A policy was taken out by the client for legal expenses such as attorney’s costs for conveyancing services. The client subsequently bought a property and incurred attorney’s costs for the conveyancing of his property. The client did not however submit his claim within 30 days as per the wording of his policy and the insurer rejected his claim.
The insurer relied on the wording of their policy whereby “all claims must be lodged within thirty days from the date of occurrence of the event giving rise to the claim. The onus will be on you (the client) to prove that you have lodged your claim timeously”. The insurer therefore stated that the correct procedure was not followed by the client in order for his claim to be successful.
The Ombud stated that in terms of the Financial Services Ombud Act, the Ombud is mandated to make decisions which are equitable and fair, and not to merely apply a strict approach to the terms and conditions of the policy. The Ombud was therefore of the view that the insurer could not prove that it had suffered any “actual prejudice” as a result of the client submitting his claim outside of the specified 30-day period. The fact that there was no prejudice suffered, the Ombud was of the view that applying a strict interpretation to the terms and wording of the policy would result in an inequitable outcome.
The recommendation of the Ombud was that the claim be settled by the insurer according to the maximum indemnity amount provided by the policy. The insurer agreed to this.
This case is an important learning as it indicates the importance of clients knowing what their duties and responsibilities are within their insurance policies. When an advisor assists their client with an insurance policy, ensure that the client understands the policy wording in order for the client to act within the bounds of the terms and conditions of his policy.
The full case study can be read in The Ombudsman’s Briefcase Newsletter (Issue no.1 of 2016). Click here to read the newsletter.