Misrepresentation and non-disclosure make headlines

16 April 2019 Myra Knoesen

It is important that clients understand their policy wordings and are also made aware of all exclusions in a policy in order to understand what they are covered for and what will stand on grounds for a rejection of a claim. 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.

Non-disclosure during underwriting

Mr S submitted a claim to his insurer, Constantia Insurance, following a motor vehicle accident which took place in October 2017. The insurer rejected the claim on the grounds that during the initial sales conversation, during which the policy was underwritten, Mr S had failed to disclose that he had previously been involved in criminal or civil litigation.

The insurer submitted that during the validation of the claim it discovered that there were three previous charges laid against Mr S. All three charges were for drunk driving between October 2016 and April 2017. The insurer argued that all three charges were laid against Ms S prior to the sales conversation, and therefore, there was a duty on Mr S to disclose these charges during the underwriting of the policy.

The insurer argued that Mr S failed to inform it during the sales conversation that he had been arrested on allegations of drunk driving and that his failure to do so prejudiced the insurer as it was unable to underwrite the risk correctly.

A lack of evidence

Mr S did not agree with the insurer’s rejection of the claim and submitted that whilst he had been previously charged with drunk driving, none of the cases ever proceeded to court and were instead withdrawn due to a lack of evidence. Mr S argued that he understood the word “litigation” in the sales conversation to refer to the process of being taken to trial in respect of the criminal charges against him. Mr S thus maintained that he had answered the insurer’s underwriting questions correctly and to the best of his knowledge.

OSTI noted that the questions put to Mr S specifically referred to litigated cases and convicted cases and did not extend to charges made against him. OSTI also considered the dictionary meaning of “litigation”, which refers to the process of taking a case to a court of law in order to obtain a judgment.

In this regard, OSTI agreed with Mr S that none of the charges brought against him ever proceeded to a court of law and were instead withdrawn. OSTI found that the insurer could not rely on charges made against Mr S which had been withdrawn to support the rejection of the claim on the grounds of undisclosed litigation. The insurer agreed to abide by OSTI’s decision and settled the claim.

Breach of policy conditions

Mr N was involved in a motor vehicle accident on 23 May 2018 around 19h55 on the M1 North in Woodmead. Mr N reported the claim to the insurer, Standard Insurance, on 24 May. Mr N’s description of the accident is that he was driving on the far-right lane of the freeway, when a vehicle in front of him suddenly slowed down. He stated that he swerved to the left lane to avoid rear-ending the vehicle in front of him but collided into the left rear side of another vehicle, which was travelling at high speed in that lane.

According to Mr N, he drove away from the accident scene without stopping because he feared the incident was an attempt to hijack his vehicle. When he later inspected the vehicle, he noticed damage to the front bumper and that the engine was leaking water.

The assessor confirmed the damage to the vehicle and reported that it was consistent with Mr N’s incident description. The assessor however also confirmed that Mr N had unlawfully left the accident scene without stopping and that he had only reported the incident a week later, on 30 May, at the Sandton Police Station.

Mr N did not dispute leaving the accident scene or his failure to report the accident to the police within 24 hours. He stated that the incident was a hijacking tactic and it was not safe for him to stop at the scene. Mr N stated that he did not know the location of the nearest police station as he was new to the area. He also stated that he was not able to report the incident to the police station sooner because he had no alternative means of transport. Mr N indicated that the insurer delayed providing a rental vehicle in terms of the cover, which was only provided on 30 May.

The insurer asserted that Mr N breached the policy by unlawfully leaving the scene of the accident and by failing to report the accident to the police within 24 hours. It submitted that as a result of such breach, it was not liable to pay the claim.

OSTI’S view

The insurer advised that there was a police station 3km away from Mr N’s residence. Mr N failed to make any effort to report the incident at this station or call 10111 for assistance. Mr N also had other options available to him. A reasonable person in the position of Mr N would have searched for the nearest police station on the navigator on his vehicle or cell phone. Alternatively, on arriving home, Mr N could have called a friend, relative or taxi for a lift to the police station in order to report the incident. OSTI did not believe that a reasonable person would have waited a week before reporting the incident to the police.

In OSTI’s view, Mr N’s actions after the accident were unreasonable and showed no effort to remedy his breach of the policy. OSTI’s view was that the insurer was entitled to exercise its right to avoid liability on the basis of Mr N’s breach of the policy. The rejection of the claim was therefore upheld.

Misrepresentation at claim stage

Mr F submitted a claim to the insurer, Guardrisk Insurance, in respect of a vehicle accident which occurred on 17 June 2018. Mr F advised the insurer that he had gone to a funeral in Elim on 16 June and whilst returning to his home in Polokwane, he lost control of the vehicle on a curve and drove over a hill and rocks, causing damage to his vehicle.

The insurer rejected the claim on the grounds of misrepresentation and non-disclosure of material facts. According to the insurer, Mr F misrepresented the facts regarding how the accident occurred and advised that the timeline of events did not correlate with Mr F’s version.

According to the insurer, Mr F stated that he had gone to Elim and returned that day but the last time his vehicle was located on the N1 highway to or from Elim was on 9 May. The vehicle diagnostic report did not show any incidents on the alleged date of loss. It indicated that the airbags deployed on 19 June. The insurer established that, according to Mr F’s bank statement, no transactions were done on 17 June but he withdrew money at Elim in Limpopo, where he was allegedly at a funeral on 17 June, on three separate occasions on 18 June. The insurer advised that the vehicle was only towed from the accident scene at 10h21 on the day of the accident and the insurer’s Assist Line was not contacted. The date on the tow-slip was different from the date of loss.

The insurer’s loss adjuster’s report however stated that the date on the towing invoice was raised with the towing company and it advised that the tow operator had made a mistake in respect of the date on which the vehicle had been towed. The loss adjuster’s findings therefore negated the factors relied on by the insurer to reject the claim.

The rejection letter stated that the events leading up to the accident were not disclosed on the claim form. OSTI considered the questions posed on the claim form. The insurer did not request Mr F to disclose events leading up to the accident but rather required Mr F to “describe what happened” on the claim form. OSTI thus disagreed that the insurer was entitled to reject the claim on the grounds of information not having been disclosed on the claim form, when the questions on the claim form itself did not require Mr F to disclose the events leading up to the accident. The insurer had thus not created a duty of disclosure on the claim form.

The evidence relied on by the insurer, in other words, the loss adjuster’s report, did not support the insurer’s rejection of the claim. OSTI recommended that the insurer settle the claim. The insurer agreed to abide by OSTI’s decision, and the claim was settled.

Editor’s Thoughts:
These cases remind us of the importance of brokers in helping clients understand their policies… policy provisions, terms and definitions make a big difference! Do you agree with this? If you have any questions please comment below, interact with us on Twitter at @fanews_online or email me -



Added by Pierre Snyman, 17 Apr 2019
Hi Myra,
I am not contesting the fact that the insured acted unlawfully. He felt threatened at the time and did not stop. I do not have quantum, but if it was pursued in a court of law and if the court did not accept his explanation, he would have received a fine which maybe would have been much less than the loss he suffered due to the repudiation.
I do not have the privilege to peruse his policy wording, but if the policy wording does not put an obligation on him to report an incident within a time limit, the insurer should not use the NRTA to divorce itself from its obligations. If the insurer wants to use the NRTA as a policy management tool, it should include that in the wording or provide appropriate proof that it informed the insured of such intentions. With regard to prejudice. An assessor confirmed to the insurer that damage found was consistent with the insured's account of the incident. Is the insurer prejudiced because the insured did not go to the police to present them with the same account of the event so that it can corroborate with the police if they have the same account of the incident afterwards. In fairness, what does the event actually matter. A vehicle that is covered comprehensively is covered for most eventualities. The insured also does agree to assist the insurer with all information and documentation he has to or could present. It is not normally a suspensive condition of the policy to deny liability if the insured can not provide substance that will assist or lead to a successful recovery action or repudiation. In this case and in the matter between the insurer and the insured, the insured's vehicle was damaged and it is duly covered in terms of his policy. He proved the damage and described the event. The insurer dids not contest the event but rather relies on actions of the insured which is not required or contained in the terms and conditions of the contract between them. If the insurer could provide proof that the information surrounding the damage was untrue and a claim would have been repudiated in terms of the policy wording, if the insured did indeed disclose the true information, the insurer has all the rights to repudiate. So I raise the question once more. How was the insurer prejudiced ?
With regard to the OSTI and a Reasonable Person. My view remains that it is unfair for one person to determine what is deemed reasonable for the full scope of our diverse nation and that even without personally interviewing the person involved in the matter.
Report Abuse
Added by Myra, 16 Apr 2019
Hi Justice, it is an eye opener indeed!

Hi Brian and Pierre, according to the case, the assessor confirmed that Mr N, having collided with another vehicle belonging to a third party and causing damage to it had unlawfully left the accident scene without stopping.

The policy condition on unlawfully leaving the scene of the accident echoed the provisions of Section 61 (1) (a-e) of the National Road Traffic Act (the Act), which reads as follows:

Duty of driver in event of accident

61. (1) The driver of a vehicle on a public road at the time when such vehicle is involved in or contributes to any accident in which any other person is killed or injured or suffers damage in respect of any property or animal shall-

(a) immediately stop the vehicle;
(b) ascertain the nature and extent of any injury sustained by any person;
(c) if a person is injured, render such assistance to the injured person as he or she may be capable of rendering;
(d) ascertain the nature and extent of any damage sustained;
(e) if required to do so by any person having reasonable grounds for so requiring, give his or her name and address, the name and address of the owner of the vehicle driven by him or her and, in the case of a motor vehicle, the registration or similar mark thereof;”

Section 61 (1) also provides:

“(f) if he or she has not already furnished the information referred to in paragraph (e) to a traffic officer at the scene of the accident, and unless he or she is incapable of doing so by reason of injuries sustained by him or her in the accident, as soon as is reasonably practicable, and in any case within 24 hours after the occurrence of such accident, report the accident to any police officer at a police station or at any office set aside by a competent authority for use by a traffic officer, and there produce his or her driving licence and furnish his or her identity number and such information as is referred to in that paragraph;”

The obligations placed on a driver involved in a motor vehicle accident, in law and under the insurance contract, provide a measure independently to verify the circumstances of the incident in the event of a legal dispute or action.

The insurer asserted that Mr N’s conduct in this matter affected its ability to validate the claim as his version could not be corroborated by independent evidence. There was no independent evidence to verify Mr N’s state of sobriety or his version with regards to the date, time and specific location of the accident, how the accident occurred and that he was in fact the incident driver. These facts would have been confirmed had Mr N remained at the accident scene and exchanged details with the third party; alternatively, immediately reported the incident to the police in accordance with the Act and insurance contract.

In OSTI’s view, Mr N’s actions
after the accident, even in the alleged
critical situation, were unreasonable
and showed no effort to remedy his
breach of the policy. As a result, the
insurer’s right to validate this claim was

Report Abuse
Added by Brian Oxley, 16 Apr 2019
I am lost as to how the insurer was prejudiced, the insured was foolish but the insurer incurred no costs . There is a growing and noticeable trend towards unusual interpretations of policy conditions and even imposition of conditions that do not exist as shown in these. It is most concerning, what happened to we pay claims unless they are clearly not covered?
Report Abuse
Added by Justice Sibiya, 16 Apr 2019
Wow! This is an eye opener, as Insurers most of our claim forms do not necessarily create a duty of disclosure and I feel this is important especially at such times when fraudulent claims are on the increase.
Report Abuse
Added by Pierre Snyman, 16 Apr 2019

I am not in agreement with the "Breach of policy conditions" outcome.
We find ourselves in a multi cultural society and a single event could lead to several different expected outcomes of which all could be deemed to be fair. Furthermore, the claimant does state that he did not stop because he was afraid of being hi-jacked. His view could correct or wrong. He does not know for a fact.
Policy wordings normally do not dictate the police reporting period other than in a case of theft. If all legalities not written into the policy wording are considered prior to acceptance of liability, very few claims would be paid for instance if a collision occurred and the insured traveled at 70 kph in a 60 kph zone thereby transgressing the law, such a claim could be rejected.
The long and the short. What is a reasonable person given the cultures and other ever changing conditions in the country ? How was the insurer prejudiced ?
Report Abuse

Comment on this post

Email Address*
Security Check *
Quick Polls


How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?


Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now