The Mercury reports that Sherwin Jerrier is R600 000 out of pocket after a judge ruled that Outsurance did not have to pay his claim after a car accident. He apparently omitted to inform them about two previous accidents for which he had chosen not to lodge claims.
A lawyer said the case of Jerrier vs Outsurance, in which KZN High Court (Pietermaritzburg) Judge Piet Koen ruled recently, has ramifications for everyone with car insurance. ‘It means that any insured person now has the obligation to inform their insurance company of every little incident, no matter how trivial – such as a supermarket trolley ding – even if they do not wish to claim. This is so the company can assess their risk,’ a lawyer reportedly told the paper. According to the report, the judge noted that while neither of the two previous accidents was reported, Jerrier had, of his own volition, referred to them when interviewed by the insurance company’s investigator after he claimed for the most recent accident. However, he said, in terms of the wording of the policy, they should have been reported. ‘Both (previous) incidents would cause a reasonable man to conclude that knowledge of them would indicate a change in Jerrier’s circumstances, at the very least from a claims history perspective, but also as a moral risk that may influence whether the company would give him cover, the conditions and the premiums,’ the judge said, absolving the company from liability.
In my view, this story is slightly slanted by both the media and the lawyer for their purposes. One of our compliance officers, who read through the actual court case, remarked that there could have been a stronger case for the claimant.
I cannot fathom why the plaintiff did not argue that this was a material term that should have been disclosed to him. With no intermediary involved, there was a duty on the insurer to do this in terms of the Consumer Protection Act.
Which raises another question – what would the outcome have been had this complaint been laid elsewhere?
He could have gone to the Short-term Ombud, in which case I suspect he would have lost too, but had he gone to the FAIS Ombud, and claimed under the FAIS Act, he would possibly have stood a better chance.
Having taken a shot via the formal legal system, and missed, he has also burnt his bridges in respect of the other options.
Ombud Determination of Jerrier vs Outsurance is shown below. Please feel free to leave any comments you may have.
IN THE KWAZULU-NATAL HIGH COURT, PIETERMARITZBURG
REPUBLIC OF SOUTH AFRICA
CASE NO: 4160/2010
In the matter between:
SHERWIN JERRIER Plaintiff
and
OUTSURANCE INSURANCE COMPANY LIMITED Defendant
J U D G M E N T
KOEN J
INTRODUCTION:
[1] This is an action in which the Plaintiff claims payment of the sum of R608 772,20,
interest thereon and costs. The claim is founded on an insurance contract, concluded
during or about December 2008 to early January 2009, in terms whereof the Plaintiff
avers that the Defendant was obliged to indemnify him for loss or damage sustained in
respect of a 2009 Audi R8 4.2 FSI Quattro A/T motor vehicle bearing registration letters
Sherla -ZN1 . This vehicle was damaged in a collision which occurred on 8 January
2010. It is contended that the amount claimed represents the necessary costs of
restoring the vehicle to its pre-accident condition.
1Hereinafter referred to as ‘the vehicle’.
THE ISSUES:
[2]
The trial proceeded on the issue of liability only, pursuant to an order granted to
that effect by the consent of the parties.
[3]
On the pleadings, the accident and damages are denied. The Plaintiff’s
unchallenged evidence however established that a collision did occur on the N2 south
on the 8 January 2010 at approximately 23h00, resulting in certain damages to the
vehicle.
[4]
It is common cause that the Defendant was duly advised of this incident and that
the Plaintiff at that time had complied with his obligations insofar as the payment of the
premium was concerned.
[5]
The Defendant has however denied being obliged to indemnify the Plaintiff. The
basis for such denial is founded on the following two provisions in the policy:
(a) ‘Your responsibilities
In order to have cover you need to:
-pay your premiums
-provide us with true and complete information when you apply for cover,
submit a claim or make changes to your facility. This also applies when
anyone else acts on your behalf.
-inform us immediately of any changes to your circumstances that may
influence whether we give you cover, the conditions of cover or the premium
we charge.
-E.g.
If you sell your car and buy another one, you need to inform
us about the change before you can take delivery of this car so
that you can be certain that your car is OUTsured by the time you
drive off the showroom floor.
…
Claims
…
Time periods
You need to:
-report your claim or any incident that may lead to a claim to us as soon as
possible, but not later than 30 days, after any incident. This includes
incidents for which you do not want to claim but which may result in a claim
in the future.
E.g.
If your car is involved in an accident with another car and
there is no apparent damage to either car, we still want to know
about this incident so that we can take steps to limit the effects of
any claim which may be made by the other person.
–
report any lost items, fire, theft, highjack … to the police within 24 hours
of the incident’.
And
(b)
‘What is not covered under comprehensive cover
Driving under the influence
If any person who drives the vehicle:
-is under the influence of alcohol or drugs
-has a concentration of alcohol in the blood exceeding the legal limit or failed a
breathalyser test
-refuses to give either breath or blood sample’.
[6]
The Defendant pleads with reference to the first provision quoted that:
‘6.3.1
The warranties, statements and answers given during the application for
insurance and at each renewal thereof constituted the basis of the contract of the
insurance and were warranted by the Plaintiff to be true and complete;
6.3.2
The Plaintiff, at the conclusion of the agreement of insurance and at every
subsequent renewal thereof, warranted that:
6.3.2.1 The
regular driver of the insured vehicle was involved in only one previous
incident whether a claim was submitted or not in the last three years being on 2
April 2008 for accidental damage;
6.3.3
The statements and answers warranted by the Plaintiff to be true and correct as
set out in 6.3.2 above were not true at the conclusion of the agreement and/or at
the subsequent renewal thereof, in that:
6.3.3.1 On or about 11 April 2009 the Plaintiff who is the regular driver of the insured
vehicle was involved in a motor vehicle collision at or near Beach road,
Amanzimtoti wherein the insured vehicle collided with another vehicle with
registration number NPN 30285.
6.3.3.2 The Plaintiff failed to disclose the above incident to the Defendant.
6.3.4 The incorrectness of the information alternatively failure to disclose this
information was of such a nature as to materially affect the assessment of the
risk, the acceptance of the risk and the determination of the terms and conditions
and the premium applicable by the Defendant under the said insurance
agreement.
6.3.5 The Defendant consequently elected to avoid the insurance agreement, as it was
entitled to do, and to reject the claim made upon it by the Plaintiff, alternatively
the Defendant hereby elects to avoid the insurance agreement and tenders
repayment of the premium paid by the Plaintiff to the Defendant in respect of the
cover provided thereunder’.
(This defence will hereinafter be referred to as the ‘non-disclosure defence’).
[7]
In the alternative, the Defendant pleads:
‘6.4.1 That the Defendant would not be obliged to pay the Plaintiff any amount in
respect of loss or damage to the insured vehicle where the driver of the
insured vehicle was under the influence of alcohol or drugs, had a
concentration of alcohol in the blood exceeding the legal limit or failed a
breathalyser test.
6.4.2
…
6.4.3
The Defendant pleads further that the driver of the vehicle at the time of
the incident;
6.4.3.1 Was under the influence of alcohol;
6.4.3.2 Had a concentration of alcohol in the blood exceeding the
legal limit’.
(This defence will hereinafter be referred to as the ‘driving under the influence’
defence).
[8]
The Defendant bears the onus of proving the aforesaid defences on a balance of
probability. The defences are considered below in turn in the order pleaded.
DISCUSSION OF RELEVANT CASE LAW RELATING TO NON-DISCLOSURE:
[9]
It is trite law that Insurance is a contract based on the utmost good faith.
[10] In Mutual and Federal Insurance Co Limited v Oudtshoorn Municipality2 , Joubert
JA held that ‘… the Court applies the reasonable man test by deciding upon a
consideration of the relevant facts of the particular case whether or not the undisclosed
information or facts are reasonably relative to the risk or the assessment of the
premiums. If the answer is in the affirmative, the undisclosed information or facts are
material3 … The court does not, in applying this test, judge the issue of materiality from
the point of view of the reasonable insurer. Nor is it judged from the point of view of the
reasonable insured. The court judges it objectively from the point of the average
prudent person or reasonable man’.
[11] In Pillay v South African National Life Assurance Co. Limited4Didcott J approved
the statement of Bowen LJ made more than a century before that ‘…every fact was
material and had to be disclosed “…which would affect the mind of the underwriter at
the time the policy is made, either as to undertaking the contract or as to the premium
on which he would take it”.’
[12] InQilingele v South African Mutual Life Assurance Society5it was stated that ‘…
what has to be ascertained is whether the result likely to have been caused by the
misrepresentation was material. Materiality is not a relative concept; something is either
material or it is not. The word material denotes substance, as opposed to form’.
21985 (1) SA 419 (A) at 435 F – I.
3The test for materiality at common law does not appear to be different from the
statutory definition as contained in s 53 (1) (b) of the Short-Term Insurance Act 53 of
1998.
41991 (1) SA 363 D at 369 F.
51993 (1) SA 69 (AD) at 74H.
[13] In Fourie v SentrasureBpk6it was also stated that the test to be applied to
determine whether the non-disclosure was material was objective. Materiality also
relates no less to the determination of the premium at which a risk will be accepted,
than to the acceptance of the risk itself.
[14] In President VersekeringsmaatskappyBpk v Trust Bank Bpk7it was stated that the
question is not if in the mind of the reasonable man, the information will have an
influence on the risk but if it will have an effect on the decision of the insurer to accept
the risk or not.
[15] In Liberty Life Association of Africa Limited v De Waal and ‘n anderNNO8 the
court held ‘… die vraag is nie net of die onjuisteinligting die risikosoubeinvloed het nie,
maar ook of dit ‘n uitwerkingsougehad het op die Appellant se beoordeling van die
risiko’.
[16] In Bruwer v Nova Risk Partners9it washeld that the interplay between the
specificity of one clause10 and the generality of a general provision in the policy relating
to disclosure11 on the facts of that case resulted in uncertainty as to what the insured
6 1997 (4) SA 950 (NKA) at 980 B – C
71999 (1) SA 208 (AD) at 216F.
81999 (4) SA 1177 (SCA) at 1182 G – H.
92011 (1) SA 234 (GSJ) at para [32].
10A specific clause, like the one in casurequiring reporting incidents for which the insured does not want to
claim but which may result in a claim in the future. The clause in that decision required that the insurer be
advised ‘as soon as you become aware of any possible prosecution or inquest’.
11A general clause, like the one in casu requiring that the insured be informed immediately of any
changes to circumstances that may influence whether we give you cover, the conditions of cover or the
premium charged. The clause in that case provided that ‘you must inform the company of all facts that are
was required to disclose. Whether such uncertainty arises will obviously depend on the
facts of each case.12
THE FACTS:
[17]
The non-disclosure relates to two events that occurred, namely:
(a)
On 2 April 2008 the Plaintiff damaged his vehicle when a wheel struck a pothole.
The damage apparently amounted to some R15 000. This incident was not
reported to the Defendant and no claim was made in respect thereof.
(b)
On or about 11 April 2009 the Plaintiff was involved in a collision with the vehicle
in Beach Road, Amanzintoti. The Plaintiff testified that he thought the damage
would be approximately R20 000 which would not make it worth for him to claim
in the light of the amount of the excess payable. He also considered that the
collision was due to his fault and thought that he could not claim for the damage
sustained. Within two weeks of the occurrence of that incident he had however
discovered that the damage in fact amounted to some R200 000-00.
[18] There is a dispute on the evidence as to how the incident of 11 April 2009
occurred and what it entailed. The Plaintiff testified that he had come out of a parking
lot in Beach Road and hit a tow bar on a bakkie that was parked there as he pulled off,
creating the impression that this all happened at low speed. According to his evidence,
material to the acceptance of the insurance or the premium that is charged. If you fail to do this, the
company may, at its option, declare this policy void. As this also applies during the currency of the policy,
any changes must be reported immediately’.
12 Such uncertainty does not arise in this matter, as the terms of the specific provision in the policy of
insurance are clear, and were not complied with.
the right hand side light on the vehicle was damaged and some other damage was
caused to the vehicle on the right. The Defendant called the driver of the other vehicle,
Mr Larcher. He testified that the Plaintiff had driven at high speed up and down the
road at a pub where he had been earlier in the afternoon, and then later came to Beach
Road where he was revving the engine of the vehicle before pulling off at huge speed,
when he lost control and collided with the back of his (Mr Larcher’s) bakkie. He saw his
bakkie ‘jump’ in the air. The light, exhaust and tow bar on his bakkie were damaged.
The plaintiff’s vehicle stopped further down the road, initially he said about 500 metres
but later conceded that the Plaintiff might have stopped 200 metres away (which might
still be too generous an estimate). He witnessed the collision. His description of the
damage to the plaintiff’s vehicle, was that it was major. The Plaintiff’s vehicle could not
be driven from the scene. The front right wheel had become completely detached.
When the vehicle was pulled onto a flatbed trailer which removed the vehicle from the
scene the front bumper scraped on the road. The vehicle had skidded down the road
after the collision before it came to a standstill. He went to the Plaintiff who was in an
argumentative and pugnacious mood. He testified that the Plaintiff urinated on the front
of the bumper of his vehicle, as if the whole incident was a joke. In his view the Plaintiff
was ‘full of alcohol’. The Plaintiff had told him that he should not go to the police and
that he would settle the damages in respect of his bakkie.
[19] Mr Larcher’s evidence was criticised for overstating the estimate of the distance
the vehicle had travelled before it came to a standstill after the collision, and for the
conflict between his evidence in court and what he had said to the Defendant’s
investigator regarding the place where the Plaintiff urinated after disembarking from the
vehicle. Mr Larcher had told the investigator, Mr Herbst, that the Plaintiff had urinated
against the door of the vehicle, as contrasted to his evidence in court that the Plaintiff
had urinated on or against the front of his bumper.
[20] I am mindful that the position of exactly where the Plaintiff allegedly urinated
against the vehicle was not dealt with in the cross-examination of the Plaintiff and that
he therefore did not have the opportunity of commenting thereon. In my view however
this is an immaterial discrepancy. Likewise, Mr Larcher’s possible overestimate of the
exact distance from impact to where the vehicle came to a standstill is not all that
significant.
[21] On what is material, Mr Larcher’s evidence is consistent, namely that this was no
minor accident. The Plaintiff was in probability under the influence of alcohol, revving
the engine of the vehicle and after the accident urinated next to or against the car,
wherever exactly it may be, in a built up area. That is not the conduct of a sober,
responsible person.
[22] But most importantly, a collision causing Mr Larcher’sbakkie to ‘jump’ and the
vehicle thereafter still careering or skidding some distance, even if less than 200
metres, down a tar road, resulting in the front right wheel of the vehicle coming off
completely so that the vehicle could not be driven, suggests gross negligence, if not
reckless driving and behaviour.
DISCUSSION:
[23] Accepting the above factual matrix, the question is whether the non-disclosure of
that incident to the Defendant at the time it occurred excuses liability or whether the
manner in which it was disclosed to the Defendant’s investigator, at the time the claim
was made in respect of the accident which occurred on 8 January 2010, excuses
liability. I shall consider the latter first.
[24] Regarding the Plaintiff’s obligation to make disclosure at the time of claiming, the
relevant provision in the policy provides:
‘In order to have cover you need to … provide us with true and complete information
when you … submit a claim …’.
[25] The only evidence in this regard was that of the investigator, Mr Herbst. The
transcript of his interview with the Plaintiff was by agreement between the parties
admitted to be an accurate record of what was said. During an interview, which
appears to have taken place on 13 January 2010, the following was said:
‘MR HERBST: Have you as the incident driver in the last three years suffered any losses
relating to any vehicle whether a claim was submitted or not … [indistinct].
[Noise on microphone]
MR JERRIER: Well the rim and the front fender and for me to basically … [indistinct].
MR HERBST: Ja, when was that accident?
MR JERRIER: That was round about April last year13 .
MR HERBST: April last year.
MR JERRIER: March/April.
MR HERBST: Okay, but you were covered by Outsurance.
MR JERRIER: I was covered with Outsurance but it was not worth me claiming.
MR HERBST: No that is fine. Has an insurance company ever cancelled or refused to
give you cover?
MR JERRIER: No’.
[26]
In a subsequent follow-up interview on 20 January 2010, the following was said:
‘MR HERBST: Okay 100%. Just touching on your previous insurance, your previous
claim, you told me that you had a previous incident where you damaged your rim for
R15 00014, you didn’t claim because it was within excess?
MR JERRIER: No, no the rim was R15 000 but I also damaged the fender and things like
that.15
MR HERBST: Okay, you told me you hit a pothole or something like that?
MR JERRIER: Ja, the pothole was a rim which was the R15 000 but I also damaged the
front bonnet and the front headlight in a different incident which I also didn’t claim for, ja’.
…
Later the interview continues
13That would have been 2009, thus referring to the second accident?
14Although the first interview referred to the incident ‘about April last year’ i.e.2009, it might be that
damage to the rim of R15000 was referred to in the portion marked ‘[Indistinct]’ otherwise the follow-up
interview would not have referred to it as the ‘previous incident where you damaged your rim for R15 000,
which in fact had occurred during April 2008.
15The only incident on the evidence where damage of that nature occurred was in the incident of 11 April
2009.
‘MR HERBST: Okay no, obviously ja, because I’ve also ascertained that the previous
claim that you had was in excess of about R200 000 where you were in Toti in front of
Almega, you were revving the car. The car jumped into gear and you smashed into a
bakkie?
MR JERRIER: Yes, but I did not claim anything.
MR HERBST: No 100%, but remember I asked you any claims, any accidents whether a
claim was submitted or not and you told me it was only for the rim and you said to me
the reason why you didn’t claim for that is because it was within excess, okay’.
[27] A fair reading of these portions of the transcript does not suggest to me as the
only reasonable inference, that the Plaintiff did not provide ‘true and complete
information when submitting the claim’. At the first interview the Plaintiff admittedly
seemed to refer to only one incident (although the answer to the initial question was not
recorded and the end of the answer to the investigator’s question was simply marked
‘[Indistinct]’. When the matter was however revisited at the second interview, the
Plaintiff of his own volition referred to both incidents which he had not claimed for,
without being prompted by the investigator.
[28] It seems to me that the only contractual context in which the non-disclosure of
the accidents may validly be raised as excusing liability, is in relation to the provision
which reads (omitting irrelevant words):
‘you need to … inform us immediately of any changes to your circumstances that may influence
whether we give you cover, the conditions of cover or the premium we charge … this includes
incidents for which you do not want to claim but which may result in a claim in the future’.
[29] Both the previous incidents, even if the Plaintiff did not want to claim and had
undertaken personal liability for any claim in respect of Mr Larcher’sbakkie against him,
were incidents ‘which may result in a claim in the future’. In my view it would be
sufficient if they were incidents which may result in a claim, in the sense of ‘could’ result
in a claim, it being irrelevant whether they ever actually would result in a claim, whether
such failure might be due simply to no claim being pursued by any party, or whether a
claim is precluded by an inclusive full and final settlement offer in settlement previously
made, or for whatever reason.
[30] Both incidents would cause a reasonable man to conclude that knowledge of
their occurrence would indicate a change to the Plaintiff’s circumstances, at the very
least from a claims history perspective, but also as a moral risk, that may (not
necessarily would) influence whether the Defendant would give the Plaintiff cover, the
conditions of cover or the premium they would charge.
[31] The Defendant adduced the evidence of Mr Luan Van Rooyen, an in-house
actuary of the Defendant, who was the only witness to testify on the probability of these
incidents influencing whether the Defendant would give cover, the conditions of cover or
the premium charged. I do not intend summarising his evidence in any great detail as it
is a matter of record. Stripped to its essentials, he testified as to the importance of an
insured’s incident history and the previous claims experience of the regular driver of a
vehicle, as one of the ‘Risk and Rating’ factors. Leaving aside the quantum16 of claims,
16 He testified however that a claim of R200 000-00 on a vehicle insured for R850 000-00 would raise
alarm bells and probably initiate an investigation had it been reported.
he testified that the existence of previous claims, even if not proceeded with and
withdrawn, could and probably certainly would result in an adjustment in premium or
other terms relating to the acceptance of the insured risk. He explained that the
occurrence of incidents which may involve claims, may trigger a multi claimant process,
which is a computer activated mechanism, dependant on a number of considerations
including incident frequency, even incidents that are reported and then withdrawn for
whatever reason, which will have an impact when an insured requests a change, or at
the time of renewal, or when another claim is reported. He could not state
unequivocally whether the multi-claim alert would have been raised had the previous
two incidents been reported, but certainly believed it could have kicked in. He opined
that it was only in approximately 10% of multi claim cases, where action would not be
taken by the Defendant.
[32] Whatever Mr Van Rooyen’s actual experience and whatever the Defendant’s
policies may be, his evidence is simply consistent with the view I believe a reasonable
man would have taken of the two incidents and the impact they would have, being the
question decisive of the issue, namely that they amounted to a change to the plaintiff’s
circumstances that may influence whether cover is given (or continued), the conditions
of such cover, or the premium charged.
[33] Mr Sichel for the Plaintiff was critical of the wording of the Defendant’s policy
conditions, particularly the examples that are provided, as lacking in particularity and not
adequately drawing the attention of the Plaintiff to the need to have reported such
incidents. The problem with giving examples, is of course always that examples of all
conceivable applications can never be provided, and if the very situation which arises is
not covered by one of a myriad of examples to be given, the same complaint will
remain. The general principle as to what was required to be disclosed was in my view
adequately stated in the policy.
[34] The Plaintiff should have reported these previous incidents within the time frames
required in terms of the policy, even if he did not want to claim. He failed to do so. This
failure amounted to a material non-disclosure or breach of the terms of the policy,
absolving the Defendant from liability.
[35] Absolution from the instance was sought at the end of the plaintiff’s case, and
dismissed. I did so as I did not at that time think that the Defendant necessarily had an
unanswerable case, particularly in the absence of what it stance would be in relation to
the non-disclosure, and whether its track record might not show that it adopts a more
benevolent attitude to that which I considered to be the attitude of the reasonable man.
At the end of the trial, I am however satisfied that the Defendant has discharged the
onus.
THE DRIVING UNDER THE INFLUENCE DEFENCE:
[36] In the light of my conclusions above, it is unnecessary to consider the driving
under the influence of alcohol defence. I accordingly do not deal with it in any great
detail, but in the event of this judgment being appealed and it possibly assuming
significance, I make the following few brief observations.
[37] The Defendant in this regard relied extensively on a written statement by the
former manager of the Plaintiff”s restaurant, Mr Johan Gouws, recoded by the
investigator and stating that the Plaintiff on the evening concerned had consumed
between ‘8 and 9 double brandy and coke between 20h00 and 23h00” after he was
already drunk when he arrived at the restaurant. I am not persuaded that the interest of
justice justify the admission of the statement in evidence. It relates to a highly material
and potentially decisive issue, on which no cross-examination would possible to
establish possible bias and/or mistake. However, even if the statement was admitted,
the evidential weight to be attached thereto in terms of s 35 of the Civil Proceedings
Evidence Act 25 of 1965 would be so minimal as not to disturb the direct viva voce
evidence of the Plaintiff and his friend Mr Ruthnum who arrived at the scene, both of
whom disputed that the Plaintiff was under the influence.
[38] I accept the expert evidence of Professor Saayman unreservedly. His
conclusions are however on the factual finding of what was consumed. In his view the
consumption of two double brandies over the time involved as the Plaintiff testified
would not have left the Plaintiff under the influence of alcohol. In his professional view,
the half tablet of Serrepress taken in the morning would contribute insubstantially to the
Plaintiff’s behaviour. Furthermore he was of the view that the Plaintiff’s conduct that
evening would not accord with a person who had consumed eight to ten double
brandies.
COSTS:
[39] Regarding costs, the Defendant was successful. The hearing lasted materially
longer than the two days for which the matter had previously been enrolled on the 16
March 2012 when it was adjourned due to the two days being insufficient, and the costs
reserved. The Plaintiff should accordingly also be liable for the costs of that
postponement that were reserved.
ORDER:
[40] Accordingly, the Plaintiff’s claim is dismissed with costs, including the costs
previously reserved in respect of the hearing that was scheduled for 16 March 2012.
DATES OF TRIAL: 18, 19 & 20 FEBRUARY 2013.
DATE OF JUDGMENT HANDED DOWN: 20 MARCH 2013
PLAINTIFF’S COUNSEL: ADV R D S SICHEL
PLAINTIFF’S ATTORNEYS: BROGAN & OLIVE
c/o AUSTEN SMITH ATTORNEYS
Tel.: 033 392 0500
DEFENDANT’S COUNSEL: ADV. C PRETORIUS
DEFENDANT’S ATTORNEYS: HARDEMANN & ASSOCIATES INC
c/o VIV GREENE ATTORNEYS
Ref.: OUT/13762.MAE
Tel.: 033 342 2766
Please feel free to leave your comments below:
