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Consumer Affairs
Sunday, April 1, 2007
Warranty ambiguity

The ambiguous wording in a motor vehicle mechanical breakdown insurance policy should not penalise the buyer Charles Pillai, the Ombud for Financial Services Providers, has ruled.
In ordering a Springs motor trader to contribute R1 067, 01, to a car owner’s repair costs, Mr Pillai, said the dealer should have taken the trouble to licence the sales representative to sell the particular product, as required in terms of the FAIS Act. He thus referred a copy of his determination to the Financial Services Board.
In essence complainant, Zahid Hatiz, thought he had Plan A (for 4 year models/110 000 kilometres) when in fact the claims department asserted he had Plan B (for 7 year models/160 000 kilometres), because the odometer on his four-year old car indicated 131 500kms.
Mr Pillai based his determination on a section of the General Code of Conduct For Authorised Financial Service Providers, which requires that representations made and information provided to a client must be factually correct and not misleading.
‘The policy has numerous restrictions and exclusions which appear not to have been drawn to the plaintiff’s attention.” Yet it was the duty of the respondent to ensure that the advice given was “clear and unambiguous” as required by the Code.
Mr Pillai said that in consequence of the dealer’s negligence and non-compliance with the Fais Act, the complainant had purchased the insurance policy in the belief that he was covered in terms of Plan A as opposed to Plan B.
In any case Mr Pillai observed that Plan B was “so restrictive, as to make me question as to why anyone would take up the policy.”
Mr Hatiz said the plan that he was sold was clearly defined as Plan A and was clearly marked by the dealer consultant in his presence. The relevant points “were circled on the actual policy document. It was explained that because my car was less than five years old, the plan that I would fall under was plan A.”
In support, Mr Pillai noted, “Complainant’s version that Plan A was circled by the representative is a material representation that goes to the heart of the matter.” Thus the dealer had represented to the complainant that he would enjoy benefits under Plan A
Aside from this “the policy wording is misleading. The use of a forward slash between ‘5 years (the current year and prior 4 year models)/110 000’ could have two different meanings.
“The first could be that the underwriter covers vehicles that are less than five years old or alternatively have less than 110 000 km.
“The second interpretation could be that vehicles less than five years and with less than 110 000 km are covered.”
“It is my view that this misleading statement should be placed squarely at the door of the product provider.
As a result the complainant had suffered financial prejudice when attempting to claim against the policy as the policy paid out the lower amount as set out in Plan B.
“Quite clearly this statement may have led this unlicensed representative to carry the confusion through to the consumer who bought the product.”

Copyright © Insurance Times and Investments® Vol:20.3 1st April, 2007
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