Policy amendment and events

Raynold Tlhavani

The March 2016 ruling of the ombud for financial services providers in Khoza v Bensure Management Services is worth reading because it reminds us of an FSP’s obligations regarding an amendment to a policy and the meaning of the word “event”.

The complainant took out a Journey policy through the FSP which entitled her to cover of R30 000 for an “insured event which is an unexpected illness, disease or accident suffered by the insured which results in the insured being admitted to a hospital via an emergency unit and having to spend a minimum of 24 consecutive hours in hospital as a result of that emergency event”. The FSP alleged that the policy had subsequently been amended to require “an unexpected acute life-threatening event”. They alleged the complainant had not suffered such an event because her life was not threatened by the soft tissue injuries she sustained in the accident. It was a violent accident in which two people died and the complainant herself was trapped in the wreckage for two hours.

The policy required four months’ notice of any material amendment. When challenged about the amendment, the FSP could not produce any evidence how the amendment was conveyed to the complainant.

The ombud reminded us that in order to effect an amendment the policy conditions must be met (four months’ notice); the record must be kept to the manner in which the amendment is conveyed to the insured; material correspondence must be kept; proof of postage by registered post would be expected in these circumstances; details of the address to which the notice was posted is required; copy of the notice to amend should be submitted; and there must be proof that at least four months’ notice of the amendment was given prior to the event. The FSP could produce none of these.

In addition, even if the policy had been amended the plaintiff had been in a “life-threatening event” followed by four days hospitalisation. Noting that the policy did not refer to a “life-threatening injury, illness or disease” the event or the accident had to be life-threatening.  Seeing two other people died in the accident this was clearly a life-threatening “event”.

Besides having to pay R30 000 the respondent was ordered to pay interest at 10.25% a year from 9 February 2010 to date of payment over six years later.

First published by : Financial Institutions Legal Snapshot