The FAIS ombud has once again stood up for consumer rights by upholding a complaint against a large insurance company and the broker who sold its product.
Charles Pillai, financial services providers ombud, said the policy contained a clause that could not be enforced.
The complaint was brought by Melishree Maduray of Phoenix, Durban, against respondents Action Plan Management and Renasa Insurance Company Limited.
Maduray had insured her 2003 Audi A3 1.8T for R146 400 through Action Plan Management, who was her broker. The short-term insurance product, Skysure, was underwritten by Renasa Insurance Company that outsourced the administration of the product to Unify.
Cover commenced from June 1 2006. The policy contained a good citizen warranty under which a claim for any loss, damage or liability would be repudiated if the car was used other than in accordance with South Africa's laws, regulations, road and traffic ordinances and bylaws.
On July 31 2006 Maduray's car overturned when she swerved to avoid an animal. It was damaged beyond repair. She submitted a claim, which was repudiated because, the insurer said, she had contravened the good citizen warranty by driving above the speed limit.
The tracking device recorded a speed of 161kph.
Maduray claimed she was travelling between 110kph and 120kph. She also said she was not aware of the warranty since she had neither been told about it by the broker nor had she received a copy of the schedule of cover or policy containing the terms and conditions of the warranty.
She first complained to the ombud for short term insurance (OSTI) after Renasa Insurance repudiated her claim. She denied a claim made to the OSTI by the broker that she had been made aware of the terms and conditions of the policy relating to the warranty.
The OSTI investigated and wrote to Renasa that "driving at an inappropriate or excessive speed would not by itself constitute a failure to take due care and precaution on the part of the insured ... that this would not constitute gross negligence by itself.
"At best, on the facts of the current complaint, it is our view that the conduct of the insured would indicate negligence.
"However, the purpose of the insurance contract is to provide cover for such negligent conduct."
Later the OSTI informed Maduray: "The decision of the insurer to reject the claim cannot be faulted."
After having exonerated the insurer, the OSTI advised Maduray to approach the FAIS ombud because there was a potential complaint against the broker.
Pillai said it was unfortunate that the OSTI changed his stance and expressed the view that - "... the decision of the insurer to reject the claim cannot be faulted".
Also, Action Plan Management failed to prove it had informed Maduray of the warranty clause.
Both companies also failed to provide copies of the record of advice, as required by the FAIS code of conduct.
Referring to the warranty, Pillai said a careful reading of the wording showed it was impossible for an insured to at all times comply with all its provisions, which were onerous in the extreme.
He concluded that neither company told Maduray of the warranty and she was consequently not only unaware of it, but was also denied the opportunity to make an informed choice.
He ordered both companies to pay her R109345 for damage to her car plus interest at 15,5 percent a year from August 1 2006.