The matter of social justice was one of the considerations in the high-profile business interruption cases that were considered over the last year.
A prime example of how this can be approached is contained in a case study in the 2019 OSTI annual report.
A claim was refuted on the basis of material misrepresentation. In addition, the insurer held that making a payment outside the terms of the policy would be unfair discrimination if this policyholder was treated differently from others.
Background
The deceased was not related to the complainant, but was cared for by her from 2009, when his parents were no longer able to support him, to 2018 when he was fatally stabbed.
Despite several affidavits confirming the close relationship, the insurer stuck to its decision, based on the fact that the complainant had described the deceased as a family member when there had not been a blood relationship.
The Ombud suggested to the insurer that it should consider equity/fairness, given the circumstances of the relationship between the complainant and the deceased. The insurer was not prepared to make a concession.
OSTI makes provisional ruling
After the complaint had been discussed by the adjudicators, a provisional ruling was made, upholding the complaint. The provisional ruling quoted as follows from the judgment of Deputy Chief Justice Moseneke in Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC) 276I – 277A:
“Indeed, it is highly desirable and in fact necessary to infuse the law of contract with constitutional values, including values of ubuntu, which inspire much of our constitutional compact. On a number of occasions in the past this court has had regard to the meaning and content of the concept of ubuntu. It emphasises the communal nature of society and ‘carries in it the ideas of humaneness, social justice and fairness’ and envelopes ‘the key values of group solidarity, compassion, respect, human dignity, conformity to basic norms and collective unity.
The adjudicators’ meeting was of the unanimous view that in this particular case, given the circumstances of the complainant in relation to the deceased, the insurer should in fairness pay the claims under the policies, less the amounts already paid. In its response, the insurer submitted, inter alia, that “equity (fairness) remains an abstract value and an inappropriate application could result in untenable legal and commercial uncertainty”.
The complaint was again discussed at an adjudicators’ meeting and it was unanimously decided that a final determination be made that the insurer should pay the claims, based on the following:
- “It appeared to the meeting that (the insurer) was of the view that equity/fairness could only be applied within the confines of the actual policy provisions. If that is so, there would be no need for an equity/fairness jurisdiction. It is precisely when the application of the policy provisions leads to an unfair/ inequitable result that it is necessary to exercise our equity jurisdiction, as in this complaint.”
- “The view of the meeting was that, based on documentation, there was no fraudulent intent on the part of the complainant when she described the relationship as she did. She described the de facto relationship.”
- “The office is aware of the fact that fraud occurs in the insurance industry when policyholders insure the lives of people where there is no insurable interest, by describing the relationship between the parties incorrectly, in the hope of benefiting from the death of someone who has no relationship with the policyholder. In our view this is not such a case.”
- “We do not create precedent with our decisions. However, where circumstances such as these pertain, we will always consider whether we should invoke our equity jurisdiction.”
- “We feel sympathy and compassion for our complainant because of the loss she suffered, but those feelings did not inform our decision. What informed our decision was fairness. The insurer is correct that fairness is not an exact and rigid concept. It is, however, part of our jurisdiction and has been since 1998; it is prescribed as a requirement for financial ombudsman schemes in terms of the Financial Services Ombud Schemes Act, 2004; it is part of the requirements for such schemes in terms of Chapter 14 (to be effective 1 April 2019) of the Financial Sector Regulation Act, 2017; it is part of the Treating Customers Fairly approach included in the Policyholder Protection Rules; and fairness is one of the fundamental principles that the International Network of Financial Services Ombudsman Schemes recommends for financial ombudsman schemes. It is therefore clear that equity/fairness is part of the financial services landscape and has been part of our jurisdiction for more than 20 years without resulting in ‘untenable legal and commercial uncertainty’.”
There will, no doubt, be an outcry from the legal fraternity about these views, similar to other cases where ubuntu trumped legal logic. The danger exists that sympathy may outweigh fairness in decisions of this nature, affecting other policyholders.
