Ambiguities in insurance policies can lead to misunderstandings about what is covered and what is not, resulting in disputes between policyholders and insurers when a claim is filed. Clear and precise wording helps to ensure that both parties have a common understanding of the coverage provided. This point was illustrated in a case that came before the Ombudsman for Short-term Insurance (OSTI).
The insurer rejected the insured’s claim for the theft of his vehicle because the vehicle was not fitted with a tracking device. It had a factory-installed immobiliser.
The insured submitted that the policy wording was ambiguous because it indicated that either an immobiliser or a tracking device was sufficient for cover.
He said the insurer knew the vehicle did not have a tracking device and accepted the vehicle with an immobiliser only.
The insured also referred to the policy schedule, which provided for the payment of an additional excess where no tracking device was installed.
The insurer’s submission
The insurer referred to the policy schedule, which read as follows:
“Additional notes
Theft or hijacking or attempted theft or hijacking cover is subject to the following requirements:
Minimum security requirements for this vehicle: VESA level 3 or 4 immobilizer. An approved tracking device will also be accepted. An approved tracking system is a requirement for cover for theft/hijacking.”
The insurer submitted that the above security requirement was highlighted in red.
The insurer also referred to the following policy terms and conditions:
“3.12.1 Tracking device warranty
The schedule will show if you have a tracking device installed or if we require a tracking device in the vehicle. If you have this system, you warrant that:
- The tracking device is installed in the vehicle.
- The tracking device is in working order and activated.”
“3.1.4 Our rights if you do not comply
If you do not give us relevant, complete, and true information, or if you do not immediately inform us of any changes, we have the right to do any one of the following:
- Change the terms and condition of your policy.
- Cancel your policy or any section of your policy from any date we choose. We have the right to keep your premiums for the cover you have had until the date of cancellation.
- Treat your policy as if it had never started. In this case, we will refund your premiums.
- Not pay out your claim.”
The insurer also said that communication was sent to the insured’s broker advising that a tracking device was required.
The insurer argued that the insured did not comply with the security requirement, and as a result, the insurer was prejudiced in terms of the potential recovery of the vehicle.
OSTI’s findings
The OSTI said the policy’s terms and conditions, read together with the schedule, did not make it clear that a tracking device was a requirement for theft/hijacking cover.
The policy schedule provided two minimum security measures, either of which would be accepted. The tracking device was presented as an alternate security requirement.
It was not effective for the insurer to highlight words in red. If the insurer wanted to make the tracking device an additional requirement, it should have clearly and plainly said so.
The tracking device warranty contained in the policy wording supported the insured’s argument.
Clause 3.12.1 does not state that the insured is required to have a tracking device.
When read together with the schedule, clause 3.12.1 is relevant only if the insured had a tracking device, which is an alternate and not a sole requirement.
The insured had an immobiliser in his vehicle; this was noted on the policy schedule and was accepted for cover.
The OSTI found that the insurer had not discharged its onus of proving that the insured had failed to comply with the minimum security requirement and recommended that the claim should be settled.
The insurer agreed to settle the claim.
