Policy wording at claims time – OSTI case studies showcase importance

The importance of policy wording was underlined again in the UK’s comprehensive High Court analysis of 21 samples in coverage extensions for business-interruption COVID-19 related losses recently. At times the hearing sounded more a semantics class than a court case.

Policy wording in terms and conditions have in many other cases also been a bone of contention as it is quite often misinterpreted by the insured. A lack of knowledge and carelessness may lead to short-term claims being rejected or, as illustrated in two recent OSTI cases, can also work out in favour of the insured.

A very important aspect, highlighted during the Guardrisk/Café Chameleon case, concerned the fact that consideration should also be given to the “business” aspect of wording, as opposed to simply the legal connotation.

Case study 1 – Stolen cell phone

Mrs N claimed for a cell phone that was stolen when she left her bag on the side of the court, whilst playing netball. The insurer rejected her claim based on the following provision in the policy:

“7.3 Prevention of loss 7.3.1 The Insured shall take all reasonable steps and precautions to safeguard the Equipment, including but not limited to, ensuring that the Equipment is: 7.3.1.2 not left exposed in a public place, place of recreation, mall or social occasion where it is vulnerable to easy removal or damage.”

Based on the above, the insurer argued that the cell phone was not safeguarded, and it had been left in a vulnerable situation where easy access could be gained to the insured’s bag.

However, OSTI stated that the ordinary grammatical meaning of the word “exposed” is not “covered or hidden; visible”. “Since the phone was in Mrs N’s bag, it was not exposed. Mrs N was playing netball and it would be unreasonable for the insurer to expect her to safeguard her bag all the time,” OSTI stated. As a result, OSTI recommended that the insurer settle the claim which it did.

Case study 2 – Stolen luggage

Mrs G and her husband were travelling by train from Paris to Disneyland in France. On the train she found herself surrounded by a group of young teenage girls. When the girls exited the train, Mrs G noticed that her luggage had been tampered with and certain high-end items, amongst others a camera and its accessories, sunglasses, a tablet, headphones, jewellery and various other items as well as cash in the bag had been stolen. The matter was reported to the police and they were informed that the girls could have belonged to an organised crime ring.

However, at claims stage her insurer rejected her claim saying she was separated from her luggage when the theft took place, as required by the policy. The wording in Mrs G’s policy stated that, “[The] insured must take safety measures to make sure that personal baggage is safe and must not leave it unsecured or unattended or beyond reach at any time in a public place.”

The insurer based its assessment on the wording of Mrs G’s statement on her insurance claim, as well as the wording that the French police had used to describe the robbery. The police report noted the cause of loss as ‘Vol a la tire’ which translates to ‘robbery’ and not ‘pickpocketing’. Furthermore, the insurer also pointed out that the items could not possibly have been pickpocketed from Mrs G’s bag without her noticing. Looking at the list of items claimed for, this sounds like a reasonable conclusion.

Yet, after studying the facts, OSTI found in favour of Mrs G.

OSTI noted that the most common translation for ‘vol a la tire’, based on the information provided, was pickpocketing. “The term was used most in the context of pickpocketing, street crimes, purse snatching and shoplifting. All the examples referred to the theft of items from the victim’s pocket or person without the victim noticing,” OSTI said.

OSTI further explained that pickpocketing is a crime that typically takes place in the presence of crowds, making it difficult for the victim to notice the theft. Based on Mrs G’s account of the event, and the police statement, OSTI therefore found that Mrs G had demonstrated on a balance of probabilities that the items were stolen from her bag, which she had on her person, while she was on a crowded train. The insurer had failed to demonstrate otherwise and paid out in full for her loss.

Click here to read the detail of the two case studies.

Click here to read “Failure to safeguard mobile device leads to claim rejection – OSTI case provides pointers” – an article where OSTI ruled in favour of the insurer and the claim was rejected.

On 2 September 2020, the Ombudsman for Short-term insurance (OSTI) hosted its first online consumer workshop discussing what consumers do and do not do which contributes towards their claims and policies becoming invalidated. Common examples of consumer behaviour that influence the outcome of a claim, such as misrepresentation and non-disclosure of material information during the underwriting of the policy or during the existence of the policy and at claims stage, incorrectly assessing the value of property, and the non-payment of premiums were highlighted. Click here to gain an in- depth insight into these topics. This is also important information to share with your clients as part of your contribution to consumer education.