Ombud overturns rejection of car insurance claim 

For years, insurers adopted the practice of rejecting claims if they found that consumers failed to disclose or deliberately withheld information from them at the time of taking out a policy.

However, a recent ruling by the non-life insurance division of South Africa’s National Financial Ombud (NFO) Scheme has turned that principle neatly on its head.

The insurer in question (which is not named) had rejected a claim for the loss of a vehicle as a result of hijacking on the basis that the driver did not have a valid professional driving permit (PrDP). In order to drive on a public road in South Africa transporting goods, dangerous goods or passengers for an income, you must have a PrDP. The permit is issued in addition to an ordinary driving licence.

According to the insurer, the vehicle should not have been on the road with the said driver because his PrDP had expired and not been renewed. The insurer also said public policy should be considered and if it, as the insurer, was to uphold claims for incidents that arise where the law has been broken, this would translate to it condoning the breaking of the law.

However, the NFO said the issue was one of materiality, in this case, whether the driver’s lack of a valid PrDP at the time of the hijacking was material to the loss.

Although the insurer’s argument was that the insured breached the policy requirement for a valid PrDP, the office was of the view that it is crucial to assess the nature of the breach.

Edite Teixeira-Mckinon, lead ombud of the non-life insurance division of the NFO, said that, in this instance, the driver’s actions did not contribute to the hijacking incident and the expired PrDP is, therefore, merely a regulatory violation.

She went a step further and said if the insurer was of the opinion that the absence of a valid PrDP was a material breach that warranted the claim being rejected, then it had to show that the absence of the valid PrDP was directly related to the risk – in this case, the hijacking.

“The insurer must demonstrate how not having a valid PrDP led to the loss, rather than merely relying on the fact that a law was broken…

“Given that the expired PrDP was unrelated to the hijacking and did not influence the event’s occurrence, no evidence to the contrary having been submitted, it must be considered immaterial to the claim.

“The loss occurred due to a criminal act of hijacking rather than a failure related to driver qualifications. Ultimately, even with an updated PrDP, the hijacking incident would have been unavoidable,” she said.

She said although the insurer’s contention regarding public policy is important to consider, it is essential to differentiate between systemic violations and isolated incidents.

In a scathing ruling, Teixeria-Mckinon said it was clear that the insurer’s arguments were rooted in a procedural shortcoming and overlooked the circumstances surrounding the loss. Upholding valid claims in instances where violations do not directly correlate with the loss aligns with principles of fairness and equity, she said.

The NFO’s recommendation requested that the insurer re-evaluate its position and settle the claim. However, the insurer in question did not accept the recommendation, and the matter was escalated for a provisional ruling.

The provisional ruling upheld the recommendation and added that the renewal of the expired permit would not require a further test of the driver’s driving skills, but was an administrative process.

A strict application of the policy wording would result in an unfair outcome for the complaint and, as a result, fairness and equity jurisdiction needed to be invoked in deciding this matter.

The insurer agreed to abide by the provisional ruling and settled the claim. And yes, the driver did successfully renew his PrDP after the claim. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.