The client of the insurer, who is the complainant, parked his vehicle and trailer in a parking area at a coffee shop whilst having coffee during his holiday. Upon returning to his vehicle, he found that his trailer with its contents to the value of R200 000 had been stolen.
When the complainant instituted a claim from his insurer, they offered to settle his claim to the value of R20 000 only, as this was the limit for loss of contents from a vehicle in terms of his policy. The client opposed the insurer’s offer and wanted the full value of the loss to be covered.
Under the “Contents of all risks cover”, the policy provided cover for contents anywhere in the world. The policy read “(we) will compensate you for any loss of or damage to contents removed from a dwelling anywhere in the world up to an amount not exceeding 25% of the contents sum insured of the dwelling or the amount stated in the schedule – whichever the lesser.” The policy read further that: “Compensation under this cover is specifically excluded per the following: Loss of contents from a vehicle (including caravans and trailers) in excess of R20 000.”
The client’s viewpoint is that he did not understand the wording of the exclusion as it was too unclear and ambiguous for him to understand as a layman. He therefore did not understand that the exclusion did not apply to the loss of a vehicle with its contents. The complainant stated that ‘loss from’ and ‘loss of’ have completely different meanings and therefore he did not understand that the exclusion would only apply if the loss occurred from the vehicle or trailer and not where the vehicle or trailer are stolen with its contents. He stated that the fact that the contents were later removed (‘loss from’) was irrelevant as the loss happened with the theft of the trailer.
The insurer’s response was that its policy was written in plain language in a way that the normal and literal meaning of the words could be understood by any person. The insurer therefore argued that the loss occurred ‘from’ a trailer and that the limitation therefore applied. The insurer stated that it had performed in terms of the policy between themselves and the client by offering to settle R20 000 of the claim.
The Ombudsman’s response
The Ombudsman held that there was no separation between the stolen contents from the trailer, as the contents of the trailer were stolen together with the trailer. The Ombudsman stated that the exclusion which the insurer relied upon could therefore not apply. Since the client had cover under the ‘contents of all risk section’ of the policy, up to a limit of 25% of the contents insured, his claim was therefore payable by the insurer under this section of the policy.
The Ombudsman also found that if the insurer’s intention was to exclude or limit its liability for a claim where items were stolen together with an insured vehicle or trailer, it should have been clearly stated in the wording of the exclusion. The insurer was therefore not entitled to apply the R20 000 limit to the complainant’s claim and recommended the insurer pay the complainant’s full claim of R200 000.
Lessons to be learnt
This complaint indicates the importance of clients being explained limitations and exclusions in a clear manner, that leaves no room for misinterpretation or ambiguity. Even though this complaint was against an insurer, it is important for advisors to note the consequences of not explaining terms and conditions in a clear manner.
Section 7(1)(ee)(vii) of the FAIS General Code of Conduct states that an FSP must provide the following to clients at the earliest possible opportunity; “concise details of any special terms or conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided.” This provision of the General Code of Conduct also links to Outcome 3 of Treating Customers Fairly (TCF) that requires that customers be given clear information about the product in plain language and that customers are to be kept appropriately informed before, during and after a point of sale. Advisors should therefore always ensure that important information such as limitations and exclusions are highlighted to the client, even after the policy has been concluded.