This article, in part, address the legal position and implications of insurance with reference to motor vehicle accidents (MVA) and the agreements and legal defenses that may be consequent thereto with reference to the attitude of our Law as may be deduced from the Supreme Court of Appeal in the matter of King Price Insurance Company Ltd v Concise Consulting Services (Pty) Ltd (1067 of 2019)  ZASCA 42 (13 April 2021).
One of the things that have a great potential of sending a shock wave of regret and self-doubt is the involvement in a motor vehicle collision. Sadly, such accidents do occur on a daily basis. In South Africa particularly, it is reported that approximately 1 million road accidents occur annually.
Given the likely probability of being involved in a motor vehicle collision, many people find it wise to insure their vehicles against damages. Taking out insurance is comparable to a future investment that some time in future owing to an accident one may need to repair or replace their own car or that of the other person. The insurance will cover such damages.
There are different types of insurance policies. Basically, Insurers in South Africa will pay for the damage to your car if something happens to it in exchange for a monthly fee, called a premium.
Traditionally, a vehicle owner will insure their car for damages in a case of an accident or by a natural event or if they happen to damage someone else’s vehicle, the insurance will cover that too. This is also the case with juristic persons. A company can own motor vehicles and one of the directors will take out insurance to cover the vehicle. However, in the case of a company, the person who will normally be driving the vehicle is not the one who insured it, it will normally be the employee as a regular driver.
Often, insurance company make it a requirement that the person taking out insurance must be the one driving it in order to ensure cover, however, in some situations, as in a company setting, insurance companies do accept that an employee will be a regular driver for purposes of the insurance.
When the insured vehicle is involved in an accident and a claim is lodged, there is some information that must be provided to the insurer and an investigation in order for the latter to establish its liability. The claim will be lodged by the individual that took out the insurance, or directors in the company and they will have to provide such information to the best of their knowledge. Should the insurance company establish that the information provided with the lodgement of the claim was false, incorrect or dishonest, the insurer will reject the claim.
The situation becomes interesting when it comes to the insurance claims in the case of companies. An employee who is a regular driver may be involved in a collision and provide information required, the director (the insured who took out the cover) of the company will proceed to lodge a claim on account of the employees accident and also provide information at the behest of the insurance company. The interesting factor features when it is established that, for some or other reason, the employee provided false and misleading information and the insurer was able to pick up on this. Is the insurance company entitled to repudiate the claim? Should the director/company, at no fault of theirs, be penalized with a rejected claim simply because the employee provided false information and misleaded them and the insurance company?
PRACTICAL CASE LAW
Insurance company should be cautious is such situations.
In one reported case, an insurance company rejected a claim for indemnification under a contract of insurance, on the ground that an employee of the insured (company) had submitted false, untrue, and misleading information during the claims process.
The insurance company relied on the fact that, when the employee provided the false and misleading information that led to the claim being rejected, was acting ‘on behalf of’ the employer (company).
The company on the other hand insisted that, it was not at fault. The employee was not acting on its behalf when it provided the information it did, that was in fact only compliance with the investigations of the insurance company and that the company itself provided truthful information according to its knowledge.
The matter played in the Magistrates Court, High Court, and the Supreme Court of Appeal.
In the Supreme Court of Appeal, the court favored the insured company and held that the evidence does not show that the employee perceived himself to be acting for the benefit or in the interests of the employer (company). His purpose in providing dishonest information was almost certainly to shield himself from adverse consequences, whether at the hands of the insurer or the respondent.
The Court also found that the employee was not acting on behalf of the Employer (company) when he gave his statement to the appellant, no fault or culpability of any sort whatsoever can be attributed to the Employer (company). The Court found that the claim should be paid because the insured itself (the director) was not dishonest and considered the regular driver to be a third-party and witness only.
Insurance companies should review and amend their policies to cater for the implications of this ruling to avoid adverse claims of dishonesty and being held liable thereto. They will also have to include reference to those individuals who will be regarded as agents for the insured (the employees), or that anyone who is a person covered in terms of the policy has the same duty as the policyholder, that is, they represent and bind the employer (company).
Companies should also be aware that, when their claims are rejected on account of their employees on grounds of dishonesty or misleading information, that does not necessarily mean the end for their claim. Their policy should be read cautiously and exercise their rights accordingly.
- King Price Insurance Company Ltd v Concise Consulting Services (Pty) Ltd (1067 of 2019)  ZASCA 42 (13 April 2021).
- STAFF WRITER
Business insider. New court case will shake-up insurance and policies in South Africa: legal expert. 30 April 2021).