PRICE TO PAY IN THE KING PRICE CASE: FAILURE TO COMPLY WITH YOUR INSURER'S REQUESTS!!
On 9 May 2022, the South Gauteng High Court division delivered a judgment in the matter between Zandisiwe Musa ("Musa" hereinafter) and King Price Insurance Company ("King Price" hereinafter). This judgment is significant in many respects, as it highlights the significance of cooperating and complying with an insurer's requests and reaffirms several legal principles relating to insurance policies. Therefore, this judgment is crucial for lawyers and anyone who has an insurance policy, and anyone involved in one way or the other in the insurance industry. This piece intends to furnish a brief summary of the case by providing a concise explanation of the facts; depicting what the crux issue in the case was; and, thereafter, explicating the decision and the reasons thereto. Lastly, it will discuss the legal principles that were considered.
In 2017, Musa took out a car insurance with King Price, containing comprehensive cover for his vehicle. In 2020, the insured vehicle was involved in an accident causing damage to it. Musa submitted his claim with King Price. To validate the claim, as a norm in the insurance claiming process, King Price's Assessor requested certain information from Musa. They specifically requested consent to access his cell phone records. Notwithstanding several follow-ups by the Assessor and despite giving Musa several extensions to provide the consent, Musa failed/refused to comply with the Assessor's request. After almost 2 months of following up, King Price formally rejected Musa's claim. In the rejection letter, King Price also informed Musa that the policy will be regarded as cancelled in a few weeks' time (exact date being 30 June 2020). After an unsuccessful complaint with the Ombudsman for short term insurance, Musa instituted action in the High Court to challenge the decision of King Price to reject his claim.
Although there were several prayers made by Musa, the crux issue for determination in the case was whether King Price had correctly and procedurally repudiated the claim and cancelled the agreement.
DECISION & RATIONALE
The court, after due consideration of the relevant policy terms and the relevant legal principles, found that King Price had correctly and procedurally repudiated the claim. It also found that cancellation of the agreement was lawful. The pertinent terms of the policy upon which King Price relied were the following:
- The insured undertook to always provide the insurer with true and complete information.
- The insured undertook to provide the insured with all information and documentation that the insurer asks for and to do so within the time frame set by the insurer.
- The insured undertook to provide the insurer with any relevant documents required to validate the claim.
- The insured undertook to comply with the insurer's instructions and requests as and when required.
The court took cognizance of the fact that the insurer's request to access further information was part of the express terms of the policy. Further, the requested information was pertinent to the verification of the insured's version. The insured had breached the terms of the contract by not ceding to the request of the insurer. As such, there had to be legal consequences for the breach i.e., cancellation of the contract. Further, the legal representatives of Musa had not argued that contract be reinstated and, therefore, the court felt that it could not look at the correctness of the rejection where the contract had been lawfully cancelled. Even more, there were "other arguments" in favor of King Price which the court found to be not worth diving into.
DISCUSSION OF THE CASE
The court reaffirmed several legal principles insofar as they relate to the law of contract and insurance law. In this case, the behaviour of Musa rendered the contract voidable i.e., it entitled King Price to cancel the contract. In any contract, the parties are bound by what they agree on and, where one party breaches the terms of the contract, the other party is entitled to cancel. The decision not to challenge the cancellation, but only focus on rejection, can be regarded as a costly error. This amounted to asking the court for specific performance on a non-existent contract. This was a precarious decision. As a result of this decision, a great opportunity was missed for the court to deal much with the issue of repudiation. This would have been a great opportunity for the court to thoroughly deal with the nature and extent of the requests by the insurers for purposes of validating car insurance claims. The same court, in the matter of Mashele v Momentum Insurance and Another (15304/2016)  ZAGPSHC 33 (2 March 2017), dealt with the insurer's requests, and this would have been yet another great chance to see the direction of our courts in this regard. The issue regarding the nature and extent of insurer's requests is critical because, in many instances, insurers frustrate the claiming process by making strenuous and burdensome demands, and requests with the intention to avoid their contractual obligations (see Mashele case). Be that as it may, the court in this case was correct insofar as the law is concerned. The decision may seem harsh and unfair to Musa having paid premiums for years, however, there are serious ramifications for failure to honor one's contractual obligations. At the end, Musa have had to pay the price for his failure to oblige with the requests of King Price.