Exceeding the speed limit is not generally on its own a sufficient reason for an insurer to reject a car insurance claim if you cause an accident. The insurer must prove that you were driving recklessly.
This is according to a case study in the 2020 annual report of the Insurance Ombudsman, released on Tuesday. Whereas in previous years the short-term and long-term insurance ombudsmen submitted separate annual reports, the two offices now fall under a single ombudsman, Judge Ron McLaren, and they submitted a joint report.
The report relates the case of Mr P, who lost control of the vehicle he was driving after swerving to avoid a dog in the road. The vehicle, which belonged to Mr M, collided with a tree and a fence. It was written off by the insurer.
Mr P was in a 60km/h zone, but submitted to the insurer that he had been driving at between 100 and 120 km/h when he had the accident.
The insurer employed three forensic experts to reconstruct the accident, and they came to widely different conclusions about the speed of the car: from as low as 68 km/h to as high as 138 km/h. While there was wide disparity in the experts' reports, it was generally agreed that had Mr P been driving within the speed limit, he would not have lost control and the accident would not have occurred.
The insurer rejected Mr M's claim on the grounds that Mr P did not take due care and precaution to prevent the accident. It referred to the policy document, which stated: "To have cover, you need to ... take all reasonable steps and precautions to prevent any accidents or losses that occur."
Mr M complained to the office of the Short-Term Insurance Ombudsman (Osti), which took up the case with the insurer. After reviewing all the evidence, the Osti recommended that the insurer reconsider its rejection of the claim on the grounds that the speeds reported by the experts were too far apart. Notably, the Osti advised that the speed at which the vehicle was travelling was not sufficient to justify a rejection of the claim on the grounds that Mr P had failed to exercise due care or take reasonable precautions to prevent the loss. The ombud noted that the standard for recklessness had not been proved by the insurer. Mr P was faced with a sudden emergency when a dog ran across the road. He lost control of the vehicle when he attempted to avoid hitting the dog. This version had not been disproved by the insurer.
The Osti found that the insurer had not proved, on a balance of probabilities, that Mr P had failed to exercise due care or take reasonable precautions to avoid the accident and recommended that Mr M’s claim be settled.
The insurer agreed to settle the claim.
BUSINESS INTERRUPTION CASE
In last year’s business interruption saga, in which thousands of small businesses claimed on their insurance policies after being forced to close, the big question was whether Covid-19 was the cause of businesses being interrupted or, in fact, the cause was the government’s intervention to suppress the spread of the disease.
In a case that went to the Osti, a small business claimed for loss of income as a result of the lockdown restrictions published on March 18 last year. The policy contained an extension for loss resulting from an interruption of or interference with the business as a consequence of a contagious or infectious disease at its premises or within a 50km radius of its premises.
The insurer accepted that Covid-19 was an infectious disease for purposes of the policy and that the insured peril was the outbreak of Covid-19 at or within 50km of the insured’s premises. However, it argued that a general pandemic and the government action in response to the pandemic were not insured perils. Even though the policyholder could prove that cases of Covid-19 had occurred at the premises, with staff being infected, the insurer declined liability.
In a letter to the insurer, the Osti indicated that, in its view, the business was interrupted due to the lockdown, which was imposed by the government in reaction to Covid-19. Using a simple test for causation, it advised that, “but for” Covid-19, the lockdown would not have been imposed and the business would not have been interrupted. Therefore, there was a factual causal link between the local cases of Covid-19, the lockdown and the business's loss.
The report states: “In determining legal causation, the question is whether ... the harm is too remote from the conduct or whether it is fair, reasonable and just that the insurer is burdened with liability. In [the ombud’s] view, it was. This view is based on the judgment in the Café Chameleon v Guardrisk Insurance matter, which was later confirmed by the Supreme Court of Appeal. It was therefore the recommendation of this office that the claim be settled.”
The insurer accepted the recommendation and the claim was settled.
According to the 2020 Annual Report, the office of the Ombudsman for Short-term Insurance (Osti) was able to claw back R119 548 901 for consumers who approached its office for assistance. Edite Teixeira-Mckinon, chief executive officer of the Osti, said that in 2020 the office registered 11 095 new complaints, 7% more than in 2019, and closed 10 805, 17.9% more than in 2019. Of the complaints registered in 2020, 786 (7%) related directly to Covid-19, with 562 relating to business interruption cover and 224 relating to travel cover.
Of the 10 805 finalised complaints, the biggest proportion (36%) related to motor vehicle claim disputes. This was followed by disputes related to homeowners’/building cover (21%), commercial cover (14%), and household contents cover (5%). The balance of 24% related to other types of cover and to general policy queries.
The complaint trends were influenced, in part, by the pandemic and nationwide lockdown. Motor vehicle-related complaints were 12% lower than in 2019, while commercial complaints increased by 5%, with the majority relating to business interruption claims.