her home was rejected by the insurer on the basis that there were no visible signs of forced entry into or exit from the insured residence. It was a condition for cover, in terms of the policy wording, that the theft of home contents must be accompanied by visible signs of forced entry into or exit from the insured building.

The loss occurred on 29 March 2019 and the claim was rejected on 12 April 2019. The insured submitted a complaint regarding the claim to OSTI on 14 March 2022.

In response to the insured’s complaint, the insurer submitted that the insured’s complaint was time-barred and fell outside OSTI’s jurisdiction. The insured’s policy contained time limits.

OSTI looked at Rule 17.6 of the Policyholder Protection Rules. OSTI found that the time-barring clause relied on by the insurer was valid and that the insurer complied with its obligations in terms of the Policyholder Protection Rules. The time-barring provisions appeared in the policy documents sent to the insured, as well as the rejection letter. The insured was aware of the time limits and failed to provide any reasonable explanation for the delay in submitting a complaint to OSTI. Accordingly, the late filing of the complaint to OSTI could not be condoned. OSTI found that the matter was time-barred and consequently fell outside of OSTI’s jurisdiction.

CASE STUDY 2: Late submission to OSTI condoned

The complainant in this matter was the insured’s brother and the executor of the late insured’s estate. The complainant approached OSTI for assistance concerning a claim for a motor vehicle accident in which the late insured and the late insured’s passengers were fatally injured. The claim was rejected by the insurer on the basis of a lack of due care, reckless driving and over-speeding.

In response to the complaint, the insurer argued that the complaint was time-barred because the complainant did not approach OSTI within the time periods stipulated in the policy for challenging the outcome of a claim. The policy contained conditions.

The insurer also provided a copy of the tracking report from the tracking device in the insured’s vehicle. The tracking report indicated that the vehicle was travelling at speeds between 160 km/h and 186 km/h in a 100 km/h zone seconds before the collision. Considering the extent of the damage and the speed travelled, the insurer was of the view that the insured was not merely negligent and that the only inference that could be drawn was that the insured was driving recklessly.

The complainant advised that his mother was initially appointed as the executor of the late insured’s estate. The late insured’s mother was handling the claim with the insurer. However, the late insured’s mother subsequently passed away. This resulted in a delay in the submission of the complaint to our office. The complainant stated that the tracking report could not be relied on because there was no indication from which tracking company the report came, and the report did not have the insured’s name on it.

OSTI found that the complainant had shown good cause for his delay in pursuing the rejection of the claim and condoned the late submission of the complaint. OSTI then proceeded to consider the merits of the claim.

Considering all the factors and circumstances, OSTI found that the probabilities favoured the conclusion that there was an irresistible inference that the insured foresaw the loss of control over the vehicle as a consequence of travelling at a speed that was almost double the prescribed speed limit. From the insured’s persistence in continuing to drive at an excessive speed, the logical inference was that he reconciled himself with that consequence. From these inferences, it followed that the insured acted recklessly.

The tracking report showed that the vehicle was travelling more than 40 km/h above the speed limit at the time of the collision. In terms of the policy, the insurer was entitled to decline liability for over-speeding. OSTI upheld the insurer’s rejection of the claim.

CASE STUDY 3: Claim legally prescribed

The insured had a motor vehicle accident in 2014. The insured submitted a claim to his insurer and the claim was rejected on the basis of dishonesty. The insured proceeded to repair the vehicle himself.

The insured approached OSTI in 2022 seeking assistance to remove the adverse record against his name.

The insurer pointed out that the insured’s claim had prescribed since more than three years had passed since the claim had been rejected. In terms of clause 11(d) of the Prescription Act, 68 of 1969 (the Prescription Act), the prescription period for any debt is three years. Accordingly, the insured’s claim prescribed in June 2017.

Since the claim had become prescribed, the complaint fell outside OSTI’s jurisdiction, and the merits could not be investigated.

CASE STUDY 4: Claim reported to the insurer too late

The dispute in this matter relates to a claim for third-party liability. The third-party was the insured’s former employee. After her employment ended, the third-party would go into the office when requested to assist with old files. On 19 December 2019, the third-party fell at the insured premises. As a result of the fall, the third-party broke her arm in two places, suffered a minor concussion and had bruising and swelling on her arms and legs. The third-party claimed medical expenses and other financial losses from the insured. The claim was reported to the insurer on 17 March 2020. The insurer rejected the insured’s liability claim on the basis that the incident was not reported to the insurer within 31 days of the date on which it occurred. The insurer relied on a provision under the general conditions of the policy to justify its rejection of the insured’s claim.

It was submitted, on behalf of the insured, that after the incident the insured kept in contact with the third-party to find out how she was doing and whether she intended to sue the insured. Since the third-party did not indicate that she had any intention of suing, the insured did not see the need to inform the insurer about the incident and concluded that it would do so if the third-party claimed. On 15 March 2020, the third-party threatened to sue the insured. The next day, the insured contacted its broker to report the claim. The insured submitted that it informed the insurer about the claim as soon as the third-party indicated that she would be suing. Therefore, the claim was reported within the time period stipulated by the policy.

The insurer submitted that the insured should have foreseen the likelihood of a liability claim ensuing and consulted its liability cover. The insured would also have known that a claim of this nature would require prompt investigation into what transpired. Instead, the insured engaged with the third-party for three months on her injuries.

OSTI noted that, in terms of the policy, there was an obligation on the insured to report any event which may give rise to a claim against the insurer as soon as reasonably possible, but not later than 31 days after the event occurred. OSTI said that, although the policy gave the insurer the discretion to reject a claim if the insured failed to comply with the condition, the insurer’s discretion must be exercised reasonably.

In the complaint before OSTI, the facts presented did not indicate that there was any intention on the part of the insured not to claim. On the contrary, the insured had every intention to claim from the insurer once the third-party claimed from the insured.

OSTI found that the insurer had not exercised its discretion reasonably. In this case, the claim was reported approximately 60 days late. Nevertheless, the insurer was able to investigate the incident and the quantum. There was nothing to indicate that the insurer would have done anything differently if the insured had reported the claim within 31 days after the incident. OSTI found that it would be unfair, inequitable and unjust to decline the claim purely on the basis that the claim was reported some 60 days late and requested the insurer to reconsider its stance. The insurer agreed to abide by OSTI’s decision.

You can read the full case studies here -https://www.osti.co.za/media/1605/briefcase_1st_edition_2023.pdf

Writer’s Thoughts

There was valuable information from the case studies on the common time limitations in insurance policies, and how they may affect not only a client’s claim but also the client’s recourse if he or she is not satisfied with the outcome of the claim. Do you agree with the outcomes of these case studies? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.

 

Comments

Added by Myra, 25 Apr 2023
Hi Dermot, i fully agree. It would be nice to know which insurers these are.
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Added by dermot quinn, 25 Apr 2023
It would be nice to know the insurers in these Ombud cases as there are some repudiations that indicate the willingness or not to abide by principles and not seek legal loopholes.
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