Insurance

Question 1

Is there any form of consumer insurance law in South Africa?

Answer 1

The Policyholder Protection Rules protect consumer insured parties only, including natural persons and smaller juristic persons (using the same thresholds for juristic persons as the Consumer Protection Act.

Question 2

What are the key differences between capital and indemnity insurance and how does this play out in South African insurance statute law?

Answer 2

Capital Insurance = life insurance 2017 Act, defined sum which is to be received by the insured if event occurs

Indemnity - non -life insurance, if an uncertain event occurs, the insured receives an amount of money equal to the loss suffered. i.e insuring property

Question 3

Can you list and explain the essential elements of an insurance contract?

Answer 3

(1) Obligation on insured to pay a premium= price paid by the insured for insurance cover
(2) The happening of a specified uncertain or unplanned event= uncertainty element
(3) Obligation of the insurer to render compensation= insurer must compensate the insured if the uncertain event occurs
(4) The existence of an insurable interest= you must have interest in the item insured beyond merely the chance of receiving a windfall payment.

Question 4

why do we need elements of an insurance contract?

Answer 4

Insurance is a form of specific contract which attracts particular niche rules (in the same way that ‘sale’, ‘lease’, and ‘mandate’ do). We thus need a working definition for an ‘insurance contract’ in order to distinguish it from other forms of contract.

Question 5

What is the relevance of insurable interest?

Answer 5

Insurance must be separated from gambling - The distinguishing mechanism adopted by most jurisdictions is insurable interest. That is to say that you must have interest in the item insured beyond merely the chance of receiving a windfall payment.

Question 6

What is the insurable interest test?

Answer 6

‘Factual expectation of damage’ test= loss has been suffered (Littlejohn).

Question 7

when must an insurable interest exist for a valid claim in indemnity insurance

Answer 7

the insurable interest must exist at the time of the claim.

Question 8

when must an insurable interest exist for a valid claim in capital insurance

Answer 8

the insurable interest must exist at the time of entering into the insurance contract.

Question 9

can you have an interest in the property of a spouse if you are married out of community of property

Answer 9

“if the insurer can show that he stands to lose something of an appreciable commercial value by the destruction of the thing insured, then even though he has neither a jus in re nor a jus ad rem to the thing insured, his interest will be an insurable one” (LittleJohn)

Question 10

Can a shareholder insure property belonging to his company

Answer 10

Macaura -Neither a simple creditor nor a shareholder in a company has any insurable interest in a particular asset which the company holds.’
But in SA - Lorcom 13 - 100% shareholder can have an interest in the property

Question 11

What are the requirements for a contract to be voidable for misrepresentation in the general common law of contract?

Answer 11

The misrepresentation must be material and induce the person to contract.

Question 12

What does the common law duty of disclosure in insurance law entail?

Answer 12

hether the ‘reasonable, prudent person’ would think that information not disclosed was ‘material to the assessment of risk’. This was a lesser standard than the ‘reasonable insurer’ (Oudtshoorn)

Question 13

Do we treat positive misrepresentation and nondisclosure separately in SA?

Answer 13

In SA we treat it the same

Question 14

which statute/instrument do the tests for positive misrep and non disclosure appear in?

Answer 14

s53 of the STIA and Rule 21 under the LTIA and possibly 2A.9.3 of the short term Policy Protector rules

Question 15

how is an affirmative warranty created in an insurance context?

Answer 15

The representation is converted into an affirmative warranty when the insured signs a so-called ‘basis of the contract’ clause in the proposal form

Question 16

how is a promissory warranty created in an insurance policy

Answer 16

A promissory warranty - stipulated by the insurer and instructs the insured to do something while cover is in place. A promissory warranty will appear in the actual insurance policy and is a term of the contract itself

Question 17

what does SA common law say about insurance warranties?

Answer 17

‘A warranty … is a condition which must be exactly complied with, whether it is material to the risk or not. If it be not so complied with … the insurer is discharged from liability.’ Lewis = a warranty must be complied with as any other condition – whether material to the risk or not. A strict compliance with its terms is a condition precedent to liability.

Question 18

Does the statutory materiality test apply to insurance warranties?

Answer 18

Norman Welthagen Investments : due to the use of the operative word ‘representation’ in the provision, only pre-contractual warranties were covered (that is: affirmative warranties) and not warranties contained in the insurance policy (that is: promissory warranties). The common law position as per Lewis was thus held to continue to be applicable with promissory warranties.
It has not been overruled yet.

Question 19

What is the approach of South African law to the interpretation of insurance contracts?

Answer 19

Oosthuizen:…[I]nsurance contracts are contracts like any other and must be construed by having regard to their language, context and purpose in what is a unitary exercise. A commercially sensible meaning is to be adopted instead of one that is insensible or at odds with the purpose of the contract. The analysis is objective and is aimed at establishing what the parties must be taken to have intended, having regard to the words they used in the light of the document as a whole and of the factual matrix within which they concluded the contract.

Question 20

What do the terms ‘risk’ and ‘peril’ mean and how are they used in insurance law and insurance policies?

Answer 20

Risk: the possibility of loss occurring
Peril: a potential cause of loss

Question 21

Distinguish a limitation from an exception in the context of an insurance policy.

Answer 21

when claiming under a policy, the insured must establish that her claim falls within the ‘four corners of the promise’ made to her by the insurer (in other words: within the general parameters of covered risk). These general parameters constitute the ‘limitations’ of the policy.

within the frame of these general parameters, there may still be specific carve outs, or ‘exceptions’/’exclusions’, which remove specific risk items which would otherwise fall within the general parameters.

Question 22

What are the South African rules on onus of proof in this context of limitations and exceptions?

Answer 22

the onus first falls on the insured to demonstrate that her claim falls within the four corners of the promise made to her - That is that her claim falls within the limitations of the policy.

if this test is met, but the insurer argues that the claim is nevertheless excluded on the wording of the policy, the onus shifts to the insurer to demonstrate that exclusion.

Question 23

May the default rules be reversed by a particular contractual provision when it comes to exclusions?

Answer 23

Joosub = the court found that the reverse onus provision required that the insurer at least establish an evidentiary basis that the exclusion was relevant. This interpretation saved the provision from being against public policy

Question 24

Describe the South African approach to determining causation in the insurance context.

Answer 24

Causation: the loss must be caused by an insured peril both in the sense that ‘but-for’ the occurrence of that insured peril the loss would not have occurred, AND in the sense that the insured peril was the ‘proximate cause’ of the loss.

Question 25

How can causation be used to limit the exposure of insurers to risk?

Answer 25

An insurance policy is careful to demarcate which risks are covered and which are not. In order for an insurance claim to be valid, the loss suffered must be caused by an insured peril. Which perils are insured is determined by interpreting the policy in question.

Question 26

What tests are used to determine causation in an insurance context?

Answer 26

The former ‘but-for’ test determines factual causation.
The latter ‘proximate cause’ test is a question of law and checks whether the loss suffered is sufficiently closely linked to an insured peril.

Question 27

What if the insured is the cause of the harm suffered? Does this prevent them from claiming from the insurer?

Answer 27

An insurance policy will generally cover losses caused by the insured herself, provided those losses were not deliberately caused.

Question 28

What is business interruption insurance?

Answer 28

This form of insurance would cover a situation where there was physical damage to business premises which interrupted trading for a period.

Question 29

Why was the interruption resulting from the Covid lockdown unusual in this context of business interruption insurance ?

Answer 29

so many businesses throughout the entire country (and indeed much of the world) facing the same form of business interruption from the same contagious disease,

Question 30

Can you explain the SCA’s approach to causation in the Guardrisk case?

Answer 30

On causation, we see in this case study how purposive interpretation of the policy may be used to cure difficult questions of factual causation.

Question 31

What is microinsurance?

Answer 31

It is a low-cost form of insurance. Caps value of products. Includes funeral insurance.
Microinsurance is a phenomenon in developing countries to fill the gap between conventional private insurance schemes and government social protection schemes.

Question 32

who may sell micro insurance

Answer 32

A separate category of ‘microinsurer’ is also created in section 1, which is defined as ‘an insurer licensed to conduct only microinsurance business’. This makes room for specific licensing conditions to apply to those who underwrite only microinsurance risks.

Question 33

If a business is not licensed as an insurer or a micro-insurer, would it still be able to sell microinsurance products to the public?

Answer 33

There might be room for non-typical entities to become involved in this industry, such as a larger co-operative (as section 22 confirms).

Question 34

what is insurtech

Answer 34

It involves offering low cost insurance products to the public.
Insurtech companies tend to also use technology to disrupt the existing market in other ways, such as by increasing efficiency in proposal and claims processes, thereby reducing the effort required from the insured in order to purchase and make use of insurtech products.