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Motor Insurance
Sunday, February 1, 2009
An accidental tale

An accidental taleVan Dorsen initially insured his motor vehicle, a 2003 Volkswagen Golf 4, 2.0 Highline, with Auto & General Insurance Company, though P A Zervas Brokers. When Auto & General increased his premium by more than 100 per cent he asked respondents to find a cheaper alternative. He was presented with a quotation from Santam Insurance Company. He accepted the quotation, furnished his banking details and authorised deduction of the monthly premium and, as far as he was concerned he was covered. When an accident took place in July 2007 he found out to his dismay that his claim for compensation for his motor vehicle was declined as he was not insured with Santam. He complained to the Ombud for Financial Services Providers.

Van Dorsen wanted compensation for his motor vehicle, which was written off as a result of the accident, and was valued at the time at between R116 000.00 and R120 000.00.
The motor vehicle was initially with Auto & General Insurance Company from 1st June 2005 through the respondent. On 1st June 2007 Auto & General deducted more than double his monthly premium. On 4th June 2007 he queried the reason for the higher premium deduction, and was told that it was an annual increase.
Being unhappy he asked a M/s Yvonne Barnard (a receptionist/administrative clerk at the respondent who dealt with complainant) to negotiate with Auto & General a better rate. She was unsuccessful but informed him that she could negotiate an affordable premium with another insurer. The next day, Barnard sent him an e-mail with two quotations - from Santam and Quicksure respectively. Complainant telephonically informed her that he would accept the quotation from Santam. The quotation was dated 4th June 2007 with the same inception date.
On 20th June 2007, almost two weeks later, Barnard again sent the Santam quotation to complainant with the request that he peruse it carefully to see that all information was loaded correctly and that-
“should you wish to except please sing (sic) and fax back to our office along with your updated banking details, copy of Id and drivers license (sic)”
A week later, in an e-mail dated 27th June 2007 Barnard asked complainant whether he wanted to be moved over from Auto & General to Santam. In response by email the same day complainant authorised the transfer, both of his car and household insurance to Santam and informed her that the premium may be deducted on the first day of each month from his bank account.
Less than an hour later, by e-mail on the same day, Barnard writes to Ansie van Tonder of C & F Outsource Management (Pty) Ltd (C & F), an administrator for Santam. The relevant part of the e-mail reads:
  “Hi Ansie,
“Herewith attached please find quotation for client Mr Van Dorsen. Please could you arrange for policy to be on cover as from the 1st July 2007.
   “Kind Regards
   “Yvonne Barnard”
Barnard copies the e-mail to the complainant at the same time. Complainant says he had not as yet, at that stage sent the requested copies of the signed quotation, his identity document and driver’s licence. However, based on the e-mail copied to him, he was placed under the impression that he would be comprehensively insured as from 1st July 2007 with the new underwriter.
Complainant’s vehicle was written off after it was involved in an accident on 13th July 2007, and duly informed his brokers on 19th July. He says he was told to forward the requirements that were still outstanding, and so e-mailed them the same day to Mrs Van Tonder of C & F.
On 31st July 2007 he was informed that he was not insured by Santam. Essentially, Barnard tells complainant that his failure to send the outstanding requirements timeously was the cause of him not having been insured with Santam. Complainant maintains that the e-mail sent by Barnard to Santam and copied to him gave him the impression that in spite of the outstanding requirements he was duly insured, more so because he had given his banking details and authority for deduction of the premiums.

Determination of the Ombud

The crisp issues to be determined are whether respondent had pertinently brought it to the complainant’s notice that he would not be insured by Santam until all the outstanding requirements had been complied with and whether it was reasonable of the complainant to assume he was insured on the strength of the e-mail copied to him. Barnard’s explanations to the complainant are somewhat convoluted. But I will revert to that later.
It is apparent from the documentation provided by respondent to this Office that in an e-mail dated 30th July 2007 Ms Ansie van Tonder reminded Yvonne Barnard that first respondent had previously been informed that for all new policy applications certain requirements were to be complied with. She referred Barnard to an e-mail dated 29th May 2007 sent to all brokers dealing with C & F, including the respondent, in this regard. The relevant part of the latter e-mail reads:
“Please take note on all NEW POLICY APPLICATIONS we need the  following:
• Signed Proposal Form or Signed Quotation Form
• Signed Debit Order Form
• Registration Number – VIN Number – Engine Number
• Correct Security on Premises and Vehicles
• Vehicle Tracking System Certificate (to qualify for discount)
• Valuation Certificates for Jewellery
• Copy of ID of Insured”

When complainant queried why he was not covered Barnard informed him that she had previously told him there would be no cover in place until such time as he had provided the outstanding requirements.
She said as much to the Ombud Office as well during the investigation of the matter. However, close scrutiny of the written communication exchanged between the parties does not reveal anywhere that complainant was pertinently told or warned about it. Such warnings as were given took place after the accident when Barnard tried to obtain cover with retrospective effect from Santam and did not succeed.
M/s Van Tonder had told her in no uncertain terms that cover would incept only after all requirements were met. Barnard also suggested to complainant that he be retrospectively re-insured with Auto & General from the date of cancellation of insurance with the latter. Auto & General required the vehicle to be inspected before it would consider re-instating the cover, but not retrospectively. As the vehicle had already been damaged that avenue reached a dead end.
The question then arose why respondent cancelled complainant’s cover with Auto & General without first ensuring that he was covered by Santam? The inevitable conclusion is that it was because Barnard herself believed complainant was covered with Santam as soon as she sent the e-mail to Van Tonder telling her to incept cover from 1st July 2007. This view is further supported by the fact that she copied that e-mail to the complainant. Furthermore, in an e-mail dated 31st July 2007 from Barnard to complainant, she says:
“No news for you, it seems that without the documentation requested when we moved you to Santam, there was no cover, at time of accident.”
However, it was, in my view not unreasonable in the circumstances for complainant to have assumed he was insured with Santam notwithstanding the outstanding requirements.
In an e-mail dated 31st July 2007 - more than two weeks after the accident - Barnard informed complainant that Santam had provided “Hold Cover” for fourteen days in which time all outstanding documentation was to have been provided. However, there is no evidence that she had conveyed this important piece of information to the complainant prior to the accident. She then says (quoted as is):
“You see the whole problem is not that you were not insured at the time of the accident, but due to the outstanding documentation and that you had your loss in this time period. The Insured (sic) has the right to say there is no cover, your 1st premium will only have gone off on the 1st August 2007 that would have been for the month of July and the Month of August.”
She concludes that she hopes her explanation clears up the situation. However, it is difficult to make sense of it.
It is apparent that respondent did not abide by an important provision of the General Code of Conduct for Authorised Financial Services Providers and Representatives (the Code) framed under the FAIS Act. An important condition, that there would be no cover unless all requirements of the insurer were complied with, was not conveyed in clear and unambiguous language to the complainant. Section 3(1) provides:
   “When a provider renders a financial service –
(a)  Representations made and information provided to a client by  the provider –
(i) must be factually correct;
(ii) must be provided in plain language, avoid uncertainty or  confusion and not be misleading;
   . . . .”
  Section 7(1) (c) (vii) imposes a duty on the financial services provider to:
“[provide] concise details of any special terms or conditions, exclusions of liability, . . . .”

I should mention my grave concern at the fact that although certain correspondence (including the letter in terms of section 27(4) of the FAIS Act) was addressed to Ms P A Zervas as the managing member and Key Individual of the respondent, all responses were received from Barnard, who, as I said earlier is a receptionist/administrative clerk of the respondent. In an e-mail dated 10th April 2008 to this Office Barnard said her duties were:
   Quoting of new insurance policies
   Sending all documentation and inforamtion (sic) to the insurer and insured
  Claims Handler – Registration of claims and following up on claims  correspondence with clients and insurer.”

According to information gleaned from the Financial Services Board’s website on 10th April 2008 the respondent has no representatives. Barnard was therefore not a registered provider in terms of the FAIS Act. The key individual and representative of the financial services provider did not respond to the complaint, it being left to Barnard to do so. Indeed, it appears quite clearly that all interaction with the complainant, even at the stage of rendering the intermediary service, was left to the receptionist/clerk. This is clearly not in accordance with the provisions of the FAIS Act and the Code of Conduct. In terms of Section 28 of the FAIS Act, a copy of this determination will be forwarded to the Registrar of the Financial Services Board. I am sure that appropriate steps will be taken in this regard.
It is abundantly clear that the respondent through its registered provider, Ms P Zervas had a duty to clearly and unambiguously inform the complainant that he would not be insured until such time as all the requested information and documents were supplied. Instead, Barnard’s copying of the e-mail to Van Tonder requesting that complainant be placed on cover from 1st July 2007 had the opposite effect, i.e. it gave the impression to complainant he was covered and that he could submit the requested information later.
I am of the view that both first and second respondents should be held jointly and severally liable for complainant’s loss. In the circumstances, I find in favour of the complainant against both first and second respondents.
After considering factsd concerning the fair value of the vehicle at the time of loss the Ombud set the amount that complainant be compensated for as R113 700.00, plus at 15.5 per cent per annum from 14th July 2007. The first and second respondents were also ordered to pay the case fees of R1 000.00 to Office of the Ombud within 30 days of date of the order (6th January 2009).

Copyright © Insurance Times and Investments® Vol:22.2 1st February, 2009
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