When in doubt let the Ombudsman decide
What should you do if you feel your insurer has unfairly refused your short-term insurance claim? We suggest you lay a complaint with the Ombudsman for Short-term Insurance – even if there’s the slightest doubt about the fairness of the insurer’s decision. In The Ombudsman’s Briefcase (Issue 1, 2009) – the official newsletter of the Ombudsman for Short-term Insurance – we find some useful case studies that illustrate how the short-term complaints resolution process works. These cases studies provide valuable information for all stakeholders in the short-term industry and demonstrate that even so-called ‘hopeless’ cases can be decided partially in the insured’s favour. FAnews Online takes a look at two recent complaints...
International drivers license no ground for rejection
The first case involves a transport business (the insured) that lodged a claim for damages after a driver in its employ crashed a mechanical horse and trailer combination. The driver had lost control of the vehicle on a hill descent. Unfortunately the insurer rejected liability on the grounds the driver, a Zimbabwean national with an international driver’s licence, “was not in possession of a valid PDP at the time of loss.” The insured turned to the Ombudsman for Short-term Insurance for assistance.
When questioned about their decision to reject the claim, the insurer argued that a Zimbabwean national “with a foreign license can only drive on the authority of that license providing he is driving a vehicle registered in the foreign country from which the license was issued.” In other words the driver “cannot drive a South African registered and licensed vehicle on his Zimbabwean license.” But they took matters a step further. In addition to the rather dubious contention already made, they suggested that an international driving permit was “not a license and this is not an authority to drive a vehicle.” These arguments were quickly kicked into touch.
The insurer was unable to “produce authority” for its suggestion that an international driver’s permit was ‘invalid’ in South Africa. The Ombudsman also “drew the attention of the insurer to the provisions of the protocol on transport concluded between member states of the Southern African Development Community in terms of Articles 22 and 23 of the SADC Treaty.” This treaty requires each member state to recognise driver’s licences and international driving permits as equal to its own documents. “Mutual recognition of licenses and permits also extended to Professional Driving Permits or other documentation issued for the same purpose,” said the Ombudsman. The insurer subsequently “gave instructions for the claim to be settled” and the matter was resolved.
Non disclosure remains a problem
Our second case demonstrates the importance of full disclosure at the inception of an insurance policy. In October 2005 the insured added a new truck to his commercial policy. Upon requesting his broker to obtain a quotation for goods-in-transit cover on the same policy the insured was informed that such cover was declined “on the grounds that the nature of the goods in transit was classified as an undesirable risk in terms of the insurer’s underwriting standards.” This vehicle was subsequently moved to a new policy with the same insurer. In April 2007 the vehicle in question was involved in a collision whilst conveying goods from Cape Town to Johannesburg. The subsequent claim was rejected out of hand by the insurer on the grounds of misrepresentation or non-disclosure. “The insurer maintained that the insured did not disclose to it, at the time of adding the vehicle to the policy, the fact that the vehicle was to be used for purposes that did not relate to the insured’s business which was earth moving,” said the Ombudsman. The insured was not operating an earth moving operation, but rather a long-distance haulage business.
“After reviewing all the facts,” the Ombudsman “upheld the insurer’s decision to cancel the policy ab initio and pointed out to the insured that the duty of disclosure arose at the inception of a policy and that the insurer was entitled to a disclosure of all information material to its assessment of the risk proposed and the premium to be charged.” In motivating the ab initio cancellation the insurers said “the nature of transport contracting demands long distance driving on a frequent basis, often at night. The goods conveyed are often targeted for theft or hi-jacking and the fact that goods belonging to third parties are being carried for reward creates a high demand to meet tight deadlines to specified destinations.” An amount of R76 517 (premium paid) was refunded and a complaint against the broker forwarded to the FAIS Ombudsman for further investigation.
Brokers beware
Upon closer examination of the case studies published by the Ombudsman for Short-term Insurance, we notice an increase in the number of complaints being referred to the FAIS Ombudsman. This once again highlights the importance of ‘fit and proper’ advice at policy inception. The insured is going to want compensation. And if he fails to win this from the insurer the broker is the next logical point of call!
Editor’s thoughts:
The various case studies published in the Ombudsman for Short-term Insurance’s Annual Report (and other communications) suggests the insured can receive some financial compensation even in the most hopeless of circumstances. Would you advocate taking so-called borderline cases to the Short-term Ombudsman as a rule, or are you worried the complaint ends up at the FAIS Ombudsman? Add your comment below, or send to [email protected]
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