Duration and Renewal of the Insurance

Contract
• Duration: the contract endures for the period expressly or tacitly agreed
upon, e.g. fixed period (a year) or indefinite period (until the death of the
insured)
• Indemnity = fixed period, can be renewed.
• Non-indemnity = indefinite period
• Renewal: insurer may send notice to insured prior to the expiry of the
insurance period.
• Renewal notice = offer to renew
• Payment of renewal premium = tacit acceptance of the offer
• Cooling-off period applicable to a long-term policy
• Insured may cancel policy within 30 days of receipt of the summary of the policy
terms, with a written
• cancellation notice
• Insurer must refund all premium payments made thus far.
Affirmative and promissory warranties

• Affirmative Warranty: a contractual undertaking that a certain state of

affairs exists, e.g. you have a valid driver’s licence

• Promissory Warranty – the insured undertakes to conduct himself in

some way, or guarantees that certain things will or will not be done,
during the period of insurance, e.g. the insured’s records will be kept
in a fire-proof safe, or the car will only be driven by people with a
valid driver’s licence.
Common law
• Common Law: if insured is dishonest or warranty not complied,
insurer can cancel the insurance

• Jordan’s Case (1969) = insurance for motor vehicle – insured

misstated aged (turning 22, and not 23), but misstatement would
diminish and not increase the risk.
Statutory protection: s 63(3) of the Insurance Act,
now s 59 of the LTIA & s 53 of the STIA
• A policy of insurance cannot be invalidated, and the obligations of the insurer
under the policy cannot be excluded or limited, on account of any representation
made to the insurer which is not true, whether or not the representation has
been warranted to be true, unless the representation is such as to be likely to
have materially affected the assessment of the risk under the policy at the time of
its issue, or at the time of any renewal or variation thereof.
• The representation or non-disclosure is to be regarded as material if a reasonable
prudent person would consider that the information in question should have
been correctly disclosed to the insurer so that it could form its own view as to the
effect of such information on the assessment of the relevant risk.
• Object : to protect insured parties against repudiation based on inconsequential
inaccuracies in the insurance proposal.
• For affirmative warranties.
• Onus is on the insurer to prove that the inaccuracy was material
Duty of the insurer to compensate the
insured

Circumstances under which the insurer is liable to pay

• (1) The risk materialized
• (2) liability of insurer is not excluded by virtue of an exception
• (3) any claim formalities complied with
The risk materialized

• The insurer is liable to pay under the policy only if a peril covered by
the policy was the proximate cause of the harm for which the insured
is claiming compensation.
• Proximate cause = dominant cause (not necessarily the first, last or
sole cause)
• Peril covered by the policy did not occur due to the insured’s
intentional conduct
• Niemand v African Life Assurance Society: life insurance, died while driving
and facing on-coming traffic. Insurer permitted by court to not pay out in
terms of the insurance policy – exclusion in the policy was applicable
Liability not excluded by an exception
• Onus on insurer to show that the exception is applicable
• Exceptions are restrictively interpreted against the insurer
• Fedgen Insurance v Leyds: car accident when car was stolen by employee –
which was outside of prescribed designated purposes listed in the insurance
policy. Court held that it did not encompass a deliberate act by the insured
causing loss, thus the exclusion was not applicable.
Any claim requirements complied with

Conditions precedent have been complied with?

• Example make formal claim within a stipulated time frame after the
loss
• occurred.
• Aim: insurer can test the validity of the claim and, where applicable, take
steps to mitigate the loss.
• Courts hold strict compliance – see Scottish Union v National
Insurance v Native Recruiting Corporation: notice period for 3 days,
even if the insured was not aware.
• time bar clause: insured has 90 days to institute legal proceedings
against the insurer if the insurer repudiates/rejects the claim:
• If the clause if unreasonable
• Unfair for the court to enforce the clause taking into consideration the
relative situation of the parties
• Note: Barkhuizen v Napier – court held that the time bar clause is not
against public policy. The clause gives the insured adequate and fair
opportunity to seek judicial redress.
Extent of the insurer’s liability
• Non – indemnity insurance
• Pay amount stated in the contract
• Indemnity insurance
• Pay actual or value of the amount of what the insured has lost
• Liability for excess
• Indemnity insurance – insured to bear the first portion of any loss
suffered up to a specified amount.
• Under-insurance
• Insurer is bound to pay only that portion of the amount of the loss which the
sum insured bears to the actual value of the property insured.
• The insured is deemed to be his own insurer for the balance.
• Double insurance
• Insured may take out as many insurances as they want for a particular risk, as
long as they are not prohibited.
• Reinstatement
• E.g. Reinstate damaged property instead of paying out some of money,
• Valued policy
• Insurer pays pre-agreed value
Dishonesty in the claims process
• Untrue statement – insured forfeits all the benefits in the policy (this
term must be expressly stated in the insurance policy)
• Common law – insurer not automatically absolved from liability
• Fraud must be material – have a bearing on the amount of the claim
or on the insured’s entitlement to recover in terms of policy.
• Fraud v negligence, for example where the amount of loss pitched too
high due to an honest mistake)
• Insured may make further separate claims despite the fraud, as long
as the insurer has not cancelled the policy.
Rejection of the claim
• Protection Rules for Short-term and Long-term Insurance
• Insurer rejects claim or disputes the quantum of the claim.
• Insurer – must give written notice to insured, with reasons
• Insured has 90 days to make representations.
• NOTE: this 90 day period is to added to the time-barring period.