Impact of weekend disasters on insurance policies

Weekend floods in the south and fires in the north will significantly impact insurance due to their extensive reach and property damage, says Mtho Maphumulo of Adams and Adams attorneys.

Storm surges of the previous weekend were a precursor to a weekend that rendered large areas of the Western and Eastern Cape flooded, while devastating fires left apocalyptic scenes in Limpopo. Many houses and tourist accommodation were burnt down along with large swathes of bushveld.

Even before the latest damage, Maphumulo says the storm surge incidents that swept across three coastal provinces caused severe damage, such as the destruction to infrastructure, personal injuries, death, disruption to harbours, particularly the smaller harbours and ports and damage to vehicles, homes and buildings.

“This destruction and damage, as well as the damage from the past weekend, are undoubtedly of great concern to the affected policyholders, insurers and reinsurers alike.” Maphumulo says these policies are the most likely to be triggered:

• Home, household contents and building insurance policies
• Business interruption policies
• Office/business furniture policies
• Business stock insurance policies
• Personal injury claims
• Funeral policies
• Life policies and
• Car insurance policies.

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Challenges to the claiming process

The insurance claiming process is not always seamless, he says.

“Disputes of different kinds are quite common and while it is not possible to pre-empt what may be the root cause of disputes, there are certain common causes of disputes that feature predominantly in insurance claims. These include:

• Non-disclosure and misrepresentation: where a business failed to disclose certain information or misrepresented certain information, a claim can be repudiated. Non-disclosure and/or misrepresentation entitles an insurer to refuse a claim. However, the insurer will have to demonstrate that the information not disclosed or misrepresented was material.
• Fraud: An allegation of a fraudulent claim is more serious than non-disclosure and misrepresentation and, therefore, has more severe ramifications. It introduces a criminal element and in this instance, an insurer is entitled to declare a policy void, which means that any policy benefits will have to be paid back.
• Non-compliance with contractual conditions: Many claims are repudiated on the basis of failure to adhere to certain policy conditions.
• Exclusion clause: It is not uncommon for policyholders to be under the impression that they enjoy certain benefits in terms of the policy, only to be advised, at the claiming stage, that their policies specifically exclude certain risks and, therefore, no benefits.
• Act of God: In cases that involve “natural disasters” (including a storm surge), it is possible for insurers to repudiate a claim by arguing that the cause of damage is an act of God.
• Failure to prove ownership: This predicament is prevalent in home or household contents insurance claims.
• Disputes over unsatisfactory payouts or assessment of claims: Sometimes a claim is not rejected but a policyholder is not satisfied with the way that the assessment of the claim was made.”

However, Maphumulo says whether any of these arguments succeed is a matter of fact – depending on the facts and circumstances of the case.

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How to make the claim process less painful

He says the claiming process can be taxing but there are ways to make it slightly less painful.

“Where possible, policyholders should use their brokers and policyholders are encouraged to ensure their discussions with brokers are confirmed in writing.

“This is critical as there may be instances where the broker can be sued for breach of statutory duties and/or breach of the common law duty of care. Policyholders can also liaise directly with their insurers,” he says.

Maphumulo says where policy holders deal directly with insurers, they must request a recording or record of advice relating to their communication with their insurers and keep it in a secure place.

He also warns that policy holders must be honest at all times when they communicate with insurers and provide all the necessary information and documentation requested by their insurer.