Short-Term Insurance Case Studies
The insured submitted a claim for accident damage to his vehicle, a silver Opel Astra (“the incident vehicle”). The accident took place when a third party collided with the rear of his vehicle on 16 April 2019.
The insurer rejected the claim on the ground that the insured misrepresented the details of the regular driver when the policy was sold. The insured referred the matter to the Ombudsman’s office due to his dissatisfaction with the rejection.
The insured’s policy incepted on 6 February 2019. He placed the following two vehicles on cover:
During the sales conversation, the insured nominated his father as the regular driver of both vehicles. He was advised of the consequences of not nominating the correct regular driver.
During the validation of the claim the insurer established that the insured was, in fact, the regular driver of the incident vehicle since the commencement of the policy. The insurer relied on the following evidence in substantiation of its rejection of the claim:
The insurer advised that had it been notified of the correct identity of the regular driver, it would have charged a higher premium. Therefore, the insured’s misrepresentation with regard to the regular driver was material to its underwriting of the risk.
The issue to be determined by OSTI was whether the insurer correctly rejected the claim.
As the insurer was relying on an exclusion to reject the claim, the insurer bore the onus of demonstrating that the insured was the regular driver of the incident vehicle since the commencement of the policy. In terms of the decision in Visser v 1Life Direct Insurance Ltd 2015 (3) SA 69 (SCA) 74F – G, an insurer can only prove that a statement is false, i.e. a misrepresentation, if it proves the truth.
During the sales conversation the question posed was, “Who will drive this vehicle most often and more frequently than any other person?” For the insurer to prove who that person is, it needs to undertake a quantitative assessment of the times and instances when the vehicle was driven since it was placed on cover, which was for approximately only two months when the loss took place.
In the validation conversation with the assessor, the insured’s father confirmed that the insured’s employer provided the insured with transport to and from work. However, whilst the insured’s father did state that the insured “normally” drove the incident vehicle, it was pointed out to the insurer that this statement must be considered in light of the insured’s allegation that he was off from work once a week and then every fourth weekend. The insurer was advised that, in terms of its own definition of a “regular“ driver, the ”normal” driver would not necessarily be the regular driver considering how few opportunities the insured had to drive the vehicle from the commencement of the policy to the time of the loss.
On the other hand, contrary to the insurer’s summary of the evidence of the insured’s neighbour, the insured’s neighbour in fact confirmed that the insured “drives the two Astras”. When probed further regarding “Which one does he drive the most?”, she confirmed “the white one. The silver one just stands there.…”
As regards the evidence of the third party, she indicated that she lives in another area. Therefore, her evidence that she normally sees the insured driving the silver Opel Astra could not be a confirmation that the insured was the regular driver of the vehicle.
It was also pointed out to the insurer that the fact that the insured was noted as the regular driver on previous policies was not sufficient evidence for the insurer to discharge its onus of proving that the insured was in fact the regular driver since the commencement of the policy.
OSTI therefore overturned the insurer’s rejection of the claim and recommended that the claim be settled in full. The insurer agreed to abide by OSTI’s recommendation.
Senior Assistant Ombudsman
On 13 December 2018 Mr P was involved in an accident while driving Mr M’s vehicle. Mr P said that he saw a dog running across the road and swerved to avoid it. In doing so, he lost control of the vehicle and collided with a tree on the side of the road and then a school fence.
The vehicle was taken for assessment and declared uneconomical to repair. The insurer also commenced with its validation of the claim and appointed an expert to determine the speed at which the vehicle was driven at the time of the collision. The insurer appointed three forensic experts to reconstruct the accident.
The reports obtained concluded the following:
During the validation of the claim Mr P told the insurer’s investigator that the vehicle was driven at a speed of between 100 – 120 km/h.
The insurer rejected the claim on the ground that Mr P did not take due care and precaution to prevent the accident. The insurer based its decision on the digital data from the vehicle and on Mr P’s submission that he travelled at a speed of between 100 – 120 km/h in a 60 km/h zone.
The terms and conditions of the policy state as follows:
To have cover, you need to do the following:
Mr M argued that the insurer had no grounds on which to reject the claim since all three experts arrived at different conclusions. The insured specifically objected to the insurer’s use of the first expert’s report on the basis that this expert never inspected the scene of the accident. Mr M stated that the expert made a mistake regarding the direction of travel of the vehicle, a fact which the insurer conceded and rectified. Mr M argued that the first expert’s mistake cast doubt on the correctness of the entire report.
Mr M also disagreed that the vehicle had travelled at a speed of 138 km/h. He argued that the vehicle could not reach this speed within the short distance travelled. In support of this argument Mr M supplied video footage of himself driving around the bend before the accident. The purpose of this was to demonstrate that the vehicle could not have negotiated the bend at 138 km/h or accelerated enough to reach this speed. Mr M also argued that the speed recorded on the tracking report is accurate and should be considered as it demonstrates that the vehicle was not travelling at a high speed.
The insurer conceded that the findings of the three experts were different and contradictory. The insurer, nevertheless, maintained its reliance on the first expert’s report. The insurer stated that the extensive damage sustained by the vehicle in the accident suggested that the vehicle was travelling at a far higher speed than reported by Mr P. The insurer said that it was not plausible that the vehicle had travelled at the speeds determined by the second and third experts.
The insurer also pointed out that the first expert’s conclusion was based on digital data retrieved from the vehicle and was, therefore, more accurate and objective.
The insurer argued that the three experts’ findings created a clear dispute of fact which meant that the complaint fell outside of OSTI’s jurisdiction.
The insurer argued further that the tracking report did not reflect the true speed of the vehicle and requested that Mr M obtain a buffer report. The buffer report revealed that a maximum speed of 85 km/h was reached by the vehicle before it collided with the tree.
After reviewing all the evidence 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, as they ranged between 85 km/h and 138 km/h. OSTI pointed out that there was no dispute of fact between the parties since two of the insurer’s expert reports were consistent with the tracking report and that the insurer cannot declare a dispute of fact in respect of its own evidence.
OSTI advised that the speed at which the vehicle was driven was not sufficient to justify a rejection of the claim on the grounds that Mr P failed to exercise due care or take reasonable precautions to prevent the loss.
OSTI noted that the standard for recklessness had not been proven by the insurer. Mr P was faced with a sudden emergency when a dog ran across the road. Mr P lost control of the vehicle when he attempted to avoid a collision with the dog. This version had not been disproved by the insurer.
OSTI found that the insurer had not discharged the onus of proving, on a balance of probabilities, that Mr P had failed to exercise due care or take reasonable precautions to avoid the accident.
Accordingly, OSTI recommended that Mr M’s claim be settled.
The insurer agreed to indemnify Mr M for the accident. It also agreed to refund the towing and storage costs. As a gesture of goodwill, the insurer also refunded the service fees and interest charged on the finance agreement from the date of loss.
Johan Janse van Rensburg
There is no doubt that the current COVID-19 pandemic has had a huge impact on the insurance industry worldwide. In South Africa businesses have been hit hard by the measures implemented by the government in order to curtail the spread of this very infectious disease. Many businesses were forced to close their doors permanently as they could not weather this storm. This resulted in huge losses of revenue. The tourism and leisure industries were particularly hard hit. This caused many businesses to turn to their insurers for relief which, in turn, led to various cases of litigation regarding business interruption claims and the interpretation of clauses contained in certain commercial insurance policies.
The big question was whether COVID-19 was the cause of businesses being interrupted or, in fact, the government intervention to curtail the spread of the disease. It is against this backdrop that the complaint under discussion was received.
The insured’s claim related to loss of income as a result of lockdown restrictions published on 18 March 2020 by the Minister of Cooperative Governance and Traditional Affairs in terms of section 27(2) of the Disaster Management Act, 57 of 2002. Needless to say the insured could not carry on business as a result of the restrictions and incurred financial losses due to the business being interrupted.
The insured had business interruption cover. The policy contained an extension under the business interruption cover for Murder, Suicide, Food Poisoning, etc. Under this extension the insured is covered for loss resulting from an interruption of or interference with the business in consequence of a contagious or infectious disease at its premises or within a 50 km radius of its premises. The insurer accepted that COVID-19 is an infectious disease for purposes of the extension. However, it asserted that the insured peril, in terms of the policy, is the outbreak of COVID-19 at or within a 50 km radius of the insured’s premises. It argued that a general pandemic and the national government action in response to the pandemic, including the nationwide lockdown, were not considered insured perils.
Even though the insured could prove that cases of COVID-19 had occurred within the 50 km radius and at the premises, with staff being infected, the insurer declined liability. The insurer argued that the cause of the business being interrupted was not the cases of COVID-19 at the insured’s premises and within a 50 km radius, but due to government action and the nationwide lockdown imposed in response to the imminent threat of a pandemic. Therefore, the cause of the business being interrupted was disputed by the insurer.
In a letter to the insurer this office indicated that, in its view, the insured’s business was interrupted due to the lockdown which was imposed by the government in reaction to COVID-19. Using a simple test for factual 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 is a factual causal link between the local cases of COVID-19, the lockdown and the business being interrupted. In determining legal causation the question is whether, having regard to directness, the absence/presence of a novus actus interveniens, legal policy, reasonableness, fairness and justice, the harm is too remote from the conduct or whether it is fair, reasonable and just that the insurer is burdened with liability. In OSTI’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 in Guardrisk Insurance Co Ltd v Café Chameleon CC 2021 (2) SA 323 (SCA).
At that time, in a UK High Court decision of a test case brought by the UK Financial Sector Conduct Authority, it was decided that the COVID-19 pandemic and the government and public response to it were a single cause of loss satisfying the requirement for cover under these types of policies.
It was therefore the recommendation of this office that the claim be settled. The insurer accepted the recommendation and the claim was duly settled.
The insured suffered a loss on 14 February 2019 when one of its employees was involved in a motor vehicle collision whilst driving the company’s vehicle.
The insured claimed for the damage to the motor vehicle from its insurer. The claim was rejected by the insurer on the basis that the driver did not have a valid driver’s licence.
In support of its stance, the insurer relied on the following exclusion in the policy:
“SPECIFIC EXCEPTIONS APPLICABLE TO ALL SUB-SECTIONS
(c) incurred while any vehicle is being driven by:
(ii) any other person with the general consent of the Insured, who is not licensed to drive such vehicle, but this shall not apply if the Insured was unaware that the driver was unlicensed and the Insured can prove to the satisfaction of the Company that, in the normal course of his business, procedures are in operation to ensure that only licensed drivers are permitted to drive insured vehicles.”
The insured approached OSTI for assistance stating that it objected to the rejection of the claim but had not received a response from the insurer. In its complaint the insured stated that it proved beyond a reasonable doubt that it did not know that the employee’s licence was invalid. The insured accused the insurer of having malicious intent by not settling the claim and by not responding to its objection. The insured sought compensation for loss of income and damage to the business as a result of the insurer’s failure to settle the claim.
The office stated that, based on the way the evidence was presented by the parties, it could safely be inferred that the driver drove the insured vehicle “with the general consent” of the insured and that he was “not licensed to drive such vehicle”. Once these facts have been established, then the exception in clause 1(c)(ii) above came into operation.
The exception, however, was not an absolute bar to a claim because it has a further provision which, for convenience, is referred to as “the proviso”. The proviso itself has two components which can be summarised as follows:
The office found that the evidence established on a balance of probabilities that the insured “was unaware that the driver was unlicensed”.
The insured set out the following facts on which it relied for submitting that “in the normal course of its business, procedures are in operation to ensure that only licensed drivers are permitted to drive insured vehicles”.
The insured advised that, before employing a driver, the driver’s licence was physically checked, and the driver’s driving ability was tested. In this case, the driver proved his ability to drive well. The insured submitted that its vehicles are monitored for speeding, harsh driving and harsh braking. This employee’s driving behaviour was impeccable and there was no reason to believe that he was unlicensed.
The insured submitted that the driver passed through numerous routine roadblocks conducted by road traffic authorities and the validity of his licence had never been questioned. When the accident was reported to the police by the driver, the validity of his licence was not questioned.
The driver stated that he obtained his licence through normal procedures. A representative of the insured attended The High Commission of Malawi in Johannesburg where it was confirmed verbally that the driver had a valid licence until 2016 and he had renewed his licence which was valid until 2022.
The insured submitted that it had exercised proper and reasonable control over the driver to ensure compliance with the National Road Traffic Act, 93 of 1996.
The insurer produced a document from a business known as “Check Your Driver” which incorporated a document that appears to emanate from the office of the Malawi Consulate General. The document stated, “it is concluded that the information presented to this office by your officer is not genuine … and should not be regarded as an International driving licence (SADC Licences)”. A note explained that “SADC” stands for “Southern African Development Community”.
The office found that the fact that a licence looks valid establishes little more than that it is not obviously or patently false. Likewise, the fact that the employee performed well in the “drive test” conveys no more than his ability to drive. Furthermore, licence inspections at “routine roadblocks” can hardly be said to form part of the insured’s “normal course of business”, as envisaged in and for the purpose of the exception.
The office stated that it was clear that the employee’s driver’s licence was invalid and the submissions made by the insured were of no assistance.
The office noted that, when deciding the issue about whether the insured “can prove to the satisfaction of the company”, the insurer’s decision must be objective and reasonable.
After a review of all the information, the office found that the insurer had made an objectively reasonable decision when it concluded that the insured did not prove “that, in the ordinary course of (its) business, procedures (were) in place to ensure that only licensed drivers are permitted to drive insured vehicles”.
The office concluded that the insurer was entitled to invoke the exception to repudiate liability for the insured’s claim.
The insured reported a claim for a bag that was stolen from his car boot. The bag contained travel documents and some personal electronic items. The insurer declined the claim on grounds that there was no violent and forcible entry into the vehicle. According to the insured he locked the vehicle by remote control while walking away from the vehicle.
The insurer relied on the following policy provision:
4.3 Specific exclusions applicable on this extension
We will not be liable for loss or damage:
4.3.13 to insured property lost from an unattended motor unless the insured property was concealed in a locked boot or compartment forming part of a locked vehicle and there is violent and forcible entry to the vehicle.
The facts and circumstances of the loss were not in dispute. However, it was the insured’s submission that even though there was no violent and forcible entry into the vehicle, as there was video footage of the loss, the insurer should indemnify him.
The insured submitted that,
“The intention of insurance policy wording is to prevent insurers from being taken advantage of by unscrupulous individuals making fraudulent claims. The intention surely is not to provide the insurer with a means for refusing assistance when theft has been proven to have occurred. It is my contention that as their stated Group values as well as their mission statement claims that their purpose is to become ‘customer obsessed’ by ‘going beyond expectations’, that they cannot be justified if applying decision-making that goes against this.”
The insured further argued,
“It is therefore reasonable to conclude that a company with such a values-driven approach would use policy wording to protect themselves from both false claims and gross negligence and not as a tool or loophole by which they can get out of paying a proven, credible claim by a client in good standing. I believe that the CCTV evidence both shows that there was not gross negligence and also proves that a theft did indeed occur from a concealed compartment, in a locked boot.”
The office viewed the video footage in question and it was clear that the insured suffered what appeared to be a genuine loss in a targeted theft incident.
The office has previously dealt with disputes involving similar facts and the office’s approach in these matters is well documented: where there are alternative methods of establishing that the loss was authentic, the insurer will be required to settle the claim. Video footage is one such method.
Apart from establishing that the insured suffered a genuine loss, the reason why insurers provide no cover in the absence of signs of forcible or violent entry is to ensure that insureds are diligent in safeguarding insured items and that they are not reckless in this regard. In other words, the policy requires an insured to lock the insured vehicle and not just leave it unlocked when unattended.
From the available evidence it appeared that the thieves were operating some sophisticated scheme through which the theft was effected. There was otherwise no explanation why the vehicle, from which the thief disembarked to commit the theft, happened to arrive shortly after the insured had left his vehicle and somehow targeted his vehicle.
When considering the matter the office suggested to the insurer that, on a balance of probabilities, the thieves had used a sophisticated method to keep the insured vehicle under surveillance and to gain access into it. This then meant that the insured could not have negligently left the vehicle unlocked, but rather that the cause of the loss must have been the use of this sophisticated method to gain access into the vehicle.
It would therefore be unfair for the insurer to decline the claim for what seemed to be a genuine loss, albeit the insurer is entitled to do so in terms of its policy wording.
As the office is entitled to not only evaluate the merits of a dispute on the relevant contractual and legal provisions, but also on considerations of fairness and equity, it was the office’s view that the circumstances of the loss justified an approach to the insurer that it considers settling the insured’s claim.
The office accordingly recommended that the insurer settle the insured’s claim.
In its response, the insurer insisted that the policy did not provide cover under the current circumstances.
It further emphasised that the video footage did not show that the insured had locked the vehicle when leaving it and the insured could not be given the benefit of doubt. The locking of the vehicle, the insurer submitted, would have prevented the loss and there was no basis on which to conclude that the insured had locked the vehicle or that any sophisticated device had been used to effect the loss.
In the light of the insurer’s further representations the office found that there was no basis on which to compel the insurer to settle the claim.
The above outcome demonstrates that, even in the face of a well-documented and consistent approach, the specific set of facts and circumstances of each matter will always determine the outcome of a dispute.
Senior Assistant Ombudsman
Mrs E approached our office for assistance as she was unhappy with the insurer’s decision to reject her late husband’s motor vehicle accident claim. According to the letter of rejection the insurer declined liability on the ground that Mr E had failed to disclose material facts when the policy was incepted.
According to the insurer Mr E had failed to disclose that he had previously been charged with driving under the influence of alcohol in 2011 and 2014. The insurer submitted that, during the sales conversation in October 2015, Mr E was asked to disclose any convictions against him in relation to driving under the influence. He responded that he had never been convicted of driving while under the influence. The insurer advised that it was prejudiced by Mr E’s non-disclosure in that it would not have accepted the risk on cover had it been aware of his previous charges and convictions.
The office considered the information and evidence presented in the dispute in light of section 53 of the Short-Term Insurance Act, and we did not agree with the insurer’s decision.
For the insurer to succeed in its rejection of a claim on the grounds of non-disclosure during the sales stage the insurer must demonstrate that it created a proper duty of disclosure by asking a clear and concise question. It must further demonstrate that the insured’s response amounted to a misrepresentation or non-disclosure in that the insured provided false or misleading information. Therefore, in determining whether the insurer created a duty of disclosure and whether there was a non-disclosure on the insured’s part, regard must be had to the specific question(s) asked.
Our office listened to the recording of the sales conversation. The question put to the insured was:
“Is there any other person besides yourself, who normally drives the vehicle that has been convicted of any driving offence or had their licence endorsed or taken away?”
Mr E responded “No”. The insurer asked no other question relating to charges or convictions for driving offences.
The wording of the insurer’s question limited its application to persons other than the insured. In our view, had the insurer sought to determine whether Mr E himself had previous driving offences, it should have asked so. As the insurer is aware of the importance of its underwriting criteria it, therefore, had the duty to concisely and unambiguously ask Mr E the relevant question regarding his own charge and conviction history. The insurer failed to do so.
In the case of Mahadeo v. Dial Direct Insurance Co Ltd 2008 (4) SA 80 (W) it was stated that policyholders could not be faulted for the way in which they understood the questions posed nor should they be held responsible for the interpretations placed by them on the nature of the questions put. The judgment further referred to comments made by Stratford JA in British America Assurance Co v Cash Wholesale 1932 AD 70 at 74 where he stated that: “Now the questions are framed by the insurance company and it is its duty to make them clear and unambiguous especially when it attaches so much importance to the truth, and such dire consequences to the untruth, of the answers. If then, the question is capable of two reasonable meanings, that which is the more favourable to the insured will be accepted by a court of law when the truth of this answer is assailed.”
As the insurer did not create a duty of disclosure regarding Mr E’s own history and limited the question to other drivers besides Mr E, it was held that the insurer was not entitled to raise the defence of non-disclosure and/or misrepresentation.
It was accordingly the recommendation of this office that the insurer settle the claim. The insurer accepted our recommendation and settled the claim in full.
Mr A complained that his insurer, in respect of a legal expenses policy, had allowed his burglary claim against his other insurer, namely XYZ Insurer, to prescribe. According to Mr A the legal expenses insurer had failed to monitor the issue of prescription, resulting in him not being able to sue XYZ Insurer.
The insured lodged a claim under his legal expenses policy for a burglary claim that had been rejected by XYZ Insurer on the basis that there was no cover at the time of the loss because the policy had been cancelled at the request of Mr A.
The legal expenses insurer rejected Mr A’s claim against XYZ Insurer on the basis that Mr A did not have reasonable prospects of success. The policy excludes claims where there are no reasonable prospects of success.
The legal expenses insurer sought the opinion of various legal professionals on the insured’s prospects of success against XYZ Insurer. The opinions generally provided were that Mr A did not have any prospects of success. The evidence is that Mr A instructed his broker to cancel the policy with XYZ Insurer. Thereafter Mr A was informed of the cancellation. At the time of the burglary there was no policy in place. Based on this it was found that Mr A would not have any prospects of success in his claim against XYZ Insurer.
While Mr A continued to contest the opinions of the legal professionals appointed by the insurer he submitted that, during this period, the insurer allowed his claim against XYZ Insurer to prescribe. Mr A submitted that, while he is aware that he is unable to proceed against XYZ Insurer, the relief that he sought from OSTI was “to sue the RESPECTIVE ROLEPLAYERS during the course of my matter and failures of procedure under their watch”.
The issue that OSTI had to decide was whether Mr A would be successful in pursuing any relief sought against the legal expenses insurer. The relief that Mr A was seeking from this insurer and/or the legal professionals that were appointed by this insurer, is a recovery in respect of his claim against XYZ Insurer. It is compelling that, at the time of the burglary, the policy with XYZ Insurer was cancelled and therefore Mr A had no cover for the claim. Based on the evidence, the legal expenses insurer found that Mr A did not have any prospects of success against XYZ Insurer.
In terms of the legal expenses policy the insurer is entitled to reject a claim where there are no reasonable prospects of success. On that basis OSTI was unable to fault the insurer.
Even if it were to be found that the claim against XYZ Insurer had prescribed due to the negligence of the insurer and/or the legal professionals, no claim against XYZ Insurer could succeed. The test would then be whether, but for the negligence of the insurer and/or the legal professionals, Mr A would have had a claim against XYZ Insurer. The onus lay with Mr A to prove this and we found that Mr A had not discharged this onus.
Even if it were found that the claim was “allowed to prescribe”, it does not take the matter any further as, ultimately, Mr A could not succeed with his claim against XYZ Insurer and therefore can have no damages claim against the insurer nor the legal professionals, in their own capacities, jointly and/or severally.
Considering all the above, OSTI found that there was no basis on which to make a finding in favour of Mr A and the complaint was dismissed.
Senio Assistant Ombudsman
Miss N habitually allowed her unlicensed partner, Mr X, to drive her vehicle. On this occasion Mr X became the victim of an attempted hijacking. Although the perpetrators failed to get away with the vehicle, the vehicle was left with some damage. Miss N reported the incident to the insurer and registered a claim for stolen items and damage to the insured vehicle.
The insurer rejected the claim when it discovered that Mr X did not have a valid driver’s licence when the hijacking happened. The insurer relied on the following provision of the policy:
7.11 What is not covered?
You will not have cover:
If you or any person with your permission is driving or towing your vehicle and is not fully licensed to drive.
The insurer argued that this claim fell squarely within the ambit of the above exclusion.
Miss N was unhappy that her claim was rejected. Miss N felt that the clause on which the insurer relied to reject her claim was not applicable as Mr X’s driving ability did not come into play in the given circumstances. According to Miss N the hijacking would have happened even if Mr X had a valid licence. In essence, Miss N argued that the licence requirement was not material to the loss.
In the alternative, Miss N argued that she permitted Mr X to drive the insured vehicle because she had had a medical emergency. In an interview with the insurer’s investigator, during the claim’s validation process, Mr X confirmed that he went to a pharmacy to purchase over-the-counter medication for Miss N. Mr X also confirmed that, before going to the pharmacy, he first attended a business meeting.
The insurer maintained its rejection of the claim and refuted Miss N’s explanation that she had had a medical emergency and pointed out that the incident driver would not have first attended a personal business meeting before going to the pharmacy if there had indeed been a medical emergency.
It was the office’s view that the role played by the unlicensed driver in the loss is irrelevant for purposes of the exclusion clause because the prohibition applies to the policyholder. The agreement between the insurer and the policyholder is such that the risk of loss or damage will not pass to the insurer if the policyholder permits an unlicensed person to drive or tow the insured vehicle. The moment the policyholder hands the keys over to an unlicensed person, there is no cover. Whatever happens after that, whether a hijacking or an accident, would not be covered.
Like any other contract, an insurance contract normally contains prohibitive clauses which bar the policyholder from engaging in certain conduct. An insurer includes prohibitive clauses to avoid exposure to unacceptable risks. However, there may be instances where the policyholder engages in prohibited conduct out of necessity. This will be the case when the policyholder finds himself/herself having no choice but to engage in the prohibited conduct to prevent a greater harm from occurring.
Policyholders may invoke necessity as a ground for holding the insurer liable to indemnify them. Considerations of fairness and equity may result in our office compelling the insurer to reconsider its stance in circumstances where prohibited conduct occurred out of necessity. Our office therefore needed to satisfy itself that this was, in fact, the case in this matter.
In Miss N’s case, the office held that the insurer was contractually entitled to reject the claim. The exclusion clause prohibits Miss N from giving unlicensed persons permission to drive or tow her insured vehicle. As Miss N did this habitually, the office agreed with the insurer that the claim fell squarely within the ambit of the exclusion.
The office also agreed with the insurer that there had been no medical emergency because, if a medical emergency had existed, Mr X would not have first attended a business meeting before going to the pharmacy. In the circumstances the office upheld the insurer’s decision to reject the claim.
Policyholders must beware that non-compliance with the policy terms and conditions could leave them exposed to a declined claim with dire financial implications.
Junior Assistant Ombudsman