A standard provision in a short-term insurance policy is the obligation on the insured to report a motor vehicle theft timeously. The December 2023 issue of the Ombudsman’s Briefcase features three case studies in which insurers rejected claims on the grounds that the insured did not adhere to the reporting conditions in the policy.
The reporting obligations in the three cases were to a tracking company, the South African Police Service (SAPS), and the insurer’s private investigator or underwriter, respectively.
In two cases, the Ombudsman for Short-term Insurance (OSTI) found in favour of the insured.
1. Tracking company notified four hours after the theft
The insurer rejected the claim because the insured reported the theft of her vehicle to the tracking company more than four hours after the theft was discovered.
The insured’s submission
The insured submitted that the theft was discovered at about 6am. She lived in a complex with a security-controlled entrance and thought it was unlikely that the vehicle had left the property. The insured and her brother-in-law searched the complex but could not find the vehicle.
The insured then assisted her 90-year-old mother with her daily needs. She arranged for a caregiver to take care of her mother and, at about 8am, went to the police station.
The insured submitted that she was in a state of shock, and it had not occurred to her to inform the tracking company of the theft. The insured said she called the tracking company as soon as she remembered there was a tracking device in the vehicle.
The insurer’s submission
The insurer rejected the claim because the insured acted with gross negligence when she failed to notify the tracking company of the theft timeously and had failed to apply reasonable precautions to mitigate the loss.
The theft was discovered at 6am, but the insured notified the tracking company at 10.35am. This prevented the tracking company from starting the tracking and recovery process and prejudiced the insurer in the recovery of the vehicle. During the elapsed four hours, the vehicle could have travelled hundreds of kilometres or could have been stripped.
The insured was asked about the tracking device when she went to the police station, but she did not contact the tracking company from the police station.
The insured went to work after reporting the matter to the SAPS and only called the tracking company during her tea break.
The OSTI’s findings
The OSTI considered the case law relating to gross negligence and the duty of an insured to take reasonable precautions to minimise loss.
The OSTI found that the insurer had not proved that the insured was grossly negligent or acted recklessly. At best, the insured was negligent when she did not call the tracking company immediately upon discovering the loss or when she was asked about the tracking device at the police station.
There was no evidence to indicate what time the vehicle was stolen; therefore, notifying the tracking company was not a guarantee that the vehicle would have been recovered.
The OSTI recommended that the insurer settle the claim, and the insurer agreed to abide by the recommendation.
2. Theft reported to the police almost 12 hours after the incident
The insurer rejected the claim because the insured failed to report the theft of the vehicle to the police immediately after discovering it.
The insurer said the insured breached a policy condition, which read:
What to do in the event of a claim
Tell the police
[…]
If you’ve suffered a theft, hijacking, burglary, or any crime-related incident, you must tell the police immediately after becoming aware of the incident.
The insured’s submission
In May 2021, the insured stayed overnight at the home of a family member. The next day, when he went outside at about 6.20am, he discovered that his vehicle was missing. The gate seemed to have been forced open and the palisade fencing was damaged. The insured concluded that the vehicle was stolen from the property.
The insured said he tried to phone the police, but the number was constantly engaged.
At about 7.30am, the insured drove to the police station. He was unable to report the vehicle as stolen because he could not remember the registration number. The insured said he owned five vehicles and a trailer and was unable to remember all the registration numbers.
The insured left the police station to start work at 8am at his homeopathic practice, which was fully booked with appointments for the day. The insured believed it was important that he attended to his patients and reported new cases of Covid-19.
In the meantime, the insured’s wife tried to report the theft at the police station. But the police told her that only the owner could report the vehicle as stolen.
The insured went back to the police station at about 2.45pm. Someone at the police station helped him to obtain the vehicle registration number using the banking app on the insured’s mobile device. The insured demonstrated this through correspondence between the insured and his bank.
The insured spent about an hour and 15 minutes at the police station. A case number was issued at about 4pm. It was assumed that the SAPS circulated the vehicle’s details at this time.
The insured reported the theft to the insurer the next day.
The insurer’s submission
The insurer submitted that the incident was reported to the police almost 12 hours after the insured became aware of the theft.
The insurer said the insured was able to inform his wife of the incident after it occurred and, therefore, he should have been able to inform the police.
The insured had ample opportunity to report the theft to the police before going to work that morning.
The insurer was prejudiced by the insured’s non-compliance with the policy condition. If the insured had reported the theft to the SAPS immediately after becoming aware of the incident, the loss could have been mitigated and the vehicle could have been recovered.
The OSTI’s findings
The OSTI said the insurer adopted an informal style of writing in its policy wording. The wording required the insured to “tell” the police of the theft. It did not require the insured to report the theft in writing, nor did it require the insured to furnish the police with the registration number of the stolen vehicle.
Even if the policy condition were read to mean that the insured must report the theft to the police with the registration number, the insured provided cogent evidence and a plausible version in support of his inability to report the matter to the police without the registration number.
The OSTI referred to the authoritative textbook South African Insurance Law, which states the following about expressions such as “immediately”, “forthwith”, and “as soon as possible”:
“In such cases, literal compliance is not required. A subjective element of reasonableness is read into the requirement. Thus, ‘as soon as possible’ means as soon as is reasonably possible for the insured in the light of prevailing circumstances and the position in which he found himself […] In short, notice within a reasonable time after the occurrence of the event is required, and it depends on the circumstances of each case what a reasonable time will be.”
The Ombudsman also referred to the case of Hean v General Accident, Fire and Life Assurance Corporation Ltd (1931), where the court stated that “‘immediate’ in the clause means reasonably immediate having regard to the circumstances of the case”.
The OSTI said the insurer failed to take the following into consideration:
- The insured and his wife tried to report the theft at the police station.
- There were lockdown regulations in place at the time.
- The insured had slept over at a family member’s residence where he would not have had access to the registration information.
- The insured owned five vehicles and a trailer.
- The insured provided evidence showing that he had approached his bank to obtain the vehicle’s information.
- The insured was a medical practitioner and had a duty to his patients during the Covid-19 pandemic.
Taking the above factors into account, the OSTI found that the insured told the police of the theft reasonably immediately. The insured was not in breach of the policy requirement.
Even if there had been a breach of the policy, the insurer failed to provide evidence that the vehicle would have been recovered or that there was a greater likelihood that the vehicle would have been recovered if the insured had told the police earlier.
The insurer accepted the OSTI’s recommendation to settle the claim.
2. Theft not reported to private investigator or underwriter
A logistics company reported a claim for the theft of a trailer 12 days after the theft was discovered.
The insurer rejected the claim on the grounds that the insured had failed to follow the claim-reporting procedure in the policy.
In terms of the policy, the insured was required to inform the insurer’s private investigator or underwriter immediately in the case of a hijacking or theft. The contact details of both the private investigator and the underwriter were stipulated in the policy.
The insurer submitted that the insured had delayed the investigation process and prejudiced the potential recovery of the vehicle.
The insured’s response
The insured submitted that the condition requiring the insured immediately to report the theft to the private investigator or underwriter was never provided to the insured.
The policy document in the insured’s possession contained the following requirements regarding the reporting of claims:
- Claims
(a) On the happening of any event which may result in a claim under this policy, the insured shall, at their own expense
(i) give notice thereof to the company:
(a) in respect of theft and hijack claims as soon as reasonably possible but in any event within 24 hours of becoming aware of such event;
(b) in respect of all other claims as soon as reasonably possible but in any event within 30 days of becoming aware of such event; and provide particulars of any other insurance covering such events as are hereby insured
(ii) as soon as reasonably possible but in any event within 24 hours inform the police of any claim involving theft or hijack or (if required by the company) loss of property and take all practicable steps to discover the guilty party and to recover the stolen or lost property.
The insured submitted that the trailer was fitted with two tracking devices. The tracking company was notified immediately after the theft was discovered. The theft was also reported to the SAPS immediately. Despite this, the trailer could not be recovered.
The insured argued that reporting the claim within 24 hours would not have guaranteed a recovery and would not have yielded a different result.
The OSTI’s findings
The insurer could not provide any evidence to prove that the policy provision requiring the insured immediately to report the theft to the insurer’s investigator or underwriter had been sent to the insured before the loss.
The theft was reported to the insurer 12 days after the loss was discovered. The insured did not comply with clause 6(a)(i)(a) of the policy.
The OSTI considered whether the delay prejudiced the insurer’s investigation of the claim and the prospects of recovering the vehicle.
The OSTI found that the investigation that would have been carried out by the insurer’s investigator was extensive and included approaching border posts, neighbouring countries, truck stops, hotspots, warehouses, and other places where the investigator had recovered other stolen and hijacked vehicles in the past. The time lapse was crucial to such an investigation.
It could not be concluded that the investigation by the investigator would have yielded the same result as reporting the theft to the police and the tracking company, particularly because the investigator did not rely only on informants and passive monitoring, as the police would have.
If carried out timeously, the comprehensive investigation conducted by the investigator would have increased the chances of recovery.
The OSTI upheld the insurer’s decision to reject the claim.
