Published Date: January 19, 2023

A few media houses have recently reported that Mr. Erlo Goshai, a Cape Town motorist, has warned motorists to “read the fine print when entering into contracts with their insurance company to make sure they are adequately covered”.

According to the reports, Goshai was driving along Marine Drive and was in the process of turning into Blaauwberg Road, when he hit a curb, lost control of his vehicle and collided into a pole. Goshai’s insurer, Insurance Underwriting Managers (IUM), rejected his claim for breaching a clause in his insurance contract, requiring him to “take all reasonable precautions and all reasonable care to prevent or minimise loss, damage, injury or liability.” The rejection of the claim was later deemed to be valid by the Ombudsman for Short Term Insurance, meaning that Goshai will not be receiving a payout from his insurer. The effect thereof, is that he is saddled with the monthly installments still owing on his financed motor vehicle whilst not enjoying the use thereof.

The clause relied upon by Goshai’s insurer, generally known as the “reasonable precautions clause”, is a controversial yet common clause found in insurance contracts, often resulting in litigation. Courts have found these clauses to be counter-intuitive, given that one of the main aims of insurance is to protect an insured against the consequences of their actions. As such, these clauses are interpreted restrictively. Furthermore, negligent conduct (conduct below the standard expected from a reasonable person) is usually not enough to breach the clause; conduct of a reckless nature is usually required, meaning the insured knew of the danger associated with their actions but did not care about the result thereof.

The degree of fault required from an insured may differ when it comes to positive obligations contained in insurance contracts. In Aspen Insurance v Sangster & Annand Ltd, the court found that an insured’s conduct does not need to meet the reckless threshold if “highly defined and circumscribed safeguards have put in place”. Negligence may accordingly be sufficient if that is what was agreed between the parties. By way of example, in Hollard Life Assurance Co Ltd v Van der Merwe the insurance company’s liability was specifically excluded for claims arising from “suicide, self-inflicted injury or self-inflicted illness, whether intended or not, or voluntary exposure to danger or obvious risk of injury”. The insured deceased died from accidentally shooting himself, without having any intent to do so. In other words, he was negligent in causing his own death. The court found the exclusion clause to be perfectly permissible under the circumstances notwithstanding the degree of fault required from the deceased in order to trigger the clause.

An insurance contract is a contract just like any other. Over and above the principle obligation of the insured having to pay a premium and the insurer being responsible to indemnify the insured, both parties have other obligations stemming from the contract. Failure to comply with these obligations may result in insurers rejecting claims. It, therefore, pays to read and understand the fine print of an insurance contract.

Jean-Paul Rudd
Partner | Attorney