Not justified in declining liability

We summed up some case studies from the Ombudsman for Short Term Insurance’s (OSTI) briefcase, which we thought would be interesting for our readers. In one of the cases it is clear that non-disclosure is still a very serious thing.

Under the influence of alcohol

Mr M was involved in a motor vehicle accident around on 8 August 2018. He reported that a friend, Ms S, was the incident driver.

The interview

The insurer appointed an assessor to validate the claim. Mr M stated that he was at work from 07h30 to 14h30. Thereafter, he went to assist a student with schoolwork. Mr M stated that he left the student’s place around 18h00 and visited a friend, Mr P. They later drove to a Chesa Nyama. Mr M advised the assessor that they had left the Chesa Nyama around 19h00 with several passengers inside his vehicle. He stated that they drove to Ms S’s home and spent some time there.

Mr M informed the assessor that the accident occurred on the way to drop off another friend named Mr O. He stated that he had asked Ms S to drive the vehicle because she knew how to get from her place to Mr O’s home. Mr M submitted that he did not consume any alcohol the entire day.

Ms S confirmed that she was the incident driver. She also corroborated Mr M’s version regarding the circumstances of the loss. Ms S was asked whether she had anything to drink before the incident. She submitted that she had consumed two Millers earlier that day, before 17h00. The assessor found a receipt for a bottle of Russian Bear vodka inside the vehicle during his inspection. According to the receipt, the alcohol was purchased at Tops Liquor. The assessor confirmed from Mr M’s bank records that he had made this purchase.

Contradicting the truth

The assessor interviewed two witnesses and they identified Mr M as having been the incident driver and stated that he was injured by an airbag in the accident. The witnesses also informed the assessor that a woman submitted that she was the incident driver.

The assessor interviewed another witness who believed that the incident driver was an injured male who was lying outside the vehicle. He also stated that the vehicle occupants were all drunk. The assessor also interviewed the towing operator. He stated that the vehicle smelled of alcohol and found alcohol bottles in the boot. In his view, all of the vehicle occupants were under the influence of alcohol because they smelled of alcohol.

According to Mr M, Mr O was the person lying down at the accident scene. He stated that Mr O was seated on the back seat without a seatbelt. The impact of the accident lunged him into the windscreen. Mr M also denied that all of the passengers inside the vehicle were drunk as two of his friends inside the vehicle did not drink alcohol at all. 

The insurer argued that the assessment findings indicated that Mr M gave false and misleading information with regards to his whereabouts before the accident, the identity of the incident driver and the consumption of alcohol.

A balance of probabilities

The receipt from Tops Liquor was the only evidence the insurer relied on to challenge Mr M’s submissions with regard to his whereabouts before the accident. This evidence, however, could not be considered in isolation.

When OSTI listened to the recorded assessment interview provided by the insurer, OSTI noted that Mr M was asked if he had purchased any alcohol on the day of the accident. He disclosed having purchased the bottle of vodka. OSTI also listened to the assessment recordings with the witnesses at the accident scene. In OSTI’s view, their submissions were merely speculative and could not be relied upon without proven objective facts; they concluded that Mr M was the incident driver without having witnessed the accident take place. The statement of the towing operator regarding the presence or use of alcohol was too general.

The insurer failed to prove that Mr M had submitted false information regarding his whereabouts before the accident, the identity of the incident driver and the consumption of alcohol. Ms S’s blood-alcohol levels were never tested. The issue was whether Ms S was, on a balance of probabilities, under the influence of alcohol at the time of the accident. The insurer had not demonstrated sufficient evidence to prove that Ms S was influenced by alcohol or that it had contributed to the accident.

In light of this, the insurer was not justified in its decision to decline liability on the basis that the incident driver was under the influence of alcohol. Accordingly, OSTI recommended that the insurer settle the claim. The insurer agreed to settle the claim.

Material misrepresentation and dishonesty

Mrs V enjoyed All Risks cover for portable possessions. Mrs V submitted a claim to her insurer in respect of the theft of her laptop and camera out of the boot of her motor vehicle, which occurred on 2 April 2019.

Validation of the claim

During the underwriting of the policy, Mrs V was asked to disclose any losses she had suffered in the preceding three years. According to a copy of the recorded underwriting conversation provided by the insurer, Mrs V disclosed a burglary which occurred in November/December 2017 to the value of approximately R20 000.

Following Mrs V’s alleged loss, an assessor was appointed to validate the claim. The insurer advised that the underwriting information provided by Mrs V was incorrect. The insurer stated that Mrs V failed to disclose additional claims submitted to her previous insurer during the relevant three-year period. The insurer submitted a TransUnion Claims Enabler Report and a copy of a recorded telephone conversation held with the previous insurer to substantiate these claims. The TransUnion Claims Enabler Report recorded 12 claims. The total value of the claims was approximately R291 499.

During the telephone conversation with the previous insurer, the assessor was informed that Mrs V had three separate policies under the financial services group. She submitted a total of seven claims relating to household contents and portable possessions between 18 February 2017 and 15 November 2018. The previous insurer also advised that the policy was cancelled in November 2018 based on an ‘unfavorable claims history’.

Intentionally provided misleading information

In light of the assessment findings, the insurer rejected the claim and voided the risk based on material misrepresentation and dishonesty. The rejection letter further stated that Mrs V informed the assessor that her laptop and camera were previously stolen in 2013. She stated that they were both subsequently replaced and never stolen again until the reported incident.

According to the rejection letter, the assessor discovered that Mrs V claimed for the same/similar items with her previous insurers after 2013 and was compensated for that loss. The insurer argued that Mrs V intentionally provided misleading information relating to the claimed items.

The insurer argued that Mrs V had a duty in terms of the policy to disclose all material facts truthfully, so that it could properly assess the risk.

The Ombudsman’s findings

In OSTI’s’ view a ‘reasonable person’ in the position of Mrs V would consider that the additional losses and claims may influence the insurer’s assessment of the risk and should, therefore, be disclosed.

OSTI was satisfied that the underwriting questions relating to Mrs V’s loss history were clear. OSTI also confirmed that Mrs V was advised at the commencement of the underwriting conversation that the information she provided must be true and complete. She was also informed that incorrect information may affect the outcome of her claims.

Having regard to the facts in the matter and the ordinary application of the law on the relevant issue, OSTI found that Mrs V misrepresented material facts relating to her risk profile. This misrepresentation materially affected the insurer’s assessment of the risk. OSTI therefore found that the insurer was within its right to void the cover and reject the claim.

Writer’s thoughts:
Regarding the first case it is evident that information provided must be based on objective facts, not conjecture and speculation. The second case shows us that non-disclosure is still a very serious thing… policyholders still fail to understand the consequences of their actions, even though the obligation is clear cut in the text of the policy or proposal form. Do you agree? If you have any questions please comment below, interact with us on Twitter at @fanews_online or email me - [email protected]