There are two sides to every story, and in disputes between consumers and their insurers when insurance claims are rejected, the Ombudsman for Short-term Insurance, Deanne Wood, must carefully weigh the merits of each party’s argument before making a ruling. Sometimes the ombudsman looks beyond the strict legal definitions and conditions of a contract and makes a decision based on equity and fairness.
Below are three case studies from the ombudsman’s most recent quarterly newsletter, The Ombudsman’s Briefcase. Two decisions went the way of the policyholder, and one the way of the insurance company.
NAMED MOTORCYCLE RIDER
Before you take out a policy, your insurer must make sure that all conditions that may adversely affect you are made clear to you and that you understand their implications. This is a requirement of the Policyholder Protection Rules, by which all insurers must abide.
In the case of Mr H, insurance company Centriq rejected his claim for damage to a motorcycle, because the person riding it – Mr H’s son – was not a named rider on the policy.
In his complaint to the ombudsman, Mr H said he had clearly told his (independent) broker that he had bought the bike for his son to use to travel to school. He also pointed out that the policy schedule contained additional excesses that were applicable to riders under the age of 25, and these should not have been included on the schedule if the insurer did not intend to cover people other than the named rider.
Mr H said he was prepared to pay the additional excess for his son, who was under the age of 25.
In its response to the complaint, Centriq said it had not received any communication from the broker stating that it was Mr H’s son who would be riding the motorcycle, and persisted in rejecting the claim. The insurer suggested that the complaint be directed to the financial advice ombud for investigation into the conduct of the broker.
The ombudsman asked Centriq to provide a copy of the proposal form or a recording of the underwriting conversation as proof that it had required Mr H to disclose the details of the named riders. The insurer also had to show that Mr H had been informed that there would be no cover for riders not named on the policy.
The ombudsman found that the proposal form did not create an obligation on Mr H to disclose the details of the named riders on the policy. Furthermore, there was no recording of an underwriting conversation, because the risk was accepted on the basis of the information on the proposal form alone.
The ombudsman recommended that the claim be paid, because Centriq had failed to comply with the Policyholder Protection Rules, in particular the rule that requires an insurer to provide you, before entering into a contract, with the “concise details of any special terms and conditions, exclusions, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided”.
Centriq agreed to settle the claim with a deduction of the additional excess for the rider being under the age of 25. Mr H accepted the settlement.
You can’t claim for things that are not covered in your policy. Mrs C found this out when she claimed on a travel insurance policy issued by Santam.
According to the ombudsman’s report, Mrs C took out cover for her overseas holiday, from November 20 to 28, 2015. During her holiday, Mrs C fell ill and, as a result, was unable to attend a number of planned activities for which she had paid in advance. Due to a lack of available flights, she was unable to fly home earlier than planned. She therefore stayed on for the full duration of the trip, returning on her scheduled flight on November 28, 2015.
On her return, Mrs C submitted a claim, under the “curtailment of journey” clause in the policy, to be reimbursed for the costs associated with the holiday activities she had missed.
Santam declined the claim. It argued that cover under this clause is provided only if the journey is curtailed, in which case the insurer would pay for the non-refundable portion of travel or accommodation arrangements paid for by the policyholder.
It said the policy did not make provision for unattended holiday activities. The insurer added that Mrs C’s accommodation was utilised for the full period of the booking.
The ombudsman considered the meaning of the word “curtailment”. She told the parties that the first step in interpreting a contract is to determine the ordinary grammatical meaning of the words used. In considering the context in which Santam used the word “curtail”, the ombudsman concluded that its ordinary grammatical meaning was to “cut short”.
The ombudsman advised Mrs C that her holiday had not been cut short and Santam had correctly interpreted its policy terms and conditions. She upheld the rejection of the claim.
LATE NOTIFICATION OF CLAIM
Your insurer needs to take your version of events into account when assessing a claim and cannot, without proof to the contrary, dismiss your version as devoid of truth.
Ms A was involved in a motor vehicle accident that involved a third party in September 2010. The third party instituted legal action against Ms A in 2012. A summons was issued and, following Ms A’s failure to defend the matter, a default judgment was granted against her. A warrant of execution was issued and a notice of attachment was served on Ms A in October 2014.
According to Ms A, she never received the summons to appear in court and became aware that there was a case against her only in October 2014, when the notice of attachment was served. Immediately on receipt of the notice, she informed her insurer.
Saxum Insurance rejected liability for the third-party claim on the basis of late notification of the claim by Ms A.
The insurer submitted that its rights had been severely prejudiced by the late notification, because a default judgment had already been granted and Ms A’s property had already been attached.
The insurer referred to the policy wording, which states that, “if you become aware of any possible prosecution or legal proceeding or claim against you, you must immediately inform the insurer in writing”.
The ombudsman told Saxum that there was nothing to suggest that Ms A was being untruthful when she said she had never received the summons. Her version was reasonably conceivable.
Also, after reading the relevant section of the policy wording and the information provided, the ombudsman was of the view that there had been no real prejudice suffered by the insurer. This was because Ms A had submitted a valid claim in terms of which she was entitled to protection against a third-party action. She had informed the insurer immediately on becoming aware of the legal proceedings instituted against her.
The ombudsman recommended that the insurer settle the claim by paying Ms A’s principal debt.
Saxum agreed and made an offer to Ms A on this basis, which she accepted.
• Note that each case is dealt with on its own merits and no precedents are created by the findings. The case studies provide guidance and insight into how the ombudsman’s office deals with complaints. Also note that the events depicted in the illustration above do not necessarily reflect the facts of the travel insurance case.
• Contact the office of Deanne Wood, the Ombudsman for Short-term Insurance, on 0860 726 890 or 011 726 8900, or email firstname.lastname@example.org