To begin, short-term insurance is a contract in which an insurance company, in return for a monthly fee, undertakes to provide policy benefits should a specified event occur. Short-term insurance can include household insurance, belongings, cell phones and vehicles insurance. However, these seemingly straightforward contracts can become complex battlegrounds when a claim is denied due to policy exclusions.

The Challenge of Policy Exclusions

Short-term insurance policies are not all-encompassing. Insurers often rely on exclusions to limit their liability for specific events or circumstances. These exclusions can range from specific perils (e.g., wear and tear or damage by pests) to specific actions by the policyholder (e.g. water damage to a household or driving a vehicle that is not roadworthy).

However, these exclusions can be a source of contention when a claim is denied. Policyholders may argue that the exclusions do not apply, or that the insurer has not sufficiently proven its applicability.

The Burden of Proof and Responsibility

South African law generally places the burden of proof on the insurer to demonstrate the applicability of an exclusion clause. This principle is bolstered by the presence of the insurers responsibility in many short-term insurance policies. Insurers cannot only reject a claim. The insurer must provide the specific policy wording upon which the rejection is based.

However, to the benefit of the policyholder, the insurer cannot unreasonably reject a claim. This transparency allows policyholders to challenge the insurer's interpretation of the exclusion. The nature of a short-term insurance policy is to place the policyholder back in the position she/he acquired prior to the insurable event.

Recent Case Law and Policyholder Rights

In the recent matter of Mahlangu v Auto & General Insurance Co Ltd [2017] ZAGPHC 142, the court ruled in favour of the policyholder on the basis of the insurer having failed to clearly demonstrate the applicability of the exclusion clause through insurer responsibility and fiduciary duties. This case highlights the importance of clear and concise wording in both the policy exclusions as well as the insurer’s fiduciary duty to not unreasonably withhold a claim and to act in good faith.

The Road Ahead

Understanding policy exclusions and the burden of proof placed on insurer’s empowers policyholders to effectively navigate claim disputes, however, the legal landscape remains dynamic. Policyholders are encouraged to:

• Carefully review policy exclusions: Before purchasing insurance, the policy needs to be thoroughly reviewed to ensure it aligns with the needs of the insured. Each section of a policy usually has its own exclusions as well as general policy exclusions.

• Seek professional guidance: If faced with a claim that has been denied due to an exclusion, consider seeking legal advice from a qualified attorney, so as to properly consider your rights in such circumstances.

• Stay informed: Staying informed about recent court judgments regarding policy exclusions can provide valuable insights into your rights. Alternatively, contact your attorneys to be apprised of recent developments.

Conclusion

Navigating policy exclusions in short-term insurance contracts, can prove to be complex in nature, and can entail various legal issues. While these policies allow insurers to manage risk, they can also create challenges for policyholders. By understanding the burden of proof and the insurer’s responsibilities, policy holders are better equipped to protect their rights and manage the complexities of claim disputes with their insurance providers.

If you have a claim repudiated, don’t hesitate to contact your attorneys and seek legal advice tailored to your needs.

Written by: Garion Malherbe

We trust that you found this article informative, please email info@hjwattorneys.co.za for assistance with all your legal queries.

This article is provided for informational purposes only and should not be substituted for legal advice on any specific matter. Any opinions expressed herein are subject to the law as at the time of writing and will change in accordance with any change in the law. We recommend that you contact HJW Attorneys at info@hjwattorneys.co.za directly for advice applicable to your specific matter.