Ombudsman's Advice

09 January 2006 Paul van Onselen

Here is a few case studies received from the Short-term Ombud's office. The importance of the correct advice and follow-up on any action taken comes to mind when reading these case studies.

1.Theft by deception/insurer liable

The Insured was anxious to sell his Nissan Hard Body and advertised the vehicle in both Junk Mail and Auto Trader. In addition, he parked the vehicle in front of his business with a for sale sign on it. The vehicle was guarded by a 24-hour guard. A potential purchaser contacted the Insured and the following day the Insured telefaxed details of the vehicle to enable the purchaser to obtain a bank guaranteed cheque. That same day, the purchaser arrived at the Insureds office after 16:00 and wished to test-drive the vehicle. The purchaser went for the test drive with the Insured, together with one of his employees. After the test drive the purchaser stated that he wished to buy the vehicle. The purchaser had allegedly forgotten to bring the bank guaranteed cheque, but around 18:00 that same evening, the purchaser presented an envelope to the Insured. He opened it and half pulled out the cheque inside and then handed the purchaser the keys to the vehicle as well as the original documentation. About an hour later, the Insured examined the cheque more closely and, to his horror realised it was a possible fraudulent cheque because it appeared to be a photostat. The next day, the bank confirmed that the document was indeed a fraudulent cheque. The Insurer rejected the Insureds claim on the ground that the Insured did not take reasonable precautions to prevent the loss. The Insured had failed to obtain an identity document, address or reference of the purchaser.

The onerous obligation on an Insurer to demonstrate that the Insured did not exercise reasonable care or precautions to prevent a loss is common knowledge. The motor policy cover is virtually on an All Risk basis insuring loss of or damage to the Insured property, even if this may have been caused by the Insureds negligence. The Insurer agreed to settle the claim.

2. Insufficient evidence to uphold declinature of a claimvehicle allegedly being driven by person under the influence of alcohol

The Insured was on her way home after having been out for dinner, when she lost control of her vehicle and drove into a wall. The owners of the wall reported to the Insurer that the Insured could not stand on her feet and fell three times. She had to lean against her vehicle to keep her balance. Her speech was terrible, could hardly hear what she was saying, and she smelled of alcohol. They asked the police not to arrest the lady because, according to them, she was not young anymore and had undertaken to pay for the damages to the wall. The S A Police also reported that the Insured was under the influence of alcohol. Her speech was slurred and she had to lean against her vehicle, and would allegedly not have passed a blood alcohol test.

The Ombudsman pointed out to the Insurer that the Insured had reported that she had hit her head in the collision and was in total shock. The Ombudsman submitted that if the lady was concussed, then it was not surprising that she could not stand on her feet and would fall over. This could also explain her speech. The smell of alcohol on the ladys breath would not be sufficient to establish on a balance of probabilities that the Insured drove the vehicle while under the influence of alcohol. The Ombudsman requested the Insurer to indicate whether it had any further objective evidence to establish that the Insured drove the vehicle while under the influence of intoxicating liquor. The Insurer conceded that it was not in possession of any further objective evidence to indicate that the Insured was under the influence of alcohol at the time of the incident. It accordingly admitted the claim in full.

3.Loss of water from burst pipe not covered

The Insureds policy incepted on 22 March 2005, and exactly three months later he reported a loss to the Insurer advising that a pipe had burst and as a result thereof, vast volumes of water were lost. He claimed for reimbursement for the costs thereof. The Insured was advised that a burst pipe is a peril that is covered in terms of the policy and that the cost of repairing the pipe would be covered. The Insurer furthermore stated that in terms of the policy, the claim for loss of water was not covered. The Insured referred to policies of two other Insurers, which did give cover for costs of water lost through leakage.

The Ombudsman agreed with the Insurer that in terms of its policy, the Insureds claim was not covered.

4.Late notification (by four years) over-looked

The deceaseds 39-year-old husband and shift boss at a gold mine, spent Sunday night, 16 April 2001, away from home. When he returned home on Monday morning, 17 April, his 26 year-old wife was understandably upset and a full-scale argument developed between the married couple. The argument became violent and, in desperation, the wife, at 7:30, requested the presence of the police, who arrived promptly. She did not wish to accompany the police, but requested them to make regular checks on the house. Shortly after the police left, the Insureds husband produced a firearm and she ran to the neighbours house for safety. She was pursued by her husband, who shot and killed her. The police were called, but the husband committed suicide as the police were approaching the house. Four years later, the Executor in the Estate of the deceased (the wife) lodged a claim with the Insurer, which rejected the claim on the grounds of late notification. The policy provided for a claim to be lodged within 180 days of bodily injury.

The Ombudsman pointed out to the Insurer that the Executor in the Estate of the Insured had considerable difficulty in obtaining documentation, because of the enmity which existed between the two sets of parents of the deceased, e.g. the two deceased were buried on separate days in separate graves. The family of the husband had removed all papers and documentation and did not grant the Executor access to such documentation. The Insurer was then persuaded to meet the claim and paid R50 000 to the Executor.

5. Materiality of learners license

The Insureds daughter, who had a learners licence and was unaccompanied, came to a halt behind a vehicle that indicated that it intended to execute a right-hand turn. Whilst stationary, the Insureds vehicle was hit from behind by the third party vehicle. The Insurer rejected the claim on the ground that the driver of the Insureds vehicle had a learners licence and was not accompanied by a passenger with a drivers licence.

The Ombudsman pointed out to the Insurer that although the driver did have a learners licence, the fact that she was not accompanied by a passenger with a drivers licence was not material to the loss and the Insurer then admitted the claim.

6.Trying to score a profit results in a loss

The Insured decided to sell her Mercedes C180 Kompressor 2003. She thought she could do better than the trade-in offer she received from a second-hand dealer and advertised the vehicle in the Junk Mail. In terms of the insurance policy, she was required to have a tracking device fitted to the vehicle. She transferred the device from the vehicle to a new vehicle she had bought. She was contacted by a prospective purchaser of the old vehicle, and then arranged for one of her male friends to take the vehicle to a shopping centre. As so often happens in cases of this nature, the buyer asked to test-drive the vehicle. The prospective buyer was accompanied by one male partner, who got in the back seat and the Insureds male friend got into the left front seat next to the driver. When they reached the Old Johannesburg road, the Insureds male friend was threatened with a pistol and he was then dropped in a desolate area and his cellphone and wallet were taken from him. Needless to say, the Insured never saw her vehicle again. The Insurer rejected the claim on the ground that the Insured had breached the condition that the vehicle, in order to obtain theft cover, should be fitted with a tracking device.

The Ombudsman was satisfied that for theft cover to operate, it was necessary that the Mercedes Benz be fitted with a tracking device and the Insurer was accordingly entitled to maintain its rejection of the claim.

7.Failure to produce supporting documentation

On 11 June 2005, the Insureds property was burgled and a number of items stolen. The Insurer rejected the claim because the Insured had failed to prove ownership and value of the items claimed for. The entire claim was then rejected.

The Ombudsman pointed out to the Insurer that the Insured was recently divorced and it was accordingly little wonder that she would not have documentary proof of items stolen, because the documents might be in the possession of her ex-husband. The Ombudsman further pointed out that it was clear that the theft was genuine, and that provided the claimed items were in keeping with the life-style of the Insured and compared to the remaining property was not out of line. The Insurer made an offer of settlement which was accepted by the Insured.

8.Insurer bound by the actions and errors of its underwriting manager

The Insureds vehicle, while driven by his son, was damaged in a collision. The underwriting manager appointed an assessor and authorised the repairs. After the vehicle was repaired, the Insured rejected the claim on the grounds that it had not received the correct premium. It stated that although the underwriting manager had been informed that the Insureds son was the regular driver of the vehicle, the policy was incorrectly loaded.

The Ombudsman ascertained that a block of business had been transferred to the current Insurer by utilising the information set out on the previous Insurers schedule without carrying out any further enquiry on the full extent of the current risk. The underwriting manager was notified of a claim, and as the Insurers agent, appointed an assessor who duly agreed to the cost of repairs and authorised the repairer to carry out the work. The risk has been incorrectly rated by the underwriting manager and a dispute arose between the Insurer and its agent. The Ombudsman concluded that any differences did not in any way affect the Insureds claim as he was in possession of a policy and cover was in place, and directed the Insurer to settle the repairers account.

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