When time runs out: A court’s take on the timely assessment of insurance claims

03 Apr 2024

Policyholders and insurers alike should take note of a judgment recently handed down in the High Court of South Africa, Gauteng Division, Johannesburg.

The case concerned a claim for specific performance in terms of a life insurance policy. The policyholder lodged a claim with his insurer through its authorised agent on or about 27 September 2017. The insurer failed to make payment of the claim, prompting the policyholder to issue summons some four years later.

Central to the insurer’s failure to pay the claim was the unresolved status of the policyholder as a person of interest in the ongoing police investigations surrounding the murder of the deceased. The South African Police Services had not yet cleared the policyholder in these investigations.

Significantly, the insurer’s contentions were not supported by any specific terms of the Policy, leading to their plea not disclosing a defence to the claim.

At the commencement of the hearing, the insurer applied for a stay of the action, pending the resolution of the ongoing criminal investigation or inquest, which remained unconcluded. Granting a stay is a discretionary act by the presiding judge, intended for use only in rare and exceptional circumstances. The primary consideration in deciding whether to grant a stay is whether it serves the interests of justice.

The policyholder argued that an insurer does not possess an indefinite period to evade liability on the basis of its real or perceived inability to assess a claim. Eventually, time must run out. The judge ruled that, after nearly seven years without a clear defence to the claim being presented, fairness leaned in favor of the policyholder, and thus, the interests of justice would not be served by granting a stay.

Consequently, the judge ordered the insurer to pay the policyholder R11,245,725.00, together with interest thereon, calculated from the date of lodgement of the claim to the date of payment. The insurer was also ordered to pay the policyholder’s costs of instituting the action.

This judgment serves as a key reminder of the legal responsibilities insurers have towards policyholders, emphasising the principle that legal and procedural delays must not unjustly hinder the rightful settlement of claims.

Article sourced from Adams & Adams.

See also:

• Negligence vs gross negligence dilemma in insurance claims: Eyebrow raising finding by the Ombudsman
• The terms, the terms… Personal-lines insurance policies
• Competition Commission raids premises of eight major long-term insurance companies
• Should an insured be penalised for untrue information supplied by another during the investigation of a claim?

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)