Policyholder aggrieved with outcome

Myra Knoesen

In a recent determination by the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud), the complainant, Mr. Jacobus Frederik Roux, lodged a complaint against the respondent, arising from a loss incurred.

The first respondent is Top Life Financial Services. The second respondent is Morgan Roodt, a representative of the first respondent. Reference in this determination to ‘respondent’ or ‘respondents’ should be read to be a reference to both respondents.

It should be noted that at the time Roodt rendered the advice to Roux, he was a representative of Old Mutual Life Assurance Company who was duly noted as the intermediary on the Santam policy wording. However, Roodt remained the representative of Roux throughout the period of insurance. Santam confirmed that the FSP for the said policy changed to Roodt on 1 September 2017.

Within the ambit of the policy

Roux is self-employed and operates a stud farm where his core business is the breeding of horses and the supply of grass feeds. According to Roux, he met with Roodt in April 2016 to review his insurance portfolio.

He held an agriculture policy with Santam at the time. Roodt suggested that he adds insurance on the life of his ten horses. Roux alleges that he specifically indicated that the horses should be covered for breeding purposes.

Subsequent to the meeting, Roux was provided with a quotation via e-mail by Roodt, which, amongst others, confirmed that each horse would be covered for R200 000. Roux duly accepted the cover.

On 8 September 2017, one of the pregnant mares suffered a uterine torsion complicated by uterine artery rupture, and euthanasia was performed on humane grounds. Roux submitted a claim to the respondent for the death of the mare.

Following submission of the necessary veterinary reports, Santam rejected the claim on the basis that the loss does not fall within the ambit of the policy. Santam advised that Roux held a farming policy in terms of which cover is only provided for the death of an insured animal caused by fire, lightning or explosion. The policy held by Roux did not provide life insurance on his horses. The policy was a short term insurance policy and was based on pre-determined perils.

Roux was aggrieved with the outcome, as he claims to have specifically instructed Roodt to provide life cover for the horses. He had been under the impression that Roodt had adequately provided for this cover after having insured the horses for business use. Roux claims to have never been informed that the insurer does not provide cover on the life of the animals and that it only provided short term insurance cover.

He is holding Roodt, who had knowledge of the nature of his business, liable for the loss that he suffered.

Relying on exclusions

The respondents’ response to the allegations raised by Roux was received during September 2018.

Roodt argued that when he met with Roux in April 2016, he wanted to cover additional items on his farm on an existing policy. Roux was concerned about farm fires, and wanted cover for the hay bales, buildings and horses. He also informed Roodt that he trains, feeds and sells off the horses.

Roodt stated that he completed a proposal form with Roux and provided a quote via e-mail. The Ombud notes that this quotation was not a formal response from the insurer concerned, but merely a typed note on e-mail providing amounts and items that will be insured with the respective premiums.

Roodt further stated that Roux phoned his office on 8 September 2017 to submit a claim for a foal that was still born, however this was clearly stated in the policy document as an exclusion.

Having considered the policy schedule provided as annexure B in Roodt’s reply, the Ombud says he could not find such an exclusion.

Roodt also relied on the fact that Roux was provided with a policy schedule on several occasions and was therefore fully aware of the cover he had. He further claimed that the said cover was discussed with Roux and was in line with his needs. Roodt concluded that the complaint has no reasonable prospects of success and should therefore be dismissed.

Limitation of cover

According to the Ombud, Roodt provided limited documentation to the office. Most importantly, no record of advice was provided. The Ombud further states that in the e-mail containing the quotation for the various items Roux requested, there was no reference to the limitation of cover; specifically that the horses will only be covered for fire, lightning and explosions. What was stated, is the following: “Lewende Hawe 10 Perde waarde R200 000 elk”. Translated to “Livestock 10 Horses R200 000 each”.

The schedule itself makes reference to a policy wording, however, the wording was not included with the response, nor is there any indication that Roux was provided with a policy wording that could have explained the limitation or extent of the cover provided.

In the determination, the Ombud highlighted the role of the adviser in this instance being an agent of Roux, a relationship governed by the law of agency. The determination highlights applicable case law which details the obligations and duties of an adviser to exercise reasonable care to ensure that an insured is appropriately covered; obligations and duties which are encapsulated in the Code of Conduct.

Law of agency

The fact that Roux is a self-employed horse breeder was not only information that was readily available, but relevant and material in determining the appropriate cover. The Ombud further stated that had Roodt properly considered this information, he would have realized that what was suitable for Roux’s needs was a mortality policy, as opposed to a normal short term insurance policy covering only insured perils like fire.

Roux, the Ombud stated, was none the wiser as to the implications of this failure on the part of the respondent. More importantly, if Roodt was unable to recommend a suitable product, he should have informed Roux accordingly and pointed him in the direction of a broker or insurer that could assist. Roodt, the Ombud said, was out of his depth and as a result failed to conduct the financial service in accordance with the required due skill care and diligence as provided for in the Code.

According to the Ombud, there is no question that a contractual relationship to render financial advice existed between Roux and Roodt. In discharging these obligations towards Roux, Roodt was duty bound to observe the FAIS Act and the Code and align the standard of such service to the Code.

The Ombud is satisfied that the respondent legally caused the loss suffered by Roux and that the respondent be held liable to compensate the complainant for such loss. The insurer, Santam, confirmed that in the event that there was a policy that would have indemnified the complainant, an amount of R200 000 would have been payable subject to a 10% excess. As a result, the amount in consideration is R180 000. The respondent is ordered to pay Roux the amount of R180 000.

Editor’s Thoughts:
By proceeding with the normal short term cover quotation, Roodt failed to understand Roux’s core business and needs. Do you believe the damage suffered by Roux was not only foreseeable, but inevitable? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za