November 1, 2008
By Neesa Moodley-isaacs
After she complained two years ago to Helm van Zijl, the then Ombudsman for Short-term Insurance, a motorist this week received a ruling in her favour from the office of the Ombud for Financial Advisory and Intermediary Services (FAIS), Charles Pillai, against an insurer and a broker.
Melishree Maduray took out car insurance with Renasa Insurance, through Gauteng-based broker company Action Plan Management (APM) in June 2006. Two months later Maduray had an accident and her car was written off. The insurer declined her claim on the basis that she had contravened the "good citizen warranty" clause in her policy.
According to this clause, Maduray waived all liability on the part of the insurer if the car was damaged as a result of her breaking any road traffic laws, including speeding. The clause also stated that the car would have a tracking system installed to monitor her driving.
Maduray's driving speed at the time of the accident was recorded by the tracking device as 161km/h in a 120km/h zone. She claimed she had been driving at a speed between 110 and 120km/h.
She said she was unaware of the good citizen warranty. The broker had not informed her of this clause and she had not received a policy schedule.
Maduray said the broker had told her the tracking device was to track the location of the car and she had thought she was insured "under all circumstances".
Renasa Insurance claimed Maduray had been grossly negligent by speeding, but an assistant ombud at the office of the short-term insurance ombudsman told the insurer that driving at an excessive speed did not by itself constitute negligence and that the purpose of insurance was to provide cover for such negligent conduct. However, in March 2007 the short-term insurance ombud decided to uphold the insurer's decision to decline the claim.
The short-term insurance ombud's office then told Maduray that she had a valid complaint against the broker and referred her to the office of the FAIS ombud. When approached for records of advice given to the client, APM was unable to produce any such records.
This is a contravention of the FAIS Act, which requires brokers to keep full records of advice given to clients.
According to the policy, it was the responsibility of the insurer, Renasa Insurance, to send the insurance agreement and the tracker agreement to the client.
In his ruling, Pillai says:
It is most probable that the broker did not inform Maduray of the good citizen warranty.
The insurer had taken it on itself to inform the client of the warranty but failed to do so.
The Short-term Insurance Act states that insurers have to send clients a copy of their policies within 30 days of taking them out, but there is no proof that Renasa Insurance did this and Maduray said she had never received a policy schedule.
'Manifestly unfair'
Pillai says that both the broker and insurer were at fault. He goes on to say that the good citizen warranty is "repugnant, manifestly unfair, one-sided and practically impossible to comply with".
He ruled that the broker and insurer were both liable for Maduray's loss and ordered them to pay her compensation of R109 345 plus interest of 15.5 percent from August 1, 2006 to the date of payment. They were also ordered to pay case fees of R1 000 each within 30 days of the ruling.
Ombud 'minefield' faced by consumers
Pillai says the case detailed in the story above highlights the frustrations faced by the average consumer when dealing with the "jurisdictional minefield" of the various ombud schemes.
The office of the Ombuds-man for Short-term Insurance (OSTI) initially disagreed with an insurer who refused to pay on the accident claim on the grounds that a tracking device showed the driver had been negligent by driving at an excessive speed. At the time an assistant ombud said insurance was supposed to "provide cover for such negligent conduct".
However, Van Zijl, the then ombudsman, later chose to support the insurer's rejection of the claim.
He then informed the complainant that she had a potential complaint against the intermediary - her insurance broker - and referred her complaint to Pillai's office.
Pillai said he had to exercise jurisdiction over the insurer in terms of the FAIS Act even though the short-term insurance ombud had already done so.
Pillai referred in his determination to remarks he made in his 2006-2007 annual report where he stated:
"Linked to consumer confusion caused by lack of awareness is the blurring of the lines that distinguish the areas of jurisdiction of the various ombudsmen. Until there is a common independent platform for the resolution of disputes, the public will continue to suffer confusion in what can only be described as a jurisdictional labyrinth or ombud market place."
Pillai said it was clearly not in the interests of the consumer and the financial services industry to have a plethora of ombuds as, in his view, it did not assist in sustaining the integrity of the industry.
Contact
You can contact the FAIS ombud, Charles Pillai, on 0860 324 766, fax 012 348 3447, post to PO Box 74571 Lynnwoodridge 0040, or email info@faisombud.co.za
  
 
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