Can insurance refuse to pay for accidents during lockdown?

Few consumers realised how the various levels of lockdown, especially the initial strict levels, would impact on their insurance cover. Would you be covered after curfew and when driving where you were not allowed to according to the regulations?

In one case the Ombudsman for Short-Term Insurance found that the fact that the consumer contravened Regulation 31 (2) of the Disaster Management Act Regulations under the Level 4 and 5 protocols, was not a direct reason for the accident and recommended the insurer pay up.

ALSO READ: Insurers will cover curfew accidents

A consumer submitted a complaint to the obudsman when his insurer rejected his claim submitted on 3 May last year after he was involved in an accident, because he contravened the regulations. He said the accident happened just after he received a permit to return to work as he travelled from one of his homes to another to get the laptop he needed for work.

He believed his claim had been unfairly rejected. The ombudsman requested a copy of the policy wording and relevant policy provision the insurer relied on to justify its rejection of the claim. If the policy provision was not relevant to the loss, the insurer would have to consider settling the claim.

The insurer said it was relevant that the accident happened about 6pm when the insured and his passenger were travelling to his second home during Alert Level 5 when travelling was severely restricted and only allowed under strict conditions.

ALSO READ: New 0% drunk-driving law: This is how it will affect your car insurance

The driver admitted he was travelling between his two homes to keep an eye on them and not for essential services, moving to a new house, moving back to his primary place of residence, moving children or attending a funeral. His work permit only allowed him to travel between his home and his place of work.

The ombud found it was clear that the consumer had contravened the regulations and if he had complied, he would not have been travelling on the road where the accident happened and it would not have happened.

The insurer said it had undertaken to assist its clients in these trying financial times and offered a payment holiday to clients who were unable to afford their premiums during the lockdown, because their risk changed due to restrictions on movement and therefore less vehicles on the roads.

ALSO READ: Vehicle insurance woes in a time of licence backlogs

Clients who contravened regulation 16 therefore directly impacted the risk, which is why the insurer said it rejected the claim. The insurer also said a clause in its policy schedule allowed it to repudiate claims where the insured or driver of the vehicle breaks the law.

The ombud did not agree and said the insurer did not show that the accident was caused by the client breaking the law. From an equity perspective it found there was no link between the breach of the law and the accident and recommended that the insurer settle the claim.

(Case studies like these are intended to provide guidance and insight into the way the Ombudsman for Short-Term Insurancedeals with complaints. Each matter is dealt with on its own merits and no precedent is created by these findings.)