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On a balance of probabilities

16 November 2022 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.

Damage caused by KZN floods

On 21 April 2022, the insured reported a claim to the insurer for water that had accumulated on the roof of his property, after the April floods in KZN.

A contractor appointed by the insurer inspected the insured’s property and reported, amongst other things, that the roof was a flat concrete roof and was poorly designed. The contractor was of the view that the damage to the insured’s property was old and had not occurred as a result of a single incident but had rather formed over a period of time.

The claim was rejected by the insurer on the basis that the policy does not cover damage resulting from gradual deterioration, wear and tear and a lack of maintenance.

The insured disagreed with the insurer’s decision. The insured submitted that approximately 300mm of rain fell over a 24-hour period. This was a natural disaster that could not have been predicted. The insured stated that the waterproofing was maintained, and that the interior was painted two years ago.

OSTI’s findings

OSTI found that the extent of the damage, including the extent of the discoloration of the ceilings and walls, the peeling paint, and the disintegrated waterproofing, visible on the photographs taken by the contractor, supported the findings made by the insurer. The internal damage was extensive and on a balance of probabilities occurred gradually over a period of time. It was unlikely that the extent of the internal damage occurred over a one-month period. OSTI upheld the insurer’s rejection of the claim.

Damage to retaining wall caused by KZN flood

In case study two, the insured’s wall collapsed as a result of the flood on 11 April 2022. The insured’s claim was rejected by the insurer on the ground that the policy does not cover loss caused by defective workmanship, materials, and design.

The insurer appointed a contractor who reported that the wall was a retaining wall. There were no weep holes in the wall which caused it to collapse. The contractor was of the view that the construction of the wall did not comply with South African National Building Standards (SANS) regulations, it was built incorrectly and was bound to fail.

The insured challenged the insurer’s rejection. The insured appointed her own contractor who reported that the wall collapsed due to the excessive rainfall that KZN had experienced. The contractor was of the opinion that the wall would have survived any normal rainfall, however, this storm was extraordinary.

The insured argued that, even though the wall was not built to engineer’s specifications, the torrential rains, exacerbated by mudslides and the sheer force of the water from the flood, caused the wall to collapse. The insured argued further that, even if the wall had been built according to an engineer’s specification, given the force of the floods, the wall may still have collapsed.

The insurer appointed an internal loss adjuster to assess the damage. The loss adjuster noted that the retaining wall was not designed by an engineer. The wall was under-designed and did not comply with the SANS regulations. Based on the loss adjuster’s report, the insurer stated that the wall failed because it was not built to an engineer’s specifications and did not comply with the building standards. The insurer maintained its rejection of the claim.

OSTI’s findings

OSTI provisionally upheld the insurer’s rejection of the claim and stated that it was common cause that the wall was not designed to engineering specifications which caused the loss.

The insured did not provide any evidence to dispute the finding that the wall did not comply with the SANS regulations. Notwithstanding, OSTI recognised that concurrent causes had operated to cause the loss, being the flood and the defective design of the retaining wall. In light of this, OSTI requested the insurer to consider settling 50% of the cost of repairing the wall. The insurer agreed to abide by OSTI’s decision and offered to settle 50% of the repair costs.

Unlawfully leaving the scene of an accident

In case study three, the insured collided with a stationary vehicle on the side of the road. After the accident, the insured was at the scene for 30 minutes and, while at the scene, he tried to approach the third-party to talk to him and to exchange numbers. However, the third-party and his friends behaved aggressively toward him. The insured then went to the petrol station across the road from the accident scene and called the insurer. The insured arranged for his vehicle to be towed and left the scene of the accident. When the insured went to the police station the next day to report the accident, he met the third-party and his brother at the police station. The third-party apologised for what had transpired after the accident.

The insurer’s assessor interviewed various witnesses, including the third-party and a police officer. The third-party stated that he did not have petrol in his vehicle. He parked his vehicle on the yellow line and intended to cross the road to buy petrol at the petrol station. Before he could cross the road, he heard a sound. He noticed that the insured had collided into the rear of his vehicle. The third-party said that the insured looked “super sober”. The third-party confirmed that the insured was not at the scene when the police arrived. He said that the insured might have left because “he felt intimidated, guilty, or attacked”. The third-party referred to a woman who arrived at the scene and said that it looked as though the woman, and the insured knew each other. He said it seemed that they were fighting and then they disappeared.

The police officer told the assessor that the insured was not at the scene of the accident. He stated that the insured was in another vehicle and when he chased after that vehicle, it disappeared. The police officer said that he contacted the insured telephonically and asked him why he was not at the scene. The insured replied that he had been threatened. The police officer said that the third-party was intoxicated and that there was a 99.9% chance that the insured was also intoxicated.

The insurer argued that merely reporting the accident within 24 hours was not sufficient to comply with section 61 of the National Road Traffic Act. The Act compels the driver to be present at the accident scene. According to the insurer, the insured’s failure to provide it with true and complete information pertaining to the circumstances surrounding the accident, and by leaving the accident scene unlawfully, prejudiced its validation of the claim. The insurer submitted that as a result of the insured’s failure to provide true and complete information, the insurer was unable to determine whether the claim fell within the ambit of the policy.

The insured denied that he was chased by the police. He also denied that he was called by a police officer asking him to return to the accident scene. The insured argued that he complied with Section 61 of the Act. He stopped his vehicle and ascertained that no one was injured. He also ascertained the nature and extent of the damage sustained to the vehicles. He reported the incident at the police station within 24 hours of the accident. He further submitted that he did not consume any alcohol. He argued he could not exchange the necessary details with the third-party due to the hostility of the third-party and his friends towards him.

OSTI’s findings

OSTI found that the threats of violence towards the insured instilled a fear of imminent harm, and he acted out of necessity by leaving the accident scene. OSTI found that the insured did not leave the accident scene unlawfully and, therefore, did not breach the policy. The insurer had not discharged its onus of proving its ground for rejection and it therefore had to settle the claim. The insurer agreed to abide by OSTI’s decision and settled the claim.

Read the case studies in full, plus another case study on the Prescription of a claim for a defective wall here

Writer’s Thoughts:
Again, these cases remind us of the importance of brokers in helping clients understand their policies… policy provisions, terms and definitions! Do you believe the rulings were fair in these cases? If you have any questions please comment below, interact with us on Twitter at @fanews_online or email me - myra@fanews.co.za

 

Comments

Added by Cynical Simon, 16 Nov 2022
It is clear that the OSTI can read and has read section 61 of the National Road Traffic Act.
It is a pity the name of the insurer isn't known for blaming and shaming such stupidity and also that intermediaries and potential clients may avoid this insurer.
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