1.1.1 A Statement or stipulation of exact truth / performance is
something of which the validity of the contract depends
18.104.22.168 Depending on the type of warranty, insurer may escape
liability (cancel contract) for breach IF ‘material / likely to
have (significantly) affected assessment of risk’
1.2 How do you know when you're
dealing with a warranty?
22.214.171.124 Whether or not the parties intended the particular
statement or undertaking to be a warranty.
1.3.1 Test (Same test as for
126.96.36.199 Was the warranty reasonably relevant to the assessment of risk,
in the sense that it either had a significant impact on the
insurance companies DECISION TO CONCLUDE THE CONTRACT or
on its decision to cCHARGE THE PREMIUMS THAT IT DID
1.3.2 NOTE: Onus is on the insurer when it
comes to proving materiality
1.3.3 Why require materiality?
188.8.131.52 To protect the insured party from inconsequential
inaccuracies (minor mistakes) in the insurance policy
184.108.40.206 A contractual undertakings that a certain
state of affairs exists. In this, BOTH TRUTH
AND ACCURACY ARE REQUIRED
220.127.116.11 What kind of information is covered?
18.104.22.168.1 It covers past and present facts, but more
importantly, also covers KNOWLEDGE OF
THE INSURED (ie. opinions).
22.214.171.124.1 The director of a company is taking out an insurance
policy obo the company, and warrants that in the
best of his reasonable belief, the company will not
be declared insolvent within 6 months.
126.96.36.199 Effect of affirmative warranty on insured’s
obligations & insurer’s rights?
188.8.131.52.1 As an insurance company, you have the
right to cancel the contract given that the
insured party lies in an affirmative warranty.
HOWEVER, THIS REQUIRES MATERIALITY.
184.108.40.206 ‘Basis of the contract’ clause
220.127.116.11.1 Says that the answers given by the insured ARE
THE REASON why the insurance company
entered into the contract.
18.104.22.168.1.1 Insurance Company includes this
clause to elevate everything in the
proposal form to MATERIAL, so they can
cancel if there is the slightest mistake
22.214.171.124.1.1.1 HOWEVER, with requirement of
MATERIALITY, insurance companies
CAN'T use this clause to escape liability
126.96.36.199 An undertaking to insure that the insured party
engaged in a particular course of conduct in the future.
Ie. certain fact will exist in the FUTURE, not now.
188.8.131.52 Effect of promissory warranty on
insured’s obligations & insurer’s rights?
184.108.40.206.1 The insured party undertakes contractual
responsibility for ensuring compliance with
a particular course of conduct. If they don’t
comply the insurance company may cancel
the contract and escape liability.
220.127.116.11 Is materiality required?
18.104.22.168.1.1 Due to this, it doesn’t matter
how minor the warranty is. If it’s
a promissory warranty and
there’s a failure to comply the
insurance company can refuse to
pay/cancel contract. So even the
smallest mistake can lead to the
contract being cancelled.
22.214.171.124 What may be recovered if policy
cancelled obo breach?
126.96.36.199.1 Unlike other insurance contracts where,
unless there is fraud, THE INSURED can only
claim a PORTION of the premiums that have
been paid to the insurance company.
188.8.131.52 Examples of PW:
184.108.40.206.1 Promise that you'll only transport
stock in a particular vehicle
220.127.116.11.2 Only my mom and I will drive my car
18.104.22.168 Iron Safe Clauses
22.214.171.124.1 Purpose is to give the insurance company
a reasonably reliable guide as to how much
stock is on the premises at any given time.
126.96.36.199.2 (3) REQUIREMENTS
188.8.131.52.2.1 1. The insured keeps a complete set of books,
accounts and stock books
184.108.40.206.2.1.1 2. They keep an accurate record of all
business transactions and stock
220.127.116.11.18.104.22.168 3. These books and records are kept either in a safe that is
fire safe or they remove the books and records to other
premises at night when the business is not open.
22.214.171.124.2.2 What is the effect of a failure to comply with requirements?
126.96.36.199.2.2.1 Just like failing to comply with any other promissory
warranty, which is that the insurance company may
cancel the contract or repudiate the claim
188.8.131.52.2.2.2 What if contract = indivisible?
184.108.40.206.220.127.116.11 Means that the clauses of the contract cannot be separated
from one another. This means that the WHOLE policy can be
avoided if there is a breach, even if a promissory warranty
like this only applies to certain goods.
2 Agent’s misrepresentation & non-disclosure
2.1 Insurance Agents
2.1.1 Insured’s agent (ie: broker)
18.104.22.168 Misrep / failure to disclose?
22.214.171.124.1 NOTE: This is in the context where the broker has
authorisation from the insured party to conclude a contract
with a insurance company on the insured’s behalf
126.96.36.199.2 The result of this is that that misrep or failure to
disclose is IMPUTED to the insured, ie. it is deemed to
have been made by the insured themselves.
188.8.131.52.2.1 So what is the impact of this?
184.108.40.206.2.1.1 The same consequences of any misrep or
non-disclosure will be the result. Ie. the insurance
company can cancel the contract or repudiate the claim.
220.127.116.11.2.2 HOWEVER, the broker owes
a DUTY OF GOOD FAITH
18.104.22.168.2.2.1 So, although you can't claim from the insurance
company, YOU CAN SUE THE BROKER
2.1.2 Insurer’s agent (canvassing agent)
22.214.171.124 Misrep / failure to disclose by agent following correct rep
/ proper disclosure by insured?
126.96.36.199.1 Whether or not a misrepresentation/failure to disclose will
be imputed to the insurance company depends on the
contract between the insurance agent and the company.
188.8.131.52.1.1 The courts reply on a doctrine of constructive
notice to determine the outcome of cases like this.
This doctrine asks two questions:
184.108.40.206.1.1.1 1. Was the information obtained/transmitted
to the insurance company by an employee?
Ie. Was the agent an employee?
220.127.116.11.18.104.22.168 2. Was the agent under a duty to correctly transmit
information to the insurance company?
22.214.171.124.126.96.36.199.1 If the answers to both of these questions are yes, then
the insurance company is deemed to know the correct
information. In this situation, they can’t cancel the
contract and they can’t repudiate the claim.
188.8.131.52.1.2 When will the knowledge of the agent
NOT be imputed to the insurer?
184.108.40.206.1.2.1 1. When the agent doesn’t have authority.
220.127.116.11.18.104.22.168 2. Where the agent breaches it’s duty to
the insurance company.
22.214.171.124.126.96.36.199.1 3. If the insured party knew that the agent
didn’t intend to submit the correct information.
188.8.131.52.1.3 Precautions by insurers against liability?
184.108.40.206.1.3.1 Transfer of agency clause (INVALID)
220.127.116.11.18.104.22.168 This will say that the insurer’s agent
is deemed to be the agent of the
INSURED. This clause, or any other
clause that exempts the insurance
company from liability based on the
agents actions, are INVALID IN LAW.
22.214.171.124.1.3.2 Basis of the contract clause
126.96.36.199.188.8.131.52 In a bid to make everything
material, it says that the proposal
form is the reason for the insurance
company entering into the contract.
184.108.40.206.220.127.116.11.1 HOWEVER You can’t override the
materiality requirement just
because this clause exists.
2.1.3 Agent's Authority
18.104.22.168.1 Contract will say that someone
has authority to act.
22.214.171.124.1 Assumed authority, which arises
from someone position in the
company for example
126.96.36.199.1 You can enforce an estoppel on an insurance
company if they deny you a claim after they
have committed a misrep/non-disclosure
2.2 NOTE: Unauthorised acts may be ratified
2.2.1 Will see acts authorised retrospectively and so
bind the principal (insurance company).
188.8.131.52 1. Acted as agent
184.108.40.206.1 2. The principal must have had knowledge
of the relevant act or must have had a
clear intention to ratify that act later.
2.3 Some clauses are AUTOMATICALLY RENDERED VOID
2.3.1 1. Transfer of agency clause
220.127.116.11 2. Clause that purports/attempts to waive the
statutory rights of the insured party.
18.104.22.168.1 3. Any provisions which seek to exempt the insurance
company from the agents mistakes.
3.1 Insurer’s right to exercise the
insured’s rights against person (3rd
party) who has caused insured’s loss
3.1.1 EG. A car accident, where two parties are
involved. A caused the accident and B is
insured. B goes to insurance company and tells
them to pay up. The insurance company pays
B, and then, based on this right of subrogation,
may proceed against A and claim the amount
that the company has paid out to B in order to
3.2 ONLY APPLIES TO INDEMNITY INSURANCE
3.3.1 1. The loss in question is
covered by the policy.
22.214.171.124 2. The loss must have been
caused by the THIRD PARTY.
126.96.36.199.1 3. The insurer must have
INDEMNIFIED THE INSURED
188.8.131.52.1.1 Ie. The insurance company has either paid
out or have reinstated the object which
has been damaged or destroyed.
184.108.40.206.1.2 Only exception to these requirements
is where the parties agree that the
insurer may proceed against the 3rd
party who caused the loss, before the
insurer indemnifies (paid out to) the
insured. So parties can contract out of
3.4 What are the insurer’s rights?
3.4.1 Two scenarios:
220.127.116.11 Insured has recovered loss from 3rd party already
18.104.22.168.1 The insurance company
has a right of recourse against the insured.
22.214.171.124.1.1 Right of recourse against insured
126.96.36.199.1.1.1 Why does this right exist?
188.8.131.52.184.108.40.206 Prevents insured parties from retaining
compensation from both the insurance company
and the 3rd party. It’s based on the principle that
nobody should be paid twice for the same loss.
220.127.116.11.1.1.2 Limits on insurer’s rights?
18.104.22.168.22.214.171.124 The insurance company may not claim more than the
actual amount that they have paid to the insured
even if the insured company profits from this.
126.96.36.199.1.1.3 What kinds of claims / liability are covered?
188.8.131.52.184.108.40.206 Any kind of claim, it may arise in
contract, delict, unjustified enrichment.
220.127.116.11.1.1.4 Why does this right of recourse
against the 3rd party exist?
18.104.22.168.22.214.171.124 It enables insurance companies to contain their
costs and so premiums do not need to rise
every time an insured party is paid out.
126.96.36.199 Insured has not recovered loss from 3rd party
188.8.131.52.1 The insurance company may take charge of legal
proceedings against that person to claim the loss.
184.108.40.206.1.1 Insurer may take charge of legal proceedings
220.127.116.11.1.1.1 In whose name is the action brought?
18.104.22.168.22.214.171.124 The insured
126.96.36.199.1.1.2 Is cession or transfer of insured’s
rights to insurer required?
188.8.131.52.184.108.40.206 Yes, because insurance companies don’t
like the publicity of being involved in a
whole lot of legal proceedings
220.127.116.11.1.1.3 Is cession or transfer of the insured
rights to the insurer required?
4 Statutory protection of the Insured
4.1 NOTE: Short-term and Long-term Insurance Acts
4.2.1 1. Freedom of choice
18.104.22.168 2. Actuarially sound
22.214.171.124.1 3. Copy of contract
126.96.36.199.1.1 4. Plain language
4.3.1 Confirms plain language requirement
188.8.131.52 Means that an ordinary consumer of the type targeted
by the particular insurance policy with average literacy
skills and minimal experience as a consumer could be
expected to understand the content and significance of
the document without undue effort.
4.3.2 Provisions limiting liability of supplier/insurance company?
184.108.40.206 These may be acceptable but certain requirements must be met:
220.127.116.11.1 1. They must be in plain language.
18.104.22.168.1.1 2. They must be brought to the attention of the consumer.
22.214.171.124.1.1.1 3. The consumer must have time to reflect on and consider them.
126.96.36.199 NOTE: Even though you can limit the
liability of the insurtance company,
unjust, unfair and unreasonable
contract terms ARE NOT PERMISSABLE.
4.3.3 Cooling-off periods
188.8.131.52 This is a right of the insured party to
cancel an insurance contract without
penalty or without reason.
184.108.40.206.1 1. Only applies when the contract is
entered into by means of direct marketing
220.127.116.11.1.1 2. The cooling off period last for 5 days
after concluding the contract.
4.4 Section 63 of Long Term Insurance Act
4.4.1 Protection for long-term
insurance POLICY BENEFITS
4.4.2 Arises IF
18.104.22.168 Assistance, life, disability or health policies, which
apply to insured or their spouse, where they have
been in force for at least THREE YEARS BEFORE the
benefits are paid out.
22.214.171.124.1 THEN There are certain Limits on
126.96.36.199.1.1 1. The policy benefits (amount paid out)
cannot be attached by creditors
188.8.131.52.1.1.1 2. Cannot be subjected to execution.
184.108.40.206.220.127.116.11 3. Will not form part of the insolvent estate.
18.104.22.168.1.2 NOTE: THERE ARE LIMITATIONS
22.214.171.124.1.2.1 1. The amount that is protected is
however capped at 50k.
126.96.36.199.188.8.131.52 2. The protection is unavailable if the
benefits have been used to secure a debt.
184.108.40.206.220.127.116.11.1 3. It only covers ASSETS THAT ARE ACQUIRED with the policy
benefits within FIVE YEARS of the policy pay out
18.104.22.168.22.214.171.124.1.1 MONEY(CASH) IS COVERED FOREVER
4.5 S48 LONG-TERM Insurance Act:
4.5.1 Cooling-off periods
126.96.36.199 Summary of policy must be sent to the insured
party within 60 days of concluding the contract.
188.8.131.52.1 From date that summary is received:
Cooling-off period of 30 days
184.108.40.206.1.1 In this, insured has a right to rescind
without reason and without penalty.
220.127.116.11.1.1.1 UNLESS benefits have already been paid out
in terms of the insurance policy.
18.104.22.168.1.1.2 If Insured RESCINDS, BROKER LOSES HIS
COMMISSION, AND HAS NO RIGHT OF
RECOURSE AGAINST THE INSURED
4.6.1 Generally doesn't cover insurance,
EXCEPT FOR CREDIT INSURANCE
22.214.171.124 Common form of CI is Credit Life Insurance
126.96.36.199.1 Cover payable in the event of a consumer’s death,
disability, terminal illness, unemployment, or other
insurable risk that is likely to impair the consumer’s
ability to meet the obligations under a credit
4.6.2 Protection for INSURED
188.8.131.52 1. Against where the cost or nature of
the credit insurance is unreasonable
184.108.40.206.1 2. Policy must provide for the payment of premiums
on a monthly basis if small or intermediate credit
agreement. OR on a monthly OR ANNUAL basis if it
is a Large credit agreements (>250k).
220.127.116.11.1.1 3. IF annaul premium is payable (large credit
agreement), the premium must be recovered
from consumer WITHIN THAT YEAR
18.104.22.168.1.1.1 4. There may NOT any addition of surcharge, fee /
additional premium where CP arranges insurance
22.214.171.124.126.96.36.199 5. When CP’s are arranging the insurance, they
have to follow the principle of adequate disclosure
188.8.131.52.184.108.40.206.1 6. freedom choice allows consumer to
REJECT the CP's suggested insurance
220.127.116.11.18.104.22.168.1.1 7. CP is deemed to be a loss payee, and when
insurer pays out, they must pay out to CP FIRST
22.214.171.124.126.96.36.199.1.1.1 8. Say premiums are paid in January and
debts owed ito CA are settled in June, then
the consumer is entitled to a
proportionate refund. So in this example,
they’ll get 50% back.
4.7 Performance & termination
4.7.1 When may an insurer refuse
to meet an insured’s claim?
188.8.131.52 1. False claim
184.108.40.206.1 2. Failure by the insured to honour
their contractual obligations
220.127.116.11.1.1 3. Material misrepresentation or
non-disclosure by the insured
18.104.22.168.1.1.1 4. Claim filed out of time
22.214.171.124.2 Fraudulent Claims (FORMS):
126.96.36.199.2.3 Self inflicted loss
(eg due to
4.8.2 Performance -->
Such as when an
4.8.3 Expiry of agreed
duration of contract
4.8.4 Supervening impossibility of performance
--> So something happens that prevents the
insurance company from paying out, such
as when they are declared insolvent.
4.8.5 Agreement --> If
parties agree to
--> If car no