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[2015] ZAKZPHC 34
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Jerrier v Outsurance Insurance Company Limited (AR 4160/2010) [2015] ZAKZPHC 34; 2015 (5) SA 433 (KZP); [2015] 3 All SA 701 (KZP) (7 July 2015)
SAFLII
Note: Certain personal/private details of parties or witnesses
have been redacted from this document in compliance
with the law
and
SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Case
no: AR 4160/2010
DATE:
04 JULY 2015
In
the matter between:
SHERWIN
JERRIER
...............................................................................................................
Appellant
And
OUTSURANCE
INSURANCE COMPANY
LIMITED
....................................................
Respondent
Judgment
Chetty
J (Vahed
et
Poyo-Dlwati JJ concurring):
1.
This is an appeal against the judgment of
Koen J in which he dismissed the appellant’s claim in the
amount of R608 772,20
against the respondent, Outsurance Insurance
Company Ltd (the insurer). The Order of the court
a
quo
was made only on the issue of
liability as the parties agreed prior to trial on a separation of the
issues of liability and quantum.
The appeal centres on the
consequences for an insured who fails to disclose to his insurer an
incident which may give rise to a
claim, even though he does not
intend to lodge a claim under the contract at the time of the
incident or at any time in the future.
In the context of motor
vehicle insurance, does this failure to disclose an incident for
which the insurer has not and will not
be required to indemnify the
insured for damages to his vehicle or that of the other driver,
permit the insurer to avoid liability
when a subsequent claim is
later made, for an unrelated incident? The court
a
quo
found that the failure of the
appellant to report two previous incidents within the time frames
stipulated in the policy, even
though he had no intention of lodging
a claim under the policy, was sufficient for the insurer to avoid
liability. The court
a quo
ultimately concluded at para 34 that:
“
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.”
2.
The facts of the matter relevant to the
issue for determination on appeal are largely common cause. The
appellant owned an
Audi R8, a high performance sports motor vehicle,
which he purchased either in December 2008 or in January 2009.
He entered
into a contract of insurance with the respondent to
provide comprehensive cover for the vehicle
,
as well as for his household contents. The respondent furnished
the appellant with a written schedule of the insurance cover
,
under cover of a letter dated 5 December 2008. In terms of the
policy, the effective date of the cover was 2 January 2009.
In
respect of the motor vehicle, the respondent undertook to insure the
vehicle against risks set out in the contract, including
damage to
the vehicle as a result of a collision.
3.
The policy schedule issued to the appellant
provided for comprehensive cover of his vehicle at retail. This value
is not specified,
although the record does reflect that the vehicle
(according to the appellant) was valued at R1,5m. The appellant
intended
to insure the vehicle for less than its retail value,
allowing for depreciation
.
The policy schedule issued by the
respondent drew to the attention of the insured the following:
‘
OUT
bonus Benefits
Should
you not claim for three consecutive years, you will receive 10% of
all your premiums paid in this period at the end of the
third year.
Should you not claim for a further period of 2 years, you will
receive 20% of all your premiums paid within this period
at the end
of the fifth year. Thereafter, for each successive claim free year
you will receive 25% of all your premiums paid within
the year at the
end of each year.’
4.
With regard to disclosures made by the
appellant at the time of the issuing of the contract, the policy
schedule records a disclosure
by the appellant that he was involved
in an accident resulting in damage to his vehicle on 2 April 2008,
that being the only ‘incident’
and claim within three
years prior to the inception of the policy. The policy, issued under
invoice number OT 2433821, comprised
the schedule reflecting the
premiums payable as well as the excess, being the amount of
R20 000,00. Added to the
schedule is what is
referred to as a “facility document issued by the insurer”,
setting out the finer details of the
obligations of both parties to
the contract. The insurer, as part of its business branding profile
as the self-proclaimed leader
in the personal insurance market,
prides itself on saving the consumer money by consistently offering
the best premiums based on
the exclusion of brokers, with the result
that no commissions are payable and that its premiums are based on an
individual’s
profile. As for the terms and conditions governing
its policy, the insurer proclaims to:
‘
Say
it simply
.
There is no fine print in our documents. Our documents are easy to
read and user-friendly so there are no hidden surprises.’
[1]
Elsewhere
the policy document states:
‘
This
is a plain language document, ensuring that it is easy to read and
conveys the details of your facility in the clearest possible
way.’
[2]
Unfortunately,
it would appear that the wording of the policy is not as simple or
worded in plain language as the insurer
may have believed. The
insurer’s intention to reduce the contractual terms of the
policy to plain language seems not to have
had the intended outcome,
with the resultant uncertainty as to what was expected of an insured
who may not want
to
lodge a claim in the hope of preserving his ‘Outbonus’.
It is this precise scenario that has given rise to
the present
litigation.
5.
The policy places diverse obligations or
responsibilities on an insured. There are two particular sets of
provisions of the policy
which are relevant to the issues on appeal.
The first sets out the following:
‘
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.
This
includes any changes to any information:
-
on your schedule
-
about the financial position of any person
covered under this facility, specifically relating to defaults, civil
judgments, sequestrations,
administration orders and liquidation of
companies in which you have an interest;
-
about convictions for offences related to
dishonesty by you or any person covered under this facility.’
6.
The second set of provisions of the
contract imposing responsibilities on the insured sets out the
following in relation to the
submission of claims:
‘
Your
responsibilities
You
have certain responsibilities which are listed below. If you fail to
meet these responsibilities, your claim may be rejected.
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, hijack (including
attempted theft or hijack) or damage caused intentionally to
the
police within 24 hours of the incident.’
7.
The policy further stipulates that the
insured is required to provide the insurer with “
all
information and documentation within the time frames we set
”,
and there is a further requirement that the information must be true
and complete.
8.
On 8 January 2010, the appellant attended
to his business affairs during the course of the morning, whereafter
he played a round
of golf in the afternoon and retired to his
restaurant (an establishment owned or managed by him) later that
evening to have dinner
and a few drinks with his friends. He left the
restaurant at about 22h30 that evening, heading towards Umhlanga,
where he had another
engagement. The weather was overcast with rain,
and on the course of his journey he encountered a puddle of water,
causing the
insured motor vehicle to move sideways, as a result of
which it collided with another vehicle travelling in the centre lane.
The
appellant’s vehicle spun around, coming to a standstill at
the side of the road. He then contacted the breakdown assist service
of the vehicle manufacturer. Not before long, a tow truck operator
arrived on the scene, eager to tow away the vehicle. Eventually
the
appellant made suitable arrangements for the vehicle to be towed
away, and reported the incident to the police the following
day.
9.
The cost of restoring the insured vehicle
to its pre-accident condition, according to a repair quotation
furnished by the appellant
to the insurer, was the sum of
R608 772,29. He duly informed the respondent of the
accident and complied with all other
formalities in respect of the
lodging of his claim for this amount. There is no dispute that the
policy was operative at the time
of the accident, with the appellant
being current with his premium payments. It is not disputed
that the appellant lodged
his claim within the stipulated 30 day time
period. On 22 January 2010 the insurer rejected the appellant’s
claim.
The reason for the repudiation, as set out in the
insurer’s letter, was that the appellant was “
driving
under the influence
”.
10.
In its plea, the insurer elected to avoid
the insurance agreement and rejected payment of the claim. In
the alternative, it
tendered a refund of the premiums paid by the
appellant. The reasons put forward by the insurer in its plea, as a
justification
for its stance, were the following:
‘
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
[N…..……...]
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.’
11.
he insurer further contended in its plea
that it was not obliged to pay the appellant any amount in respect of
loss or damage to
the insured vehicle on the basis that he had
breached a condition of the policy as he was under the influence of
alcohol and had
a concentration of alcohol in his blood which
exceeded the legal limit at the time of the incident. In the
proceedings in
the court
a quo
the insurer relied on a statement by the former manager of the
appellant’s restaurant in which the manager had related to
the
insurance investigator that the appellant had consumed ‘nine
double Brandy’s and Coke between 20h00 and 23h00’.
It also emerged that the appellant was taking anti-depressant
medication at the time, following a death in his family.
12.
The appellant however disputed the
contentions advanced in the statement of the former restaurant
manager. As the manager
was deceased by the time the matter
came before the court, the insurer attempted to have his hand written
statement admitted into
evidence. The court
a
quo
concluded that it was not in the
interests of justice to admit the statement into evidence. Even if it
were, the court reasoned
that the statement would not be of
sufficient weight to displace the version of the appellant and his
friend, who arrived at the
scene of the accident on 8 January 2010,
that the appellant was not under the influence of alcohol. On appeal
before us, that the
insurer did not dispute the findings of fact by
the court
a quo
.
Mr
Pretorius,
who
appeared for the insurer, did not pursue the defence based on the
alleged intoxication of the appellant. Accordingly, this appeal
turns
on whether the court
a quo
was correct in concluding that the failure of the appellant to report
earlier ‘incidents’ (in respect of which no claim
was
lodged), amounted to a material disclosure or breach of the insurance
policy, absolving the respondent from liability for the
subsequent
accident resulting in damages of R608 772,29.
13.
In relation to what Koen J termed the
“non-disclosure” defence, the plea of the insurer
referred to a single incident
of non-disclosure, that being in
relation to an accident in Amanzimtoti on 11 April 2009. In the
course of his discussions
with Mr Herbst, the accident investigator
appointed by the insurer, the appellant of his own accord disclosed
the existence of
two
incidents
for which he did not claim. It is noteworthy that when Herbst
first interviewed the appellant, he described his
role as being to
“
motivate the claim
”
and that he was a “
mediator
”
between the appellant and the insurer. In truth, Herbst was
employed by a company retained to assess claims on behalf
of the
insurer.
14.
During
the course of his discussion with Herbst regarding the design of the
insured motor car, the appellant informed Herbst that
he had hit a
pothole and consequently damaged his rim, which cost R15 000 to
repair. The appellant stated that he paid
for the repair
himself. At a later stage in the interview, the appellant was
asked whether in the last three years he suffered
any losses relating
to any vehicle and “
whether
a claim was submitted or not
”.
[3]
The appellant responded as follows:
‘
Well
the rim and the front fender and for me to basically ….’
[indistinct]
The
appellant went on to add that it was not worth his while claiming for
the damage and he repaired it himself. When Herbst
interviewed
the appellant for a second time, the appellant confirmed that he
mentioned in the first interview that his rim was
damaged and
repaired at a cost of R15 000. The interview, which formed
part of the record reflects the following conversation:
‘
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.
Mr
Herbst
: Okay, but this is something
that you didn’t disclose to me because you said to me at the
assessment and please just keep
in mind that obviously I had a listen
to the conversation again.
……………
..
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.’
[4]
15.
In
his evidence before the court
a
quo
,
the appellant admitted that he did not submit a claim against the
insurer in respect of damages to his car, on the basis that
he
initially regarded the incident as being trivial and he estimated the
damages at R20 000. He testified that he did
not inform
the insurer of the incident as he would lose his no claim bonus.
He also thought that the accident was his fault,
and for those
reasons did not claim. In light of him paying the owner of the
other vehicle an amount of R12 000, he
considered that there
would be no prejudice to anyone by him not informing the insurer of
the incident. His evidence was
further that when he discovered
the damage to his car was R200 000 instead of the R20 000
he initially believed, he still
did not submit a claim “because
it was too late”.
[5]
16.
Under
cross-examination, the appellant conceded that he was involved in a
collision resulting in R200 000 repairs to his vehicle
and paid
R12 000 to repair the other vehicle belonging to a Mr Larcher. A
short while thereafter, the appellant drove into
a pothole resulting
in damages totalling R15 000. In relation to the collision
resulting in the R200 000 damages,
the appellant initially
believed the damages to be insignificant. Importantly though,
he did not want to lodge a claim as
this would cause him to lose his
‘no claim bonus’.
T
he
insurer refers to this in its policy document as the “OUTbonus”.
When questioned that his failure to report
the accident resulting in
R200 000 damages
c
ould
impact on the amount of his premiums, the appellant disputed this,
suggesting that premiums could be upwardly adjusted for
clients
making frequent claims on the insurer, not for those who do not
submit claims.
[6]
17.
The court
a
quo
concluded, and correctly so in my
view, that there was no attempt by the appellant to withhold
information from Herbst during the
course of the interviews.
This then leads to the crux of this appeal – whether the
appellant was contractually obliged
to disclose the two incidents in
which the insured vehicle was damaged or put differently, whether his
failure to make disclosure
of these two incidents allows the insurer
to validly avoid liability in terms of the contract. The
reasoning of the court
a quo is reflected in the following
conclusion:
‘
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.’
[7]
18.
The
evidence of the appellant is that he did not report the two incidents
to the insurer because he believed that they would fall
within the
amount of his excess of R20 000. The further reason
proffered by the appellant for not reporting the incidents
was that
he did not want to lose his OUTbonus. The “OUTbonus’
as referred to in the respondent’s policy
document is what
supposedly sets it apart from others in the insurance industry. As
the insurer’s branding slogan proclaims:
“
You
always
get something out”
.
[8]
To honour this promise, if an insured does not claim for three years
from the inception of the policy, he receive
s
10%
of the total premiums paid back in cash. As the duration of the
policy moves on to the 5
th
year and onwards, the rewards progressively increase, as long as the
insured does not claim. The policy document explains
in plain
terms language that as an insured,
you
are rewarded for not claiming
.
[9]
The document goes on to explain that the:
‘
OUTbonus
will be forfeited following the payment of any claim submitted for
any incident, including any liability claim settled
or where letters
of demand or summonses are referred to us and the incident date
falls with the appropriate OUTbonus cycle.’
[10]
19.
It
was therefore not surprising that the appellant, in light of the
benefits of not submitting a claim, which he in any event believed
fell within the confines of the excess which he would be obliged to
pay had he claimed, did not submit a claim for the two incidents
which took place in 2009. In my view, the manner in which the
insurer’s policy is designed, it positively discourages
its
clients from submitting claims. This self-absorption of the
risk or damage by an insured is rewarded by the insurer paying
the
insured 10% of their premiums after the first three years of the
policy. The protection of the Outbonus is also allowed
even if
a client submits a claim, but then decides to withdraw it. Such
withdrawal is deemed to be final in terms of the
policy.
[11]
20.
In considering the wording of the policy,
it is apparent that the insurer’s policy is not similar to
other ‘conventional’
policies, which are subject to an
annual renewal and a requirement that the insured inform the insurer
on the anniversary of the
policy of any change in circumstances that
may lead to a reconsideration of the assumed risk. It was
submitted that the insurer
chose not to require its clients to
complete an annual questionnaire, in terms of which it would reassess
the risk on a yearly
basis. This contention was not disputed.
The present matter is therefore distinguishable from that considered
in
Whyte’s Estate v Dominion
Insurance Company of South Africa Ltd
1945 TPD 382.
The respondent’s Outsurance policy provides
for an indefinite insurance facility for as long as the premiums
continue
to be paid. The longer a client remains insured with
the respondent without claiming, the greater the reward in the form
of a percentage of the premiums paid, with the first reward due after
a three year claim free period. To this extent, the policy
establishes an incentive for clients not to submit claims.
21.
In
regard to the contractual provisions on which the insurer relies for
the contention that the appellant should have reported the
two
incidents which occurred in the course of 2009, the first is that the
insured is required to inform the insurer “immediately”
of any “changes to [your] circumstances”. The
respondent proceeds to give examples of what a “change in
circumstances” entails
[12]
.
The respondent does not include in the list of circumstances an
accident or collision with another motor vehicle.
As I
understand the duty to report a “change in circumstances”
in the context of the respondent’s policy document
it relates
primarily to the risk assessment of the insured and his ability to
continue paying the premiums determined at the inception
of the
policy. In my view, this section of the policy should be read
in the light of the basis on which the insurer elected
to
assume the risk, and further what premium should be charged. In
doing so, the insurer indicates in plain language that
“
Your
premium is based on your individual profile. In short, we make
sure that good risk clients do not subsidise bad risks
”.
[13]
To this extent, the insurer requires that it be immediately informed
whether the financial position of the insured is adversely
affected
by a civil judgment, sequestration, an administration order or the
liquidation of a company in which the insured has an
interest. This
is what the insurer regards as being material to the risk it
assumes. In my view, if the respondent intended
for this clause
to include the occurrence of every ‘incident’, it should
have said so. The requirement to report
immediately
a change in circumstances contemplates, in my view, a change to the
insured’s personal circumstances rather than a change
to the
condition of the vehicle.
[14]
22.
Moreover, to suggest that this clause
obliges an insured to immediately report any incident or damage to
his or her motor vehicle
imposes an uncertain and vague burden on the
insured, subsequent to the commencement of the insurance contract.
For example,
would the insured be obliged to inform the respondent of
near misses that he encounters every day when negotiating a busy
intersection
on his way to work? Alternatively, if the
appellant hypothetically had one drink too many and drove home,
narrowly avoiding
an accident, should he have reported this to the
insurer? The permutations of what could constitute an
“incident”
are innumerable and too wide to begin to
define, unless the respondent specifically spelt out in unambiguous
terms what it required
the insured to report.
23.
Mr
Pillemer
SC, who appeared for the appellant, submitted at the outset that in
analysing the wording of the contract to determine the
responsibilities
of the appellant and the insured, the contract has
to be interpreted in
contra proferentum
against the insurer. There was no argument from the respondent
against this submission and I agree that in respect of insurance
agreements in particular, they should be interpreted strictly against
the insurer. The respondent, who set out to word its
policy in
‘plain language’ must to that extent be hoisted by its
own petard where the examples of ‘incidents’
set out in
the policy do not encapsulate the requirement to report an accident
for which the insured undertakes at the time or
at any time
thereafter not to claim in order to preserve his OUTbonus.
24.
The second contractual provision relied
upon by the respondent as to why the appellant was obliged to report
the incidents in 2009
is the provision that requires the appellant as
soon as possible but not later than 30 days afterwards, to report “
a
claim or any incident that may lead to a claim
”,
including incidents for which the insured does not want to claim but
may result in a claim in the future. The respondent
proceeds to
provide an example in the policy of an instance where the insured
vehicle is involved in a collision, but with no apparent
damage to
the other car. The insurer stipulates that it still needs to
“
know
”
about the incident so that it can take steps to “
limit
the effects of any claim which may be made by the other person
”.
In my view, the obligation to report a claim or an incident in this
provision relates to circumstances where the
insured has suffered
damages to his vehicle and where the vehicle belonging to the other
party has also been damaged. The
insured enforces the
obligation on the insurer to undertake the necessary repairs to his
vehicle. Where the owner of the
other vehicle demands payment
of its damages, the insured driver may simply refer the claim to the
insurer to settle.
25.
The obligation to report a claim or an
incident only arises if the insured wishes to enforce the
indemnification for loss which
the insurer is obliged to honour.
If the appellant was involved in an accident and the other party, as
in the case of Mr
Larcher whose bakkie was damaged in the incident at
Amanzimtoti in 2009, agreed to accept an offer in full and final
settlement
for the repairs to his vehicle, there can be no possible
reason for the respondent to be informed of the incident. In
this
instance, the appellant elected to make a conscious decision to
absorb the damages to repair his own vehicle and that of the other
party. His reward for absorbing the loss is the retention of
his no-claim status and the preservation of his Outbonus.
26.
The 30-day notice period is a
guillotine provision, after which the insurer is exempted from
indemnifying the appellant or any other
party which has sustained
damages in an accident. In the course of argument on the merits of
the matter in the court
a quo
,
counsel for the insurer raised the spectre of the appellant settling
a claim by the driver of the other vehicle which sustained
damages in
an accident, only for the other driver at a later stage to contend
that he suffered damages in an amount exceeding the
amount for which
he initially settled. It was suggested by counsel that in such
circumstances, an insurer, would be obliged
to defend or settle the
claim by the other driver. The following interchange, during
the course of argument on the merits,
is illustrative of the point:
‘
Koen
J:
Or I knocked into a
pedestrian who dented my bonnet slightly. The damage is only a
few thousand rand. But it happened
when I went down the off
ramp down the highway and I was travelling in the incorrect lane down
to Durban facing oncoming traffic.
The damage is minimal but
circumstances indicate that I am reckless.
Mr
Pretorius:
The reasonable would say
that this is a circumstance that may influence. And M’Lord,
the policy obviously does not stand
in isolation. We have to
consider the provisions no page 46 as well.
Koen
J:
Yes.
Mr
Pretorius:
That includes the
obligation. Again:
‘
You
need to report your claim or any incident that may lead to a claim to
us as soon as possible. That includes incidents for which
you do not
want to claim but which may result in a claim in the future.’
My
learned colleague, unless I understood him wrong, I think failed to
keep in mind the possibility of a claim. Your Lordship
uses the
example of the …
[indistinct]
Koen
J:
That is just from the old delict
lectures.
Mr
Pretorius:
This may relate to
such a claim. It may also relate to a third party claim.
In the instance of Larcher, a claim by Larcher.
Now again,
subjectively, which is irrelevant, the plaintiff may have thought “I
am sorting out Larcher, no claim will arise.”
Koen
J:
Well let us assume that he sorted
him out and he got an acknowledgment from him that what he paid him
was in full and final settlement
of any claim he could ever have.
Mr
Pretorius:
Yes, M’Lord
Koen
J:
Would it still [incomplete]
Mr
Pretorius:
Because Larcher, the
plaintiff at that stage thought his damages were R20 000.00. He
may have thought that Larcher, just bumping
into the tow bar may be
R50 000, that is an example. It turns out that as the
plaintiff’s damages appeared to be ten
times more, Larcher all
of a sudden had – his damages come to R40 000.00 or whatever.
Koen
J:
No, that was my example, he
discovered that the chassis is bent.
Mr
Pretorius:
Yes, substantially more.
Now he says “I am not going to pay for that.” “I
disagree that that bent
chassis was as a result of me driving into
the back of your vehicle”. Then there is this possibility
of a claim that
may arise. Larcher, if he is insured, or his
employer, will obviously report it to their insurers, and as Your
Lordship knows,
at the end of the day the big fight is going to be
between Outsurance and whoever those insurance is.
So as I say
…..[intervention]
Koen
J:
Or there may be a knock for knock
agreement. Or something.
Mr
Pretorius:
There might be a knock for
knock, one does not know.
Koen
J:
Yes.
Mr
Pretorius:
That is why “which may
result” objectively.
Koen
J:
It does not have to.
Mr
Pretorius:
It
does not have to result. M’Lord, the policy places –
clearly places an obligation on the plaintiff. The
plaintiff in
his own evidence, did not inform the defendant at the time, firstly
30 days, and alternatively on the clause on page
45, immediately.
He did not inform them. It matters not that he informed them at
claim stage. He should have
informed them at this stage and he
did not. Those non-disclosures, I submit, were
material……..’
[15]
27.
To the extent that the court
a
quo
was persuaded by this line of
reasoning, I am of the respectful view that the court erred in this
regard. Whether the driver
of the other vehicle seeks to claim
either immediately, or after 30 days of the incident or after
entering into a settlement agreement,
it is immaterial to the
insurer. The obligation to indemnify the appellant against all
loss to his vehicle arises from a
contractual nexus between the
appellant and the insurer. A third party who has suffered
damages has no contractual relationship
with the insurer. As
such, the only party against whom it can claim damages is the
appellant.
28.
Where the appellant elected not to report
the matter to the insurer within 30 days in my view marks the end of
the insurer’s
liability. The driver of the other vehicle
still has a claim against the appellant; however there is no
obligation on the
insurer to indemnify the appellant against such a
claim. The words “
but which
may result in a claim in the future
”
can only relate to an election by the insured whether he wishes to
claim beyond the 30 day period and in respect of that
incident only.
In the present matter, the appellant elected not to report the
incidents to the insurer and settled his own
loss and that of the
other driver. As long as the appellant understood that he would
have no claim against the insurer for
those incidents at the time or
at any time in the future, there was no obligation to him to bring
the matter to the attention of
the insurer. His motives for
doing so are irrelevant, but in this case it is known that it was
directed at the preservation
of his no claim bonus.
29.
It was further submitted on behalf of the
appellant that the court
a quo
conflated the reporting duties of an insured (to
immediately
report
a change of circumstances) and
the 30-day period within which the insured must inform the insurer,
even if he does not intend to
claim but may claim in the future.
An accident for which the insured does not wish to submit a claim
cannot be construed
on any interpretation to mean a “change in
circumstances” as contemplated in the insurer’s policy.
In regard
to the 30-day notice period, the common sense
interpretation of that clause can only mean that if the insured
elects not to report
the matter within 30 days, he loses the right to
claim his loss in respect of
that
incident only.
The election to
report the matter is entirely at the behest of the insured.
Consider for example if one is in a shopping centre
and the attendant
at the super market employed as a casual worker gathering shopping
trolleys accidently allows a trolley to bump
into one’s rear
fender. The damage is minimal, with barely a scrape of paint.
As the owner of the insured vehicle,
you are aware that the damage
can be repaired with an application of paint compound or renovating
polish available from a local
auto spares shop. The cost of
repair would be under R500. The damage to the insured vehicle
is unrecognisable and in
no way whatsoever diminishes the value of
the vehicle. As the insured, one declines the generous offer
from the trolley assistant
to pay for the damages and have the fender
repaired immediately. The insured does not wish to jeopardise
his no-claim bonus
nor risk incurring the excess payment of R20 000
to effect repairs of under R500. Can it possibly be said that
this
election by the insured not to report the incident may result in
the insurer avoiding liability under the contract for damages
totalling R608 722 a month later, when the vehicle is involved
in a serious collision?
30.
The requirement to notify the insurer of
every incident may result in insurers being flooded with information
on entirely irrelevant
events. At the same time, it would
create general confusion and uncertainty among the clients of the
insurers as to what
incidents should be reported.
31.
In the case of the appellant, at the time
of claiming for the accident on 8 January 2010, he disclosed to the
insurer the existence
of the pothole incident that damaged the rim
and of the incident involving Mr Larcher. To the extent that
the latter incident
may have resulted in greater damage to the
appellant’s vehicle than he thought at first, and that it is
impossible to tell
apart the impact of the previous accidents from
that on 8 January 2010, the appellant will only be entitled to the
damages that
he is able to prove in respect of the last mentioned
incident. His failure to report or lodge a claim in respect of
the earlier
incidents should not have resulted in a rejection of the
claim for the subsequent accident because he failed to comply with
the
30 day reporting provision.
32.
It bears noting that in
Mahadeo
v Dial Direct Insurance Ltd
2008 (4) SA
80
(W) the court considered whether the failure by an insured to
declare that he had sustained damage to his vehicle as a result of
driving into a pothole was sufficient to allow the insurer to avoid
liability based on what it considered to be a material
non-disclosure.
The plaintiff had been paid out in respect of
damages arising from a pothole by a previous insurer. These
facts were not
disclosed to the defendant, a new insurer, who
enquired from the plaintiff whether he had had any accidents or
stolen cars claims
or ‘claims’ within the past two years.
As the plaintiff did not consider the pothole incident to be an
accident,
he replied in the negative. In his mind an accident
involved a collision of some sort either between two vehicles or a
vehicle
and an object. He did not consider the minor damage sustained
after his vehicle rolled into a pothole to be an accident as there
was no collision.
33.
Boruchowitz J considered at para [21] that
the issue was:
‘…
not
the defendant's policies and procedures in relation to the assessment
of the risk but whether the reasonable man in
the position of
the plaintiff would have thought that the pothole incident may have
an impact on an insurer's assessment
of the risk.’
The
Court answered this query in para [21] in the following manner:
‘
The
defendant's subjective views and its own internal practices are
irrelevant. The essential question is whether the reasonable
man
would have considered them to be relevant. Whether the reasonable
man would have considered all claims for the preceding
six
years to be relevant depends on the questions asked of the plaintiff
in the sales conversation.’
In
para [22] the Court concluded that both “positive and negative
misrepresentations are to be treated on the basis of the
reasonable-person test postulated in the
Oudtshoorn
Municipality
and
President
Versekeringsmaatskappy
cases and in
determining materiality emphasis is not to be placed on the
subjective views or practices of the insurer”.
The Court
dismissed the defendant’s plea of non-disclosure and found in
favour of the plaintiff.
34.
With regard to the appellant’s
failure, in the present matter, to disclose the pothole incident and
the accident in April
2009, the court
a
quo
concluded in para [30] that:
‘
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.’
This
conclusion, apart from it being contrary to the approach favoured in
Mahadeo
, in my view, cannot be sustained as it conflates the
duty to disclose true and correct information at the commencement of
the contract
and the duty to disclose during the duration of the
contract. At set out earlier, the Outsurance policy is not one
which
is subject to an annual renewal assessment of risk. As
such, there can be no contention that the failure to disclose the two
incidents had a bearing on the conditions of cover or the premiums
charged. The policy simply does not provide for this on-going
duty to report after commencement of the policy. Even if it did
(see paras 5 and 6 above) the obligation to report “incidents”
is not set out with any particularity and is bound to lead to
uncertainty as to what should and should not be reported, especially
where the insured has no intention of lodging a claim. To that
end, I would uphold the appeal.
35.
It is necessary for me to deal with one
further aspect of the judgment, where the court a quo in para 9 held
that:
‘
It
is trite law that Insurance is a contract based on the utmost good
faith.’
In
my view, the court a quo erred when it held that a contract of
insurance is based on utmost good faith. In
Mutual and Federal
Insurance Co Ltd v Oudtshoorn Municipality
1985 (1) SA 419
(A) at
433A-D Joubert JA noted that:
‘
The
duty of disclosure is imposed
ex lege
.
It is not based upon an implied term of the contract of insurance.
Nor does it flow from the requirement of
bona
fides
…
Yet
the duty of disclosure is not common to all types of contract. It is
restricted to those contracts, such as contracts of
insurance,
where it is required
ex lege
.
Moreover, there is no magic in the expression
uberrima
fides
. There are no degrees of good
faith. It is entirely inconceivable that there could be a little,
more or most (utmost) good faith.
The distinction is between good
faith or bad faith. There is no room for
uberrima
fides
as a third category of faith
in our law.’
The
Court went on further to jettison the concept of
uberrima
fides
, holding at 433E-F
:
‘
In
my opinion
uberrima fides
is an alien, vague, useless expression without any particular meaning
in law. As I have indicated, it cannot be used in our law
for the
purpose of explaining the juristic basis of the duty to disclose
a material fact before the conclusion of a contract
of insurance. Our
law of insurance has no need for
uberrima
fides
and the time has come to jettison
it.’
36.
For the reasons set out above, I am of the
view that the conclusion reached by the court
a
quo
cannot be sustained. The
failure of the appellant to report the two previous incidents within
the 30 day time bar cannot,
on any interpretation, permit the
respondent to avoid liability under the insurance agreement in
respect of loss sustained in a
later, unrelated accident. The
appellant resolved not to claim in respect of both incidents and to
carry the costs associated
with his own damage and that of the driver
of the other driver. The underlying intention of the appellant
was to preserve
the reward of a refund, being of a percentage of his
premiums for not claiming. The attraction of the Outbonus to
consumers
should not be underestimated. It is a key feature
that differentiates the Outsurance policy from others in the
insurance
industry. Other sectors have developed similar models
to attract and retain clientele. Airlines offer rewards for
passengers’
frequent flights, or upgrading their status
depending on the number of ‘miles’ accumulated in a
calendar year.
Banks offer rewards and points depending on the
frequency with which one uses a credit card. The list is
ongoing. Seen in
this context, it is not surprising that an insured
would opt not to claim for damages which he or she elects to
self-absorb in
order to ‘get something out’. This
case is a suitable illustration of how difficult it can be for a
prospective
client seeking insurance to determine either at the
commencement of a contract or at any time thereafter, what a
reasonable person
would have considered to be material for the
purpose of ascertaining the risk to be assumed by the insurer.
37.
I cannot agree that the failure of the
appellant to disclose the two previous incidents constituted
‘material’ non-disclosure.
In this regard see
Regent Insurance Co Ltd v King’s
Property Development (Pty) Ltd t/a King’s Prop
2015 (3) SA 85
(SCA) where the Court at para 22 held:
‘
The
history of the case law dealing with the distinction between material
positive misrepresentations and material non-disclosures
is set out
with great clarity by Schutz JA in
Clifford
v Commercial Union Insurance Co of SA Ltd
[1998] ZASCA 37
;
1998
(4) SA 150
(SCA). This court endorsed the view that the test for
whether a non-disclosure is material to the assessment of the risk is
objective.
In this regard the court in
Clifford
confirmed the principles adopted in
Mutual
and Federal Insurance Co Ltd v Oudtshoorn Municipality
1985
(1) SA 419 (A)
at
435G – I in finding that the test was whether the reasonable
person would have considered that the risk should have been
disclosed
to the insurer. But, in interpreting s 63(1) of the former Insurance
Act, this court held that the test for determining
whether a
misrepresentation was material was a subjective one:
Qilingele
v South African Mutual Life Assurance Society
1993
(1) SA 69
(A)
. In
Clifford
Schutz JA (delivering the majority judgment) considered, but did not
decide, that that aspect of
Qilingele
was wrongly decided. (The minority considered that it was not
necessary for the decision to pronounce on the correctness or
otherwise
of
Qilingele
and refrained from doing so.)’
I
accordingly agree with Mr Pillemer’s submission that the basis
of repudiation by the insurer was bad in law, with the result
that
the appeal should be upheld.
38.
In relation to costs, Mr
Pillemer
contended the appeal should be allowed with the costs of two counsel
on account of the matter being sufficiently complex and in
light of
the public interest generated as a result of the decision of the
court
a quo
.
Mr
Pretorius
opposed such an order in the event of the appellant being successful,
contending that costs of only one counsel should be allowed.
Where two or more
counsel are employed, the provisions of Rule 69(1) are applicable. It
provides:
“
Save
where the court authorizes fees consequent upon the employment of
more than one advocate to be included in a party and party
bill of
costs, only such fees as are consequent upon the employment of one
advocate shall be allowed as between party and party.
39.
In
Van Wyk
v Rondalia
1967 (1) SA 373
(T) the Court considered that in determining whether
to allow the costs of two counsel, the question asked was ‘was
it “a
wise and reasonable precaution” on the part of the
plaintiff to appoint two advocates?’. The amount sued by
the
appellant is not substantial, but that alone cannot be a
determinant in answering the question whether the costs of two
counsel
should be allowed. Mr
Pillemer
submitted that complex issues of law and interpretation were to be
considered on appeal. The issues of interpretation related
essentially to the meaning to be given to two sections of an
insurance policy and the respective obligations of an insurer under
the policy. It is correct that the issues on appeal were novel,
but I do not consider them to be of ‘undue complexity’
to
warrant the employment of two counsel
(see
Ehlers and others v Rand Water Board
2006 (3) SA 299
(SCA)).
40.
In the result, I make the following order:
1.
The appeal is upheld with
costs, such costs to include the costs of senior counsel.
2.
The order of the Court
a
quo
is set aside and replaced
with the following:
“
a.
The Defendant is held liable to indemnify the Plaintiff in respect of
the collision on 8 January 2010 for such damages, if any,
as may be
agreed or determined by the Court.
b.
The defendant is directed to pay the plaintiff’s trial costs
which costs shall include those associated with the preparation
for
trial. ”
M
R CHETTY
VAHED,
J
POYO-DLWATI,
J
Appearances:
For
the Applicant : M Pillemer SC & R Naidu
Instructed
by : Mahes Attorneys
C/o
Botha & Olivier Inc.
Pietermaritzburg
– 033 342 7190
For
the First Respondent : C Pretorius
Instructed
by : Hardam & Associates
C/o
Viv Greene Attorneys
Pietermaritzburg
Date
of Hearing : 4 February 2015
Date
of Judgment : 04 July 2015
[1]
Record:
p.36.
[2]
Record:
p.41.
[3]
Interview
with appellant, p. 263.
[4]
Record:
Transcript of recording between Q Herbst and S Jerrier.
[5]
Reconstructed
record: p.379F.
[6]
Record:
p. 391 15-20 – check this
[7]
Judgment,
para 29.
[8]
Record:
Policy document, p.36.
[9]
Record:
Policy document, p.44.
[10]
Record:
Policy document, p.44.
[11]
Record:
Policy document, p. 44.
[12]
Record
: Policy document, p.45
[13]
Record
: Policy document, p.36
[14]
See
JP Van Niekerk ‘Goodbye to the Duty of Disclosure in Insurance
Law: Reasons to Rethink, Restrict, Reform or Repeal the
Duty (Part
1)’ (2005) 17
SA
Merc LJ
150 in which the duty to disclose in the context of insurance
contracts is considered extensively.
[15]
Record:
p.749 [ line 7] to p.751 [line8].