Dear broker, I pranged my Ferrari

Nothing puts more fear into the heart of a short-term insurance broker than a late night or early morning call from his or her client to inform of a serious motor vehicle accident. After the precursory “are you and your passengers okay” the focus invariably turns to the extent of the damage, and the likely impact of the ensuing claim on the client’s and brokers’ loss ratio. You, see, dear reader, an accident claim has consequences that go beyond the inconvenience caused to the individual client as he or she waits to be indemnified for the loss, to issues such as underwriting margins and the profitability of a book of business.

Supercar meets lamppost, write-off

Imagine, therefore, how queasy you might feel when one of your clients calls and says, “Dave, I’ve just pranged my Ferrari, and it’s a write-off”. Although our introduction is fictional, it is quite common for insured sportscars to be severely damaged or written off following accidents; and as luck would have it, we recently received a High Court judgement that had its beginnings in just such an incident. On the evening of 22 February 2019, Mr Sashin Govender (the plaintiff) and his mother were involved in an accident on William Nicol Road in Fourways, Johannesburg. According to the court papers, the plaintiff lost control of the vehicle before colliding with a lamppost on the centre island. The car, a red Ferrari California, “was catastrophically damaged beyond repair”. 

The car was insured with Guardrisk Insurance Limited, the defendant in this matter. “It was common cause that the insurance policy was effective on the date of the collision,” noted the judgement, adding that the defendant had chosen to repudiate liability under the policy. Why? According to the court papers, the single issue upon which the repudiation was based was that the plaintiff had failed to “…take all reasonable precautions to prevent loss, damage, accidents” as required by clause 3 of the general terms and conditions of the policy of insurance. You can take it from me, dear reader, that brokers and clients hate the ‘recklessness’ repudiation, because it opens up acres of space for subjective interpretations about the cause of the loss and / or events that precede it. 

The fact that your client has written off a high value vehicle will immediately sound the alarm bells at the insurer on risk. And the fact that the vehicle involved in this claim was a Ferrari would immediately have ‘triggered’ certain biases from all parties. After conducting an interview with the plaintiff and appointing an external investigator, the assessor assigned by Guardrisk determined that the plaintiff “had been travelling at an excessive speed having regard to the inclement weather and that this speed had been so excessive that the plaintiff was regarded as having been reckless, breaching clause 3 and thus not entitled to indemnification in the policy”. 

The dreaded ‘clause 3’ contravention

Does a repudiation on grounds of contravention of clause 3 sound familiar? FAnews is certain that many non-life brokers have had to fight a clause 3 battle on behalf of their clients but is also fairly confident that many such interventions are resolved for the client without legal escalation. Insurance assessors are employed by insurers as a form of risk mitigation and given the job to flag and further investigate claims where a loss event potentially contravenes the insurance policy’s terms and conditions. In their world the word ‘Ferrari’ combined with phrases like ‘work function’ and ‘inclement weather’ and the time of the incident, being 9:30PM, would have screamed “repudiate!” Apologies, this writer accepts that this sweeping anti-assessor comment is unfair. 

In this matter, the assessor interviewed the plaintiff around two weeks after the accident and was broadly in agreement with the plaintiff’s version of events. The only question remained around the speed the vehicle was travelling at the moment of the accident. It is worth noting that during the assessor’s interview, the plaintiff estimated his speed at 100kmph, so we now have 80 and 100 to consider, with another number lurking in the wings. The assessor felt that the damage to the vehicle did not correlate with the claimed speed, and appointed an investigator to complete further assessments, including analysing the vehicles ‘black boxes’ which record real-time data relating to the performance of the vehicle. 

Unfortunately, Ferrari was not prepared to assist the investigator with retrieving this data, with the result the investigator came up with his own calculation of the pre-accident speed, being around 135kmph. PS, the investigator’s speed estimate is well over the speed limit on that section of road, but well short of the vehicle’s capabilities. This anyway turned out to be a moot point because the plaintiff’s attorney poked all manner of holes through the methodology used to calculate the speed. You can read the judgement for more on how the investigators efforts affected the outcome in this matter. 

Choosing between 80, 100 or 135

The writer assumes this 135kmph would have been the vehicle’s speed at the moment of impact with the lamp post because vehicles aquaplaning or spinning over wet surfaces do not decelerate much. How does the Judge choose between 80, 100 or 135kmph? And more importantly, does the speed even matter in this case? “The crisp issue for determination was whether, having regard to the prevailing weather conditions, the plaintiff had been travelling at a speed which was so excessive that it amounted to recklessness,” the judgment notes, “since both parties agreed that it was only a finding of recklessness that would absolve the defendant from liability under the policy”. This is a crucial point: excessive speed on its own does not imply recklessness. 

Those among you who are fans of accident reconstruction, engineering and phrases like ‘tensile strength’ will likely enjoy reading the judgement; but for our purposes the ruling is what matters. As it turns out, the back and forth between attorneys for the plaintiff and the defendant resulted in the defendant electing not to call its expert investigator. And, after a time, all present accepted 100kmph as “the probable speed that the plaintiff was travelling at immediately prior to the collision” … until clause 30 of the ruling, which threw the curveball that “the evidence by the plaintiff that he was travelling at 80 km per hour could not be excluded”. The judgement then restated that it was up to the defendant to establish the recklessness on which it relied to repudiate the claim. 

On this point, the judge cited Santam Ltd v CC Designing CC2, which in turn quoted with approval the English case of Fraser v BN Furman (Productions) Ltd. “What in my judgment is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger, should not deliberately court it by taking measures which he himself knows are inadequate to avert it. In other words, it is not enough that the employer's omission to take any particular precaution to avoid accidents should be negligent, it must be at least reckless [in other words] made with actual recognition by the insured himself that a danger exists, not caring whether or not it is averted”. That becomes the test in this case. 

The plaintiff did not act recklessly

Based on the test case, the Judge had no hesitation in resolving this matter. “Having regard to the particular facts in this case, there is to my mind no question that the plaintiff did not act recklessly; the defendant failed to discharge the onus upon it and the plaintiff is entitled to judgment”. Guardrisk was ordered to pay the plaintiff the sum of ZARR1.827 million plus interest from 30 August 2019. It was also instructed “to pay the plaintiff’s taxed or agreed costs of the action to date”. The writer’s final comment; avoid court if you can; this matter took from August 2019 until 2 March 2023 to resolve. 

Writer’s thoughts:

A couple of blocks from my house there is a double-lane road where vehicles usually travel at 100-120kmph despite the 60kmph speed limit. Not one of these drivers is reckless, in my subjective view, though I am frequently annoyed by their flagrant disregard for the law as they pass the 80kmph me. Do you think the recklessness repudiation was abused in the Govender vs Guardrisk matter? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za.

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