Insurance: The risk of not Reporting

SmashCarHaving your insurance claim repudiated is particularly galling if you’ve been meticulously paying out hefty premiums for years. But take care to comply strictly with all the terms and conditions of your policy contract – not doing so can cost you dearly.

R600k down for not reporting

Take for example the recent and widely-reported case of a motorist down R608 772 (plus interest and legal costs) after the High Court upheld his insurance company’s repudiation of a claim for accident damage to his Audi R8 Quattro. His mistake? He had failed to advise them of two previous accidents.

The motorist had never had any intention of claiming for the two prior accidents, but that was irrelevant. What sunk him was the particular wording of his policy which required him to –

…..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

and

…..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.

That’s pretty clear, and as insurance is a contract based on “utmost good faith”, a high standard of honesty is required of both parties. Finding that a “reasonable man” would have concluded that the insurer “may” (not “would”) have been influenced by knowledge of the two incidents in giving cover or in setting conditions or premiums, the Court held that the motorist’s failure to report them “amounted to a material non-disclosure or breach of the terms of the policy”.

What’s “material”?

Every policy will have its own wording, but yours is likely to impose reporting requirements on you similar to the ones quoted above. Regardless, and notwithstanding subsequent media statements by insurance companies and others to the effect that only “material” incidents need be reported, why take a chance? Although the onus would be on your insurer to prove that your non-disclosure is indeed “material”, you really don’t want to risk the cost and aggravation of asking a court to decide who is right and who isn’t. And even if reporting an incident exposes you to a possible premium increase (reportedly unlikely for “isolated minor incidents”) that’s surely a small price to pay for not having to fight a major claim rejection down the line.

So, what to do?

It’s probably best to err on the side of caution. Report all incidents, even minor ones, within the required time frames. And keep proof that you did so.

Ashersons Attorneys

Ashersons Attorneys

Industry news and noteworthy articles from a boutique corporate law firm in Cape Town, South Africa

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