Mahadeo v Dial Direct Insurance Ltd

• Jurisdiction: South Africa
• Citation: 2008 (4) SA 80 (W)

Mahadeo v Dial Direct Insurance Ltd
2008 (4) SA 80 (W)

2008 (4) SA p80

Citation	2008 (4) SA 80 (W)
Case No	06/3536
Court	Witwatersrand Local Division
Judge	Boruchowitz J
Heard	May 11, 2007
Judgment	February 1, 2008
Counsel	A de Kok for the plaintiff.; MM Segal for the defendant.

Flynote : Sleutelwoorde B

Insurance — Applicable legal principles — Duty of disclosure — Non-disclosure and positive representations — Amendment to legislation governing short-term insurance bringing law on positive representations into line with law on non-disclosure — Statutory definition of materiality now same as common-law C position — To be judged neither from point of view of insurer nor of insured, but from that of notional reasonable and prudent person — Test being whether reasonable person would have considered fact in issue reasonably relevant to assessment of risk by an insurer — Short-Term Insurance Act 53 of 1998, s 53, as amended by Insurance Amendment Act 17 of 2003.

D Insurance — Applicable legal principles — Duty of disclosure — Whether fact material — Assessment of reasonable person — Nature of questions asked by insurer may lead to conclusion that reasonable person would not have regarded certain fact as material — May even constitute waiver by insurer of right to receive information about particular fact — Short-Term Insurance Act 53 of 1998, s 53, as amended by Insurance Amendment Act 17 of 2003.

Headnote : Kopnota

E The effect of the most recent amendment to s 53 of the Short-Term Insurance Act 53 of 1998 by the Insurance Amendment Act 17 of 2003 is to bring the law with regard to positive representations into line with the law on non-disclosures. The statutory definition of materiality in s 53(1)(b) is effectively identical to that adopted in President Versekeringsmaatskappy Bpk F v Trust Bank van Afrika Bpk en 'n Ander 1989 (1) SA 208 (A) in relation to the common-law position. The test remains objective: The question whether the particular information ought to have been disclosed is judged not from the point of view of the insurer, or the insured, but from the point of view of the notional reasonable and prudent person. The subjective test propounded in Qilingele v South African Mutual Life Assurance Society 1993 (1) SA 69 (A) G would appear to no longer apply. Thus, the test in respect of both positive and negative misrepresentations is not whether the reasonable person would have disclosed the fact in question, but whether the reasonable person would have considered that fact reasonably relevant to the risk and its assessment by an insurer. In determining materiality, emphasis is not to be placed on the subjective views or practices of the insurer. H (Paragraphs [17] - [18] and [22] at 86G - 87A and 88C.)

The reasonable man's assessment of whether a fact is material will often be influenced by the specific questions which the insurer may ask of the proposer for insurance, and what the insured considers to be relevant will often depend upon the nature of the questions asked in the proposal form or, as in the present case, during the sales conversation. The nature of the I questions posed may lead to the conclusion that a reasonable person would not have regarded certain facts as material. The questions put by an insurer may therefore enlarge or limit a proposer's duty of disclosure and depending on the circumstances, serve to define the limits of what is material. In certain instances the nature and range of questions may constitute a waiver on the part of the insurer of its right to receive information about particular J material facts. (Paragraph [19] at 87B - C.)

2008 (4) SA p81

Cases Considered

Annotations A

Reported cases

AA Mutual Life Assurance Association Ltd v Singh 1991 (3) SA 514 (A): dictum at 520J - 521F applied

British America Assurance Co v Cash Wholesale 1932 AD 70: dictum at 74 applied B

Clifford v Commercial Union Insurance Co of SA Ltd 1998 (4) SA 150 (SCA): dictum at 156E applied

Commercial Union Insurance Co of SA Ltd v Lotter 1999 (2) SA 147 (SCA): dictum at 154B applied

Cronje v AA Lewens 1989 (4) SA 818 (W): applied

Fouché v The Corporation of London Assurance 1931 WLD 145: dictum at 159 - 160 applied C

Fransba Vervoer (Edms) Bpk v Incorporated General Insurances Ltd 1976 (4) SA 970 (W): dictum at 977C applied

Mutual & Federal Insurance Co Ltd v Oudtshoorn Municipality 1985 (1) SA 419 (A): dictum at 435F - I applied

President Versekeringsmaatskappy Bpk v Trust Bank van Afrika Bpk en 'n Ander 1989 (1) SA 208 (A): dictum at 216F applied D

Qilingele v South African Mutual Life Assurance Society 1993 (1) SA 69 (A): not followed

S v Naidoo 1985 (2) SA 32 (N): referred to

Sikweyiya v Aegis Insurance Co Ltd 1995 (4) SA 143 (E): dictum at 146I - 147B compared. E

Foreign cases

Lustre Hosiery Ltd v York (1935) 54 CLR 134: referred to.

Statutes Considered

Statutes

The Short-Term Insurance Act 53 of 1998, s 53: see Juta's Statutes of South Africa 2006/7 vol 2 at 1-673. F

Case Information

Civil trial in an action for indemnification in terms of an insurance policy. The facts appear from the reasons for judgment.

A de Kok for the plaintiff.

MM Segal for the defendant. G

Cur adv vult.

Postea (February 1).

Judgment

Boruchowitz J:

[1] The plaintiff sues the defendant for indemnification under a policy of H insurance. In terms of the policy the defendant undertook, with effect from 1 March 2005, to indemnify the plaintiff against the loss of or damage to a 2003 model Audi A4 1.8 Turbo motor vehicle. The said vehicle was damaged in a collision which occurred during the currency of the policy, but the defendant has refused to indemnify the plaintiff in I respect of such damage.

[2] The defendant has sought to justify its repudiation of the plaintiff's claim on the ground that at the time of the conclusion of the contract of insurance the plaintiff had been guilty of a material misrepresentation or non-disclosure. The defence is pleaded as follows: J

2008 (4) SA p82

Boruchowitz J

8.2

A Without limiting the generality of the aforegoing the Defendant pleads as follows:

8.2.1

At the time of the conclusion of the policy, the Plaintiff omitted to inform the Defendant that he had previously suffered a loss on or about 24 January 2003.

8.2.2

On the strength of the aforegoing non-disclosure, the plaintiff B was allocated a six-year no claim bonus.

8.2.3

Had the plaintiff revealed the loss he would have been allocated a two-year no claim bonus.

8.2.4

The non-disclosure was material in the assessment of the risk and the calculation of the premium.

8.2.5

The defendant has accordingly suffered prejudice in the C acceptance of the risk and/or premium prejudice.

8.3

In the premises, as it was entitled to, the defendant has avoided the motor section of the policy, and has refunded all premiums paid on account of the policy in respect of the vehicle.

8.4

Alternatively to the aforegoing:

8.4.1

D At the time of the execution of the agreement, plaintiff was aware, and defendant unaware, of a previous claim submitted by plaintiff consequential upon plaintiff's vehicle careering into a pothole in January 2003.

8.4.2

As a result of the collision, plaintiff's vehicle was damaged.

8.4.3

Plaintiff failed to disclose the aforegoing to the defendant.

8.4.4

E The misrepresentation (alternatively non-disclosure) was material, constituting information which ought to have been disclosed by the plaintiff in order to enable the defendant to form its own view as to the effect of such information on the assessment of the risk, under the policy.

8.4.5

In the premises defendant, as it was entitled to, has avoided F the motor section of the policy, and refunded all premiums paid on account of the policy in respect of the vehicle.

8.5

Alternatively to the aforegoing and only in the event that the court finds that the defendant was not entitled to avoid the agreement of insurance, the defendant pleads as follows:

8.5.1

In terms of the policy the plaintiff was obliged to furnish the G defendant with true and complete information.

8.5.2

A breach of the aforegoing term by the plaintiff will entitle the defendant to reject cover.

8.5.3

The plaintiff failed to furnish the defendant with true and complete information.

8.5.4

In the premises defendant, as it was entitled to, rejected H cover.

[3] It is common cause that during January 2003 the plaintiff had driven the vehicle into a pothole causing minor damage thereto, and that consequent thereon he had submitted a claim to his previous insurers I and had received payment. These facts were not disclosed to the defendant. What is not common cause is whether the pothole incident and subsequent claim occurred on or about 24 January 2003 as alleged by the defendant.

[4] A further non-disclosure contended for, during the course of J argument, related to a claim allegedly submitted by the plaintiff's wife.

2008 (4) SA p83

Boruchowitz J

As this was not specifically raised as a defence in the defendant's plea I A need say nothing further in regard thereto.

[5] The circumstances giving rise to the conclusion of the policy can be briefly stated. The proposal for insurance was made telephonically. On 19 January 2005 the plaintiff responded to the defendant's advertisement on the internet whereafter he was telephoned by a consultant representing B the defendant, one Tshali Tsanwani. The plaintiff and Tsanwani had a lengthy telephone discussion during which various aspects of the proposed insurance were discussed. Agreement was eventually reached on the nature and extent of the proposed insurance and the premium to be charged. Insurance cover was to be provided with effect from...