Insurer correctly repudiated claim for allegedly written-off car – High Court

The High Court in Pretoria has ruled that King Price Insurance correctly repudiated a motor vehicle claim by a policyholder who failed to disclose what he described as two “minor” incidents.

Peter Seepi instituted action against King Price for the payment of R300 000. His 2016 Mercedes-Benz C220 was allegedly written off following an accident on 21 August 2017. The replacement value of the vehicle was R450 000, and Seepi submitted that he sold the wreck for R150 000.

King Price repudiated Seepi’s claim because of the non-disclosure of material information at the inception of the agreement.

The Court’s judgment, which has handed down in December, also shows there was a dispute over whether Seepi’s vehicle had, in fact, been involved in an accident in August 2017.

But it was common cause that, during the sales call in June 2017, Seepi did not inform King Price of the following:

• On 20 June 2014, the windscreen of his vehicle was chipped after being hit by a stone. He instituted a claim with OUTsurance on 21 June, but he did not proceed with the claim.
• On 21 June 2014, a cyclist drove into his vehicle, and the left-side mirror glass popped out. He instituted a claim with OUTsurance on 23 June, but he did not proceed with the claim.

Seepi submitted that the incidents were “minor”, had occurred “years before” he took out the policy with King Price, and related to a different car.

He had not proceeded with the claims because the excess of R3 500 was too expensive. It cost him R200 to fix the chipped window and R500 to fix the side mirror.

Seepi testified he was under the impression that he had given King Price permission to check his credit record, during which the insurer should have discovered the previous incidents.

He contended there is a difference between a claim and a payout, and because he did not receive a payout, it was as if he did not claim.

No onus

Judge Mabaeng Lenyai said Seepi failed to prove the existence of any facts for an indemnity claim in terms of the insurance policy.

During cross-examination, Seepi was reminded that there was a dispute as to whether an accident had occurred and the damages and quantum he claimed.” Seepi did not respond to the issues in dispute and as a result no evidence was presented of the accident and the damages suffered.

“In my view, the plaintiff failed to prove facts necessary to bring his claim within the terms of the insurance contract and the defendant thus never attracted an onus. There was just no case for the defendant to meet,” Judge Lenyai said.

Repudiation based on non-disclosure

The judge said “the heart of this matter” was whether King Price rightfully repudiated the contract on the grounds of non-disclosure.

She referred to section 53(1) of the Short-term Insurance Act, which addresses misrepresentation and the failure to disclose material information. On the issue of non-disclosure, she referred to what the then Appellate Division held in the matter of Mutual and Federal Insurance Co Ltd v Oudtshoorn Municipality (1985):

“There is a duty on both insured and insurer to disclose to each other prior to the conclusion of the contract of insurance every fact relative and material to the risk (periculum risicum) or the assessment of the premium. This duty of disclosure relates to material facts of which the parties had actual knowledge, all constructive knowledge prior to conclusion of the contract of insurance. Breach of this duty of disclosure amounts to mala fides or fraud, entitling the aggrieved party to avoid the contract of insurance.”

Judge Lenyai said a party that relies on the non-disclosure of a fact by the other contracting party to repudiate a claim must prove that:

• the fact was not disclosed;
• the fact was within the knowledge of the other party;
• the fact was material – that is, a reasonable man in the position of the insured would have considered the non-disclosed fact as being reasonably relevant for a proper assessment of the risk and premium; and
• the non-disclosed fact caused the party to either enter the contract at all or on the agreed terms.

Justice Lenyai said Seepi’s concessions, in his admissions and during cross-examination, met the abovementioned criteria. This was “the end of the matter”, and King Price correctly repudiated the claim, she said.