The blind leading the blind

We recently came across a determination which we thought would be an interesting read amongst our readers.

The complainant, Michelle Collard sought the assistance of the Short Term Insurance Ombud (OSTI) after her insurer, Santam, repudiated a claim in respect of her motor vehicle which had been stolen.

The matter was then outside OSTI’s jurisdiction and they referred the complaint to the Financial Advisory and Intermediary Services (FAIS) Ombud.

Too little, too late

In December 2008, Collard purchased a new car – an Opel and contacted her broker, the respondents – Henry Grundling Makelaars (the first respondent) and Henry Grundling (the second respondent) to add the new vehicle to her Santam policy. She also informed them not remove her “old” vehicle a VW Citi Golf as she was selling the VW but will keep the vehicle registered in her name till the vehicle was paid off
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The second respondent informed Collard that the policy will be updated to include the new information and that she should continue to pay the premiums.

During September 2009, the VW was stolen whilst in the possession of the purchaser. The theft was reported to the police but the vehicle was never recovered. Collard, through the first respondent, filed a claim against the policy for compensation for her lost vehicle.

A shocking revelation

After the claim was made, the insurer appointed an assessor who found that the vehicle was stolen from the possession of the purchaser and not from Collard who, according to the insurer’s records, was in possession of the vehicle. The assessor raised the question of insurable interest and change in risk.

The policy contained an exclusionary clause that if the vehicle was sold or hired out for money, there will be no cover provided.

On 26 November 2009, Collard was informed by the insurer that her claim had been rejected. The insurer relied on the terms and conditions of the policy which provided that in the event of a sale of the vehicle, cover will cease. It further transpired that the insurer was not aware that the vehicle had been sold by the respondents.

It takes one small thing

Collard claims Santam accepted the policy changes and the premiums she was paying but at no time was she informed that her vehicle was not properly covered and that she was an “outstanding” member of Santam for many years with only one claim.

She argues that Santam should have contacted her. She was not aware of the fact that her broker did not inform Santam of the changed circumstances around the sale of the vehicle. It was the OSTI who informed Collard that the cause of the problem was the actions or lack thereof by her brokers.

Two side to the story

The Office sent an email to the respondents pointing out that Collard had made a full disclosure of all the circumstances regarding the vehicle to her broker.

On the same day, there was a response from Liana Grundling who, in an email, stated the following: “Unfortunately I would not be able to assist in resolving this matter and the business that was dealing with this client, Henry Grundling Brokers, is no longer in operation.”

Collard informed the Office that in fact the business is in operation and the son of the second respondent is in charge of the business.

Collard lost her vehicle and was unable to make a successful claim against her insurance policy. This, according to the Office, was all as a result of the respondents’ conduct who, according to the Office, were unprofessional and negligent in providing financial services to the complainant.

The retail value of the vehicle was R14 200 which was subject to an excess of R3 000. The insurer would have paid an amount of R11 200. For reasons set out above the respondents were ordered to pay Collard the amount of R11 200.