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[2021] ZAGPPHC 111
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Motshwane v iWyze Valuables Insurance (87941/2016) [2021] ZAGPPHC 111 (26 January 2021)
HIGH
COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
(1)
REPORTABLE: NO.
(2)
OF INTEREST TO OTHER JUDGES: NO.
(3)
REVISED.
DATE
26
FEBRUARY 2021
CASE
NO: 87941/2016
In
the matter between:
ADVOCATE
BOKANG MPHO MOTSHWANE
Plaintiff
and
iWYZE
VALUABLES INSURANCE
Defendant
Coram:
Davis J
Insurance
– rejection of claim; material non-disclosure; extent of
obligation of insured
;
disclosure
must be risk related to be material
.
J
U D G M E N T
This
matter has been heard in open court in terms of the Directives of the
Judge President of this Division dated
25
March 2020, 24 April 2020 and 11 May
2020.
The judgment and order are accordingly published and distributed
electronically.
DAVIS, J
[1]
Introduction
1.1
The plaintiff took out
short-term insurance with the defendant on 14 December 2015 to
comprehensively insure his newly purchased
Renault Megane motor
vehicle.
1.2
On 28 February 2016 the
plaintiff was involved in a motor vehicle accident and the Renault
Megane was damaged beyond economic repair.
1.3
On 13 May 2016 the
defendant rejected the plaintiff’s insurance claim, citing
material non-disclosure of refusal by another
insurer as the reason.
1.4
Both the actual
non-disclosure and the materiality thereof are in dispute.
[2]
The background facts
Despite what has been stated in
paragraph 1.4 above, the surrounding facts of the case are largely
not in dispute. Due to
rather extensive investigation
by the defendant
of
the plaintiff’s claim, even the preceding recorded
conversations between the plaintiff and the broker and the plaintiff
and the representative of the defendant when the insurance cover was
obtained, have been obtained and transcribed (the parties
are in
agreement with the correctness of these transcriptions). From
this and other documentary evidence, the background
facts are the
following:
2.1
On 17 October 2015 the
plaintiff took out a short-term insurance policy with the Mutual and
Federal Insurance Company (M & F)
for another vehicle of his.
At an intersection, someone drove into the plaintiff’s vehicle
and a claim for R 208 475,
32 was registered with M & F on 2
November 2015, and subsequently paid out. It appears that the
vehicle was “written
off” and the policy terminated “as
cover was no longer required”.
2.2
Shortly hereafter, the
plaintiff purchased the Renault mentioned in paragraph 1.1. He
needed to have insurance cover in place
before he could drive the
vehicle off the motor dealership’s floor.
2.3
For purposes of
acquiring insurance cover for the vehicle, the plaintiff sought and
obtained quotations. This was done via
a broker and the
relevant part of the conversation between the plaintiff and the
broker was recorded as being the following:
“
Broker
:
Absa R 5479, Mi Way R 6191, Oakhurst R
Highest, M & F, Santam wouldn’t give me a quote.
Also
checked with KP, A & G, New National, but the lowest was Absa.
Client
:
I think I’m actually going
to speak to M & F, because I was already an existing
client with
them, then I doubt from what it was, to that much, yebo.
Broker
:
Ok, because I was there myself, né, I tried to do an E-quote
and they wouldn’t
my …
Client
:
They wouldn’t?
Broker
:
Ja, they wouldn’t …
ee risk ratio.
Client
:
Pardon?
Broker
:
The risk, they said that the risk, you are a high risk client, that
is what they said.
Client
:
Oh, they didn’t, they didn’t want to deal with me.
Broker
:
Yes
Client
:
Why am I a high risk …?
Broker
:
Explains due to the accident, irrespective of whose fault it is.
Client
:
So calling them won’t make a difference.
Broker
:
I don’t think so, no went I went there, they asked: was this
client already insured
with us? And I said yes, it was, he was, he
was sorry and like but you know they had to get confirmation from
other higher authority
and they said they won’t be able to
proceed with the quotation.
Client
:
Not even with a quote.
Broker
:
Sorry
Client
:
Not even with a quote.
Broker
:
Yes, I could not get a quote at all from them
.
2.4
The insurance cover
which the plaintiff obtained from the defendant, was preceeded by a
telephone call which went like this:
“
Agent
:
iWyze is underwritten by M & F Insurance Company Limited, which
is a licensed financial
services provider and a member of the Old
Mutual group …
So who are you currently insured
with, it can be for a house or for contents or for another vehicle
Client
:
No.
Agent
:
You are currently not covered?
Client
:
I am only covered with life insurance, that is with Momentum and that
is not short
term.
Agent
:
And for how long have you had uninterrupted short term insurance
cover?
Client
:
For a period of two months.
Agent
:
For a period of two months, ok and then have you or anyone you intend
covering
even been informed by an insurance broker or an
Administrator or Insurance Company that your insurance was cancelled
or you should
seek alternative insurance or you have been refused
renewal of insurance, have these ever happened to you?
Client
:
(Deep breath) Ahmm, no.
Agent
:
Ok, thank you, and then have you ever had any accidents, incidents or
losses in
the past 5 years?
Client
:
In the past 5 years, only this recent one which was in November 2015.
Agent
:
which was in November, ok, and then what happened …
”
2.5
After this
conversation, a quote was prepared, which the plaintiff accepted.
This resulted in a “welcome pack”
being sent to the
plaintiff. This contained: a welcome letter, a policy schedule,
general policy terms and conditions, an
“iAlert”
brochure, a no-claim reward brochure, a statutory notice to
short-term insurance policyholders and a statutory
SASRIA Soc Ltd
notice. All these documents were electronically generated.
2.6
The iWyse “Schedule
Summary” consisted of a number of pages. The first page
contained the plaintiff’s particulars
and an itemized table of
the composition and calculation of the premiums, totaling R 2966,05
per month. The vehicle was identified
by its registration
number. The second page contained details of a R10 404.31
no-claims reward and an advertisement
of roadside and household
emergency numbers. The third page is headed “DECLARATION”
and contains, inter alia,
the following (all printed):
“
Who were you previously
insured with? Not insured
Have you been convicted of any offences?
No
How many accidents or losses have you had
in the past 5 years. This includes accidents,
incidents or losses regardless of whether you
claimed for them or not and regardless of
whether you were insured or not.
1
Have you or anyone you intend covering ever
been informed by any insurance broker,
administrator or insurance company that:
No
·
Your
insurance was cancelled?
·
You should
seek alternative insurance?
·
You have been
refused renewal of insurance?
·
Have you or
anyone you intend covering ever had your insurance policies cancelled
due to fraud or dishonesty
?
PREVIOUS LOSSES.
LOSS DATE LOSS
TYPE
LOSS
VALUE
02/11/2015
Vehicle Third Party Liability
R323 000
…
You must check all the information
that you have provided to make sure that it is correct, including
material information.
Material information is information that
a reasonable person would consider important to provide to iWyze so
that iWyze can properly
assess your risk. In assessing your
risk, iWyze can decide whether or not to insure you or what premium
to charge for your
risk and whether to apply additional terms and
conditions
”
.
The fourth page contains extensive details of the
Renault, including serial numbers, “extras”, immobilizer
particulars
and particulars of where the vehicle would be kept and
who the regular driver would be as well as his licence particulars.
The fifth and sixth pages again refer to the extent of cover chosen,
including the SASRIA premiums.
2.7
The general terms and
conditions, included in the next document span some 24 pages with 13
clauses and their sub-clauses in fine
print. Clause 4.1 thereof
accord with the caution to check all information as well as the
descriptions of materiality contained
in the abovequoted portion on
page three of the policy schedule, to which the following has been
added:
“
4.2 IMPORTANT: All
information provided by you will be validated at claims stage
”.
2.8
After the inception of
the policy, premiums were paid and time progressed. In January
2016, the vehicle was involved in a
minor accident, assessed by the
defendant’s appointed “panel beater” at some
R40 000.00. The plaintiff
submitted a claim to the
defendant, which was paid and the vehicle was repaired after the
plaintiff had paid the required excess.
2.9
On 28 February 2016, on
his way home, the plaintiff was involved in a more serious accident
when an oncoming vehicle veered into
the plaintiff’s lane,
resulting in a virtual head-on collision. The vehicle was,
after a full investigation and assessment
by the defendant, as
evidenced by a report with numerous photographs, tests and
valuations, determined to be uneconomical to repair.
Having
regard to the excess payable and the credit shortfall and amount due
to Wesbank at which the plaintiff had financed the
vehicle, the claim
amount determined by the defendant under cover of the policy, was R
322 342, 61.
2.10
Initially the defendant
indicated that the claim would be entertained and that the merits
regarding negligence in causing the accident
was not held against the
plaintiff. Subsequently, however, on 27 April 2016 the
plaintiff was informed that his claim was
rejected. The formal
rejection letter reads as follows:
“
The rejection of the claim
is due to the following reason(s):
·
Material
Non-disclosure: Refusal of Insurance. Validation of the claim
revealed that you failed to disclose to us that you
have been
previously refused insurance by another broker, administrator or
insurer prior to inception of your policy with us.
A disclosure
opportunity was created for you at sale/quotation stage of your
policy and you opted not to disclose this information.
The
disclosure of the refusal to renew insurance and cancellation is
material for consideration by the present underwriter to decide
if
cover would have been issued, if the risk premium would have been
amended or if the confirmation of the cover would have been
declined
at sales stage
”
.
[3]
The general
principles of disclosure in insurances contracts
:
3.1
At common law, the
principle is trite that, when seeking insurance cover, an insured
must make full and complete disclosure of all
facts which may be
material to the insurer’s assessment of the risk. An
insurer can then properly assess and decide
at what cost (i.e. the
premium) it will assume the risk or whether it will do so at all.
See:
Regent
Insurance Co Ltd v King’s Property Development (Pty) Ltd
2015 (3) SA 85
(SCA) at [20].
3.2
In order to preclude
insurers from treating misrepresentations or non-disclosures that are
trivial as grounds for avoiding insurance
contracts and rejecting
claims, legislation has been enacted, regulating the position in the
short-term insurance market.
Since the inception of the
Short-term Insurance Act, 53 of 1998
, there is no longer a
distinction in the test for materiality between misrepresentations
and non-disclosures. The test is
an objective one and the onus
in this regard is on the insurer. See.
Clifford
v Commercial Union Insurance Co Ltd
[1998] ZASCA 37
;
1998 (4) SA 150
(SCA) and
Mutual
and Federal Insurance Co Ltd v Oudtshoorn Municipality
1985 (1) SA 419
(A) (these judgments are still valid on this topic,
despite having dealt with section 63 (3) of the Insurance Act, 27 of
1943,
see:
Regent
Insurance
above at
para [23]).
3.3
The abovementioned
legislative enactment, being
Section 53
(1) of the
Short-term
Insurance Act, reads
as follows:
‘
Misrepresentation and
failure to disclose material information
(1)(a) Notwithstanding anything to the contrary
contained in a short-term policy, whether entered into before or
after the commencement
of this Act, but subject to subsection (2)–
(i) the policy shall
not be invalidated;
(ii) the obligation of the
short-term insurer thereunder shall not be excluded or limited; and
(iii) the obligations of the
policyholder shall not be increased, on account of any representation
made to the
insurer which is not true, or failure to disclose
information, whether or not the representation or disclosure has been
warranted
to be true and correct, unless that representation or
non-disclosure is such as to be likely to have materially affected
the assessment
of the risk under the policy concerned at the time of
its issue or at the time of any renewal or variation thereof.
(b)
the representation or non-disclosure shall be regarded as material if
a reasonable, prudent person would
consider that the particular
information constituting the representation or which was not
disclosed, as the case may be, should
have been correctly disclosed
to the short-term insurer so that the insurer could form its own view
as to the effect of such information
on the assessment of the
relevant risk’
.
[4]
The oral evidence
Apart from the common cause facts and documentation
constituting the source of the backgrounds facts referred to in
paragraph [2]
above, the following oral evidence was led:
4.1
The plaintiff:
He testified that he did not consider that his previous
insurance policy had been cancelled in any of the manners
contemplated in
the defendant’s insurance questionnaire put to
him: he had done nothing wrong or dishonest in respect of his
previous policy
with M & F and the contract had terminated when
it was no longer necessary after the subject thereof was no longer
insurable.
It was not cancelled by M & F. He
did not seek to renew it and had not received any adverse
notifications
from M & F. He could not understand why M &
F would decline to furnish him with a quotation. He did not
know
that he was deemed to “high risk” and was never
furnished with any particulars in this regard. He did not
consider
the declining of furnishing of a quotation as a refusal to
insure. He considered the defendant bound by the impression
created
by it after his first claim in January 2016 had been approved
and paid out after it had been validated. Had that claim been
rejected and his policy then been invalidated, he would have effected
the repairs himself and cancelled the policy. In the
plaintiff’s view, he had answered all the questions put to him,
in the manner in which they had been put to him, prior to
obtaining
insurance cover from the defendant, truthfully. Had he been
asked whether a company had refused or declined to
furnish him with a
quotation, he would have answered that question, but it was never
asked in that fashion. The plaintiff
was his own only witness.
4.2
Peter Walker:
The defendant’s first witness was one of its
assessors at the time, Mr Peter Walker. He explained that there
are two
types of investigation done in respect of a claim. The
first is a so-called “desktop” investigation.
Although
called a “desktop” investigation, it is rather
extensive. All information which can be sourced by way
enquiries
in respect of the client’s claim history, previous
insurance covers and particulars regarding the incident, the
reporting
thereof and the people involved and eyewitness particulars
are gathered during this investigation. The second type of
investigation
performed is an “on the road”
investigation. During this investigation the vehicle is
physically inspected, the
accident scene is visited, police records
and accident report information are investigated and witnesses and
the client are interviewed.
Mr Walker was not involved in the
plaintiff’s first claim under the contract in question in
January 2016. Mr
Walker was, however, involved in the
processing of the plaintiff’s second claim, that is the one
being the subject matter
of the current litigation. After the
claim had been registered and sent to the claims department, he
received it on 31 March
2016. On 4 April 2016 he did “spot
checks” at other insurance companies. This involves
sending e-mails
to a random selection of other short-term insurance
companies to find out if they had any record of the client in
question.
E-mails were in this instance sent to Budget
Insurance, First for Women and M & F. Lastmentioned company
replied some
time later. Its reporting was recorded in a claims
presentation by one Lawrence Coetzee as follows: “
Good day.
Kindly note that the insured had a Motor-sure Personal Lines Policy
number …………….
with Mutual &
Federal and a declined quote due to loss ratio. Please view the
claims history for the last 5 years below
…
” (then
the claims history referred to in paragraph 2.6 above was set out).
Mr Walker made no decision on the claim
or on the information
obtained by him. He forwarded it to Mr Modupi Mokwena who in
turn forwarded it to Mr Lawrence Coetzee
who proceeded with the
validation process. Mr Walker could not explain what the
reference to “loss ratio” was
and stated that it was an
“underwriting question”.
4.3
Mr Mokgobolotho
This witness was an investigation team leader in the
employ of the defendant. He allocated “on the road”
investigations
and managed teams of investigators. He was the
team leader who attended to the plaintiff’s claim in question
and who
had allocated the claim to aforementioned Lawrence Coetzee
(who has since left the employ of the defendant). He noted Mr
Coetzee’s report and forwarded it to a management team to
consider, which they did one Friday morning, arriving at the
conclusion
to reject the plaintiff’s claim. At the
management meeting, the conversation between the plaintiff and his
broker had
also been considered. He testified that the issue
was not one of “losses” or previous claims, but purely
the
non-disclosure of a refusal of insurance. According to Mr
Mokgobolotho, when an insurance company refuses to provide an
insurance
quote, it is an indication that they are not prepared to
deal with a particular client. For anyone else to deal with the
client would require a transfer of risk which would require more
information. The answers given provide indications for
underwrites
as to whether to accept a client and on what terms and
conditions. He confirmed the procedure followed by the
defendant as
being the following: a client talks to a sales agent
telephonically, is asked questions and the answers are recorded.
Thereafter
a “quote” is generated and a premium is
offered to the client who then has to decide to accept it or not.
The
questions asked are all insurance underwriting related.
Had, in this instance, the defendant been informed at the time that
the agreement was concluded, that the answer to the underwriting
questions (relating to M & F’s refusal “to quote”
the plaintiff) was “yes”, they would have declined to
insure the plaintiff. In his view, the refusal to quote
is the
same as refusing to insure. It also results in a client having
to seek alternative insurance as his only other option.
Mr
Mokgobolotho was asked to comment on the wording of clause 4.1 of the
policy referred to in paragraphs 2.6 and 2.7 above.
His
response was that the obligation to furnish information was on the
client, but the decision in respect thereof would be that
of the
underwriter. He further shed some light on the validation
process which took place in respect of the plaintiff’s
first
claim under the policy in question. At that time “checks”
were made with Outsurance, MiWay and Callout
with no adverse
information being obtained. This resulted in the claim being
validated and paid. Now that M & F’s
stance has
become known, the defendant is counterclaiming return of the amount
paid. His explanation of “high risk”
based on “loss
ratio” was that it was an underwriting issue relating to the
premiums paid or recovered over a certain
period of time and the
costs or loss paid out. He could, however, not further
elucidate thereon, but reiterated that, if
a client had answered to a
question put to him by an agent that another insurance company had
refused to quote him, the defendant
would also refuse to quote the
client.
4.4
Mr Tsamayi
Mr Tsamayi was an insurance underwriter with an advanced
Diploma in Insurance and with 14 years of experience. He has
been
employed at Old Mutual iWyze since 1 September 2017 and was
accordingly not in the employ of the defendant at the time of either
the application for insurance by the plaintiff, the claim/s in
question or the rejection in dispute. He was only asked
for his advice subsequent to the events. He was, however able
to provide evidence of a factual nature regarding the defendant’s
business practices. He initially stated that the questions
contained in the questionnaire referred to in paragraph 2.6 above
was
to find out from a prospective insurer if he or she has been found
undesirable by any other insurance company and if so, to
assess
whether to insure or not. He contradicted the existence of such
“assessment” taking place by giving evidence
in line with
that of Mr Mokgobolotho, namely that, if any of the answers to the
questions was “yes”, this would lead
to an automatic
decline to furnish insurance cover. He contradicted himself
again later, to say the answers were necessary
to assess the risk and
non-disclosure would deny an opportunity to do so. He then
later testified again to the opposite by
stating that the defendant’s
business rule was if a policy had been declined by any other
insurance company on the basis
of “loss ratio” in the
preceding 5 years, if would lead to an automatic refusal to provide
cover. This would
be without further investigation or
assessment and by simply relying on the other company’s
determination. He could
not advise how M & F had arrived at
its determination in question. He could not fully explain the
term “loss ratio”
but assumed that it related to the
ratio between the premiums and the value of claims over a period of
three years. In cross-examination
he was directly asked: “
So,
if one insurance company declines to quote, due to loss ratio
?”
He answered “
If in the past 5 years, we would decline
insurance. We do not investigate it. We don’t go
into loss ratio reasons,
it would take too long
”.
[5]
Evaluation
5.1
From what the various
witnesses have testified and perhaps somewhat ineffectually tried to
explain, despite questions from the court,
it appears that the term
“loss ratio” simply refers to the ratio between the total
amount of the premiums recovered
by an insurance company in respect
of a specific policy and the amounts paid out in respect of claims
submitted under the same
policy. One can understand how it can
make business sense for an insurance company to say: “Well, we
have received
only R10 000 in premiums, but had to pay out
R100 000 in claims, at this rate (or ratio) we are working at a
loss”
(This was the example put to Mr Tsamayi and he agreed
that this might be what loss ratio referred to but he was not aware
of any
other specifics in addition to his evidence summed up in
paragraph 4.4 above).
5.2
The surprising
consequence of this, on the defendant’s own witnesses’
evidence, is that should any insurance company
shout “loss
ratio” in respect of its own experience of a particular policy
or insured, then the defendant would decline
to provide insurance
cover, irrespective of what loss ratio formula that other company had
applied. On the defendant’s
evidence, this could mean
that if any insured has received a payout of a claim which equals or
which is in excess of the premiums
paid (or in any other ratio,
undisclosed by the defendant) in a period of three years before such
an insured seeks (new) insurance
cover from the defendant, his
application would be declined without ado. Such an insured
would also be none the wiser as
to why this happened.
5.3
Of course, an insurer
is entitled to arrange his business in the aforementioned fashion and
thereby supposedly limit his risks.
I say supposedly, for,
unless there are any special circumstances peculiar to a particular
insured or unless he is in the habit
or business of undertaking
hazardous exploits (which are covered by other pre-insurance
questions), the chances of an insured having
a new car written off
within 3 months of his previous car being written off (as was the car
with the plaintiff) are presumably
slim. It is the epitome of
bad luck. Be that as it may, as stated, an insurer is entitled
to run his business in that
fashion but then, in my view, the
question with which it seeks to establish these facts, should be
clear and unambiguous.
If not, an incorrect answer might not
amount to an actual non-disclosure, but simply a truthful answer to
an opaque question.
5.4
There are, in my view,
therefore two issues at stake. The first is whether the
questions asked were sufficiently clear to
elevate the plaintiff’s
answers to that of non-disclosure or not. The second issue is
more fundamental, that is whether
the “loss ratio” issue
is one pertaining to actual risk and therefore material to disclose
or not.
5.5
Dealing with the first
issue: were the questions asked on behalf of the defendant
sufficiently unambiguous so that the responses
on which the defendant
seeks to rely on in this matter, justify its avoidance of the
insurance contract in question?
The four questions
relating to insurance cover at other insurance companies than the
defendant (quoted in paragraph 2.6 above),
are bracketed together in
one section of the printed questionnaire which formed part of the
policy documents sent to the plaintiff.
These documents were
sent already completed and reflected the single answer given to the
composite question asked by the defendant’s
agent (as quoted in
paragraph 2.4 above). Three of the four questions were, in the
transcript of the oral conversation with
the agent, rolled into one:
“…
have
you or anyone you intend covering
been
informed by an insurance broker
or an administrator
or
Insurance company
that your insurance
was
cancelled
or
you should
seek alternative insurance
or
you have
been refused renewal of insurance
have these ever happened to you?
”
(My underlining). The fourth question reflected in the
printed document relating to cancellation due to fraud,
was not
orally asked, but nothing turns on this.
5.6
Upon a simple reading
(or hearing) of the questions which were asked, they appear to refer
to insurance cover
in
existence
at the
time of the three occurrences, being (1) cancellation, (2) referral
to alternative insurance and (3) refusal of renewal.
The first
occurrence, cancellation, clearly refers to instances where an
existing policy is terminated by way of cancellation by
an insurer.
In the plaintiff’s case, this did not happen. The third
occurrence, refusal of renewal, again, presumably
of an existing
policy, also did not happen. One of the witnesses for the
defendant tried to place a construction on the first
time seeking of
insurance cover by the plaintiff for his newly purchased Renault as
constituting a “renewal”, but this
clearly cannot fly.
5.7
It is the second
occurrence, advice to seek alternative insurance, which elicited some
argument. The one meaning attributable
to the question is that
which occurs where a broker or insurer, during the existence of a
policy, advises a client to seek alternative
cover. The other
meaning, is the construction sought to be placed by the defendant on
M & F’s refusal to quote,
namely that such refusal has the
result that the plaintiff had to seek alternate cover. Yes, the
result of M & F’s
refusal to quote is that the plaintiff
would by default have to seek alternative cover, but there was no
such express advice given
to the plaintiff by his previous insurer.
M & F simply refused to quote, as did another insurer with whom
the plaintiff
had no prior dealings (Santam). The question to
which the defendant actually sought an answer, if it wanted to rely
on the
real reason for rejection of the plaintiff’s claim as
disclosed by Mr Mokgobolotho and Mr Tsamayi, would have been “has
any insurance company, whether a company who had previously provided
cover for you or not, ever refused to furnish a quotation
to you for
this vehicle?”. Had the plaintiff then said “no”,
that answer would have been false and would
clearly have amounted to
a non-disclosure.
5.8
What is however of
importance, is that in its rejection letter, the defendant did not
rely on this issue of advice to seek alternate
insurance cover (the
“second occurrence” referred to above), but on the issue
of refusal only. The issue of refusal
in the questionnaire,
however, refers to renewal only and not to new cover or insurance for
a new item. The plaintiff, in
his evidence, also stressed this:
he was not seeking to renew an existing policy or to renew the
continuation of a policy by changing
insurers, he wanted to take out
a new policy, hithertofore never in existence for a vehicle never
owned by him before. The
issue of renewal and hence, the
relevance of the question, did therefore not arise. The
questions asked were therefore so
ambiguous, that the plaintiff
cannot be faulted for not having disclosed M & F’s refusal
to furnish him with a quotation.
5.9
The more fundamental
issue, however, is whether the “loss ratio” was related
to the actual risk to be assumed and therefore,
material, as
contemplated in
section 53(1)(b)
of the
Short-term Insurance Act.
Mr
Tsamayi was adamant that the “loss ratio” issue was a
relevant fact for the defendant (and its underwriter) to consider.
He gave this answer in the context of the debate about materiality.
In this regard, as already pointed out, the test for
materiality is
an objective one (
Oudtshoorn
Municipality
–
case at 435F – I).
5.10
The Supreme Court of
Appeal had occasion to consider the impact of the above in
Commercial
Union Insurance Co of SA Ltd v Wallace NO and Others
2004 (1) SA 326
(SCA) from paragraph [65] onwards. The question
to be decided therein was whether an insured had been under an
obligation
to disclose its financial position when it increased cover
in respect of stock (in that case, paper) insured against fire.
The insurance company claimed that it did, as a dire financial
situation might increase the risk of fraudulent claims (or even
arson). The court of appeal disagreed (at [68]) but found that,
as the goods that were insured constituted the stock-in-trade
of a
going concern, what was relevant to have been disclosed to the
insurer, was that the insured had ceased its trading activities
and
that the stock which it wished to have insured, were “
the
remnants of its former business, which was of doubtful saleability in
its hands
”
(at [72]). That information was directly linked to the nature
of the goods to be insured and therefore directly related
to the risk
to be undertaken in providing cover for those goods. This
information, the court found at [72] “…
would
have presented a true picture of the risk that Commercial Union was
asked to insure
”.
The information (and the disclosure or non-disclosure thereof) was
therefore
material
for the insured to take a decision on the assumption of that risk.
5.11
The learned judge of
appeal explained the court’s reasoning further as follows at
[71]: “
In my
view, there is a clear and material distinction between the risk in
each case. In the former case (insuring stock-in-trade)
it can
generally be expected that the insured will have a positive interest
in avoiding the occurrence of the event that has been
insured
against, … because of the disruption that will be caused to
the ordinary conduct of its business. The insurance,
in other
words, is taken as a precaution against the occurrence of an
unwelcome event. In the case before us, however, Press
Supplies
(the insured) had no such vested interest in avoiding the occurrence
of the insured event. On the contrary, its
occurrence was
likely to be welcomed, for it would have the effect if relieving
Press Suppliers of stock that was in any event
unwanted, without any
trouble at all … . In my view, the risk that presented
itself in this case was materially different
to the risk that would
have attached to the stock-in-trade of a going concern
”.
5.12
In similar fashion, in
the
Regent
Insurance
-case
(referred to in paragraph 3.1 above) it was found to be material to
the risk insured (also in the context of fire insurance),
that one of
the largest co-tenants of the insurer, regularly had flammable
material in storage. Information of this nature,
was considered
necessary to disclose.
5.13
Applying the above
considerations to the present case, the only possible objectively
ascertained material fact relating to the risk
attached to the
prospective provision of insurance cover to the plaintiff, was that
he had submitted a claim in respect of a previously
insured vehicle,
which has been paid. This fact he had disclosed truthfully when
asked. The fact whether another insurance
company had assessed
that the “loss ratio” between premiums collected by it
and the loss paid out, was too high, has
nothing to do with the
actual risk to be assumed, but is a purely business decision. I
hasten to add that, if an insurer
is prone to causing vehicle
accidents, due to negligence or bad driving habits, and an insurer
refuses to insure him for this reason
(or charges higher premiums),
then those facts are clearly material. All the witnesses
however, were clear that such a situation
was not what “loss
ratio” referred to, neither in general nor in the present
instance. In fact, the investigator
Walker made it clear that
there were no adverse findings made in respect of the plaintiff’s
person, his driving skills or
any propensity to be involved in
accidents. There was also no such reason why M & F labelled
him “high risk”,
the only reason was the aforesaid “loss
ratio”. This “loss ratio”, as explained
earlier, is the “ratio”
experienced by M & F in
relation to the plaintiff’s previous insurance contract with M
& F and the claim paid out
thereunder. It was peculiar to M
& F at the time and not related to the transfer of risk to any
other insurer.
[6]
Conclusion
6.1
I therefore find that
on the facts of this case, the “loss ratio” has not been
established by the defendant to be “material”
to the risk
sought to have been undertaken by it, but was at best a consideration
relevant to the exercise of a business decision.
There was
therefore no obligation on the plaintiff to disclose that M & F
had declined to quote the plaintiff on the required
insurance cover,
unless such a question was clearly and unambiguously asked, which it
had not.
6.2
It follows that
the plaintiff’s claim should succeed and that the counterclaim
for the recovery of the amounts paid out in
respect of the first
incident covered under the policy in question, should fail.
Having reached this conclusion, I need not
make a determination in
respect of the plaintiff’s pleaded reliance on estoppel.
6.3
As to the quantum of
the plaintiff’s claim, it appears that the plaintiff would have
been paid the settlement amount referred
to in paragraph 2.9 above in
terms of the policy. The policy also had a rental option which
would have been paid, in the
amount of R 5 380.13, which the
plaintiff had thus far paid himself. The plaintiff also paid
vehicle storage release
fees of R 2 359,80. This, the
defendant would have covered, had the claim been processed as it
should have been.
6.4
The plaintiff however,
also claims R 67 500,00 as a loss of fees due to him being
without a vehicle. These are consequential
damages which were
excluded from the policy. Although he might have experienced
this loss as a result of the rejection of
his claim, his action was,
however, principally based on contract for the amounts covered by the
policy only. Insofar as
the plaintiff attempted to claim these
damages outside the policy, the single sentence pleaded that “
the
aforesaid damages are causally linked to the Defendant’s breach
of the agreement
”
is insufficient to establish a cause of action for this amount.
The plaintiff also failed to produce evidence as to
why he could not
continue to rent a vehicle so as to enable him not to lose the fees
or why he could not use alternate transport.
The proposition
that, had the claim been paid out, he would have purchased another
vehicle and would then not have lost fees, was
also not sufficiently
covered in evidence. I find that this portion of the
plaintiff’s claim cannot succeed.
6.5
The plaintiff was
substantially successful and the defendant unsuccessful, both in
respect of its defence and its counterclaim.
I find no cogent
reason to depart from the customary rule that costs should follow the
event.
[7]
Order:
1.
The defendant is
ordered to pay the plaintiff the amount of R330 082,54 together
with interest thereon at the prescribed rate
of 7% per annum from
date of service of the summons to date of payment.
2.
The counterclaim is
dismissed with costs.
3.
The defendant is
ordered to pay the plaintiff’s costs of suit.
N
DAVIS
Judge
of the High Court
Gauteng Division, Pretoria
Date of
Hearing: 16, 17 & 18 November 2020
Judgment
delivered: 26 February 2021
APPEARANCES:
For
the Applicants:
Adv.
P R
Msaule
Attorney
for Applicants:
Mokgara Attorneys
,
Pretoria
For
the Defendant:
Adv L
T
Leballo
Attorney
for Defendant:
Macrobert Attorneys, Pretoria