Bruwer v Nova Risk Partners LTD 2011 (1) SA 234 (GSJ)

1. Bruwer (“the insured”) had comprehensive motor vehicle insurance with Nova Risk Partners (“the insurer”) as from 1 November 2003. The indemnity covered the insured against damage, liability or injury. The insurer repudiated the insured’s claim after he suffered damages as a result of a motor vehicle accident on 17 January 2008. The issue for determination was whether the repudiation was justified in light of the facts and the provisions of the policy.

2. The court a quo dismissed the insured’s claim based on the grounds of a failure to disclose material information to the insurer which entitled it to void the insurance policy from inception. The material information included an endorsement of the insured’s driver’s licence and a conviction for negligent driving. The matter was taken on appeal by the insured. 3. The particular provision of the policy that was relevant to the dispute was:

SECTION 5 - GENERAL CONDITIONS

“6. Disclosure

You must inform the Company of all facts that are material to the acceptance of the insurance or the premium that is charged. If you fail to do this, the Company may, at its option, declare this policy void. As this also applies during the currency of this policy, any changes must be reported immediately. (It is therefore important for you to disclose all material facts that may be of relevance to the Company)”

4. On 29 September 2006 the insured was involved in a motor vehicle collision (“first accident”). He was tested for alcohol and was subsequently charged with reckless/negligent driving and driving under the influence of alcohol. At the trial a dispute arose as to when notification was given to the insurer of the impending prosecution. The court held that the insurer was aware of the prosecution as there was an electronic communication between the insured and insurer regarding the prosecution. He was convicted of reckless/negligent driving and was given a 5 year suspended sentence, a fine of R8,000.00 or 6 months imprisonment and his driver’s license was endorsed. After the conviction and sentence of the insured, the insurer of its own accord enquired about the outcome of the trial and was therefore aware of the guilty verdict.

5. On 17 January 2008 the insured was involved in a second motor vehicle collision (“the second accident”), which forms the subject of this appeal. The insured submitted a claim to the insurer which claim was subsequently repudiated on the grounds that the second accident was attributable to the insured’s driving under the influence of alcohol. The very next day the insurer gave the insured notice of its intention to terminate the policy within 30 days on the grounds of the failure to comply with a reasonable request to disclose the insured’s conviction and ‘suspension’ of his driver’s licence in relation to the first accident.

6. The insured launched an application against the insurer. The insurer responded with a letter indicating that the grounds for cancellation were as follows:

“You have failed to submit any documentation or comply with our reasonable requests for information and documentation relevant to the claim and you furthermore failed to disclose material information relating to your conviction and suspension of driver’s licence, therefore we deny liability on the following grounds:

Section 5 - General Conditions

1. The Company will be relieved of all liability if any person or entity claiming any benefit under this policy fails to comply with its conditions.

We therefore regret to inform you that your claim has been repudiated“

7. The court a quo dismissed the insured’s claims because of his failure to inform the insurer:

(i) of the endorsement of his driver's licence;

(ii) of his conviction for negligent driving; and

(iii) of all material facts affecting the acceptance of the insurance risk and/or the premium.

8. Mathopo J, in the court a quo, held that the failure to disclose the facts listed above, entitled the insurer to void the policy and to reject the insured’s claim in regard to the second accident.

9. CJ Claassen J in the court of appeal judgment deviated from the court a quo’s decision and found in favour of the insured. The following reasons were given:

9.1 When considering how a court should adjudicate an insurance contract it is trite law that the agreement will first have to be properly interpreted and construed. The court of appeal dealt with the ‘golden rule’ of interpretation. This is a two-pronged rule consisting of a primary and secondary tenet:

9.1.1 The primary tenet involves looking at the ordinary grammatical meaning of words and the words as they are read in context of the contract as a whole.

9.1.2 The secondary tenet favors the interpretation of the words that will lead to the contract being valid.

9.2 If a document contains a special reference to a “particular thing”, it is assumed that the parties intended to exclude everything else, even that which would have been implied in the circumstances, had it not been for the special reference. With regard to insurance contracts it has been held that clauses which limit or exclude an insurer’s liability and are couched in vague and ambiguous language must be strictly interpreted. In insurance contracts, clauses which limit or exclude an insurer’s obligation to render performance to the insured, and which are expressed in vague and ambiguous language, should be strictly interpreted. Insurers usually draft the policy and therefore they have a duty to make clear and spell out plainly the limitations that they wish to impose and the risks that they wish to exclude.

10. The court then dealt with Clause 3.1.7 of the policy which states:

“If anything happens that could result in a claim

3.1 you must -

3.1.7 immediately advise the Company as soon as you become aware of any possible prosecution or inquest. “

11. Although this clause deals specifically with claims, whilst clause 6, referenced above, deals with disclosure requirements, the court of appeal held that the specifics of the contractual duty of disclosure when making claims is overridden by a clause dealing with the general duty to disclose. 12. The appeal court

found that the insured’s duty to disclose information regarding the first accident fell under clause 3.1.7. In interpreting this clause, the court of appeal found that it was clear and unambiguous that the only thing required of the insured in terms thereof was information regarding ‘any possible prosecution’ and nothing else. The absence of the demand to supply information regarding a conviction or sentence is significant.

13. Nothing prevented the insurer, as author of the policy, to state in clause 3.1.7 that information was required regarding “any possible prosecution and/or conviction and/or sentence and/or suspension or endorsement of a license” if they deemed such information to be of a material value to assess the risk and/or premium payable. Therefore the insured was entitled to assume that the insurer was not interested in receiving information of actual convictions, sentences and/or endorsements of licenses.

14. The fact that the insured did not disclose his conviction and sentence was, in the appeal court’s view, not a breach of his contractual obligation and therefore on the proven facts there was no non-disclosure. The question of materiality accordingly did not arise.

15. The evidence clearly showed that the conviction of negligent driving did not in any way affect the insurance risk or calculation of the premium as the insurance policy expressly indemnified the insured against such negligence. Furthermore no admissible evidence was led that showed that an endorsement of a driver’s license would affect the calculation of risk and/or premiums.

16. Non-disclosure of the actual conviction, sentence and endorsement would not have been regarded by a reasonable prudent person as affecting the calculation of the risk and/or premium. The failure to disclose this was therefore inconsequential. The policy only demanded notification by the insured of the impending prosecution. The insured had complied with this requirement and the various attempts by the insurer to void the policy were based not only on incorrect grounds, but also on spurious ones.

17. The court allowed the appeal and ordered the insurer to indemnify the insured in terms of the policy with costs.