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Ngqono v Auto & General Insurance Company (441/2004) [2006] ZAECHC 135 (7 September 2006)

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  • Registrar: 441/2004






  • for the Plaintiff: Adv. Peterson

for the Respondent: Adv. Dugmore

Instructing attorneys:

  • Plaintiff: Wheeldon Rushmere and Cole

  • Respondent: Netteltons

SUMMARY: Summary:

Insurance – S. 53 of Short term Insurance Act 53 of 1998 – Sub-section makes no distinction between misrepresentation and non-disclosure of material information – Objective test of materiality applies to both misrepresentation and non-disclosure.

Plaintiff misrepresented to defendant by furnishing inaccurate information relevant to assessment of premium – Plaintiff sued defendant (insurer) for damages caused to her vehicle – Held, that misrepresentation material and that it induced defendant to enter into contract with plaintiff – Plaintiff’s action dismissed with costs.



CASE NO: 441/2004

In the matter between:






[1] In this action the plaintiff sues the defendant, the insurer of her 2003 Isuzu KB 250 LWB LE (“Isuzu Vehicle”) for damages based on a short-term of insurance contract which was entered into on 11 June 2003. The defendant has repudiated the contract alleging that when the plaintiff made a proposal for insurance she provided the defendant with inaccurate material information relating to her insurance history, which induced the defendant to accept the proposal and to offer the plaintiff a lower premium than would have been the case had accurate information relevant to the assessment of a proper premium been given.

[2] The quantum of the plaintiff’s damages has been agreed in the sum of R92 092 – 00.

[3] The facts of the matter may be summarised as follows. The plaintiff, a married person, initially owned a Golf Chico motor vehicle which was insured by her husband with the defendant. She used this vehicle from 1997 until she separated from her husband in 1999. On that occasion her husband removed the Golf Chico vehicle from her possession permanently. Since then, and for a period of about two years, she did not own a vehicle.

[4] In March 2001, she obtained employment from a company known as Amanz’abantu (Pty) Ltd. As from that date she used a vehicle belonging to the said company until she bought an Opel Corsa motor vehicle on 22 July 2002, which she insured with the defendant.

[5] On 11 June 2003, the plaintiff bought the Isuzu vehicle and, on the same date, made a telephonic proposal for insurance to Hot-line Administrative Services (Pty) Ltd, a company which administered the defendant’s insurance contracts. A transcript of the proposal for insurance made by the plaintiff has been handed in as evidence and the content thereof has been admitted as correct. On 23 January 2004, the plaintiff’s Isuzu vehicle was damaged in an accident beyond economical repair and her claim for indemnification by the defendant was repudiated as follows in a letter addressed to her on 8 March 2004:

When you applied for insurance on the Isuzu kb 250 Diesel LE LWB on 11 June 2003 you declared that you have been driving comprehensively insured vehicles uninterruptedly without any breaks for the past 5 years. Based on this information a discounted premium was allocated and the consultant Mr Bodlani confirmed that the information would be verified at the time of a claim. To date we have not received the requested confirmation of your previous insurance history and all efforts from our side to assist in confirming details with noted Insurers Prestasi and Hollard proved fruitless. In view of the above we cannot verify that the correct premium was calculated and received, therefore we unfortunately have no alternative but reject your claim accordingly. ”

[6] In answer to the letter of repudiation the plaintiff’s Attorney wrote to the defendant as follows:

Our client alleges that your repudiation is unlawful. She confirms that the situation regarding the fact that she has been driving comprehensively insured vehicles uninterruptedly without any breaks for the past five years is in fact true, factually and legally.”

[7] In her reply to a request for particulars for trial the plaintiff stated that from the moment she separated from her husband in 1999 until March 2001 (the date she started her employment with Amanz’abantu (Pty) Ltd) she did not own or regularly drive any vehicle. However, in her evidence she stated, for the first time under cross-examination, that during the period referred to above she used various vehicles which either belonged to her family transport business or to other persons - information which has not been pleaded. The transcript of the telephonic proposal for insurance, to which I shall refer presently, does not contain this information. The plaintiff’s brother also testified and supported her version that during the period 1999 to March 2001, the plaintiff used vehicles belonging to the family transport business. The particulars for trial were furnished by the plaintiff at a time when she knew that the reason for the repudiation of her claim was that she had not been driving comprehensively insured vehicles regularly for a period of five years prior to making the proposal for insurance.

[8] In her evidence, the plaintiff experienced certain difficulties in regard to some of the information she furnished to the defendant at the time of making a proposal for insurance. For that reason, it is necessary to refer to the transcript of the proposal made on 11 June 2003.

[9] The transcript records the telephonic discussion between Moses Bodlani (representing Hot-line Administrative Services (Pty) Ltd) and the plaintiff. The relevant portions of the transcript are the following (save for the omissions, they have been quoted verbatim):

“OP - long did you actually have the Opel Corsa Utility?

C - For a year.

OP - For one year?

C - Year in May.

OP - that is May this year.

C - Mmm.

(I interpose to mention that plaintiff’s evidence was that this was a positive response).

OP - Before the Opel Corsa Utility did you actually have any vehicle which was insured comprehensively and you as the regular driver?

C - Mmm.

OP - And then if that is immediately when you actually,… sold out that vehicle you took the Opel Corsa Insurance.

C - Mmm.

OP - Was there any interruption of cover?

C - What do you mean?

OP - Interruption of cover, did you actually after, actually sold the,… that is the car, before the Opel Corsa, did you actually… were you or did you actually immediately bought the Opel Corsa?

C - No.

OP - Okay or after that.

C - I stayed for some time using the company vehicle.

OP - A company?

C - For a long time.

OP - For a company vehicle, the company vehicle were they actually insured?

C - They are insured, I don’t know where, how.

OP - You don’t know where or how?

C - Far away from me that information.

OP - Alright … this company vehicle that you actually drove thereafter was actually insured, how many years did you actually drive this company car?

C - For four or five years.

OP - Four.

C - four or five years I think.

OP - Four or five years, that’s four or five years, the reason why I am asking this is I’ve been asking this information for the claims free group, that is the No Claims Bonus, if you have been driving a vehicle for one year, you get entitled to a one year claims free group, in this period of four to five years that you were driving this company vehicle, did you have any claim?

C - Nothing.

OP - Nothing?

C - Nothing.”

Later in the transcript the following is recorded:

OP - You see I’m going to give you that claims free group of four years based on the information you gave to us”

[10] Under cross-examination the plaintiff conceded that the information she gave to the defendant that she drove an insured company vehicle for four or five years was incorrect. She explained that when giving this information she thought that what was being asked of her was whether she had submitted claims or suffered losses during the period referred to above. Indeed the answer she gave was incorrect as the question posed did not refer to any claims submitted or losses suffered by her. On this aspect her evidence contradicts the statement she made during the telephonic discussion with Moses Bodlani.

[11] During argument Mr Paterson, for the plaintiff, submitted that, if Moses Bodlani thought that the company referred to by the plaintiff was Amanz’abantu, he was wrong. This submission is not supported by the pleadings and the correspondence that passed between the parties. Had the plaintiff used other vehicles (including those of her family business), I would have expected her to have said so in the pleadings. Details of the vehicles she used and the companies that insured them were sought in the request for particulars for trial. The plaintiff did not make mention of her family transport business and the other vehicles she allegedly used during the relevant period. In the context of the transcript the plaintiff could only have been referring to a vehicle or vehicles owned by Amanz’abantu (Pty) Ltd which she drove regularly, and not to any other vehicles.

[12] The plaintiff told Moses Bodlani that the company vehicle that she drove was comprehensively insured and that during the five-year period in question she did not submit any claims for damages caused to the vehicle. It was on the strength of this information that Moses Bodlani allowed the plaintiff a no claims bonus of four years – information admitted by her to be incorrect.

[13] Nick Jacobs, the manager of Hot-line services, testified that insurance history determines whether or not one is entitled to a no claims bonus. He testified that if one has no insurance history, one is not allowed a no claims bonus. He said that the higher the no claims bonus, the lower the premium; the lower the no claims bonus, the higher the premium.

[14] According to Nick Jacobs, had the plaintiff supplied the correct information, she would have qualified for a no claims bonus of two years and would have been liable to pay a higher premium than that ultimately paid by her.

[15] Mr Paterson conceded that on the information provided by the plaintiff to Moses Bodlani she was not entitled to a four-year no claim bonus, but to two years. Counsel also conceded that, on the basis of this information, the plaintiff would have been charged a higher premium by the defendant. However, Counsel submitted that the transcript of the telephonic conversation shows that Moses Bodlani failed to explore the statements made by the plaintiff. Had he done so, Counsel argued, a true and correct picture would have emerged regarding the alleged comprehensively insured company vehicles she regularly drove, the period she drove such vehicles, the identity of the company or companies that owned them, and whether or not there was an interruption of insurance cover.

[16] The transcript of the telephonic discussion leaves me in no doubt that the plaintiff understood and appreciated the questions that were put to her by Moses Bodlani. At the commencement of her cross-examination she herself pointed out to the court the incorrect information she gave to Moses Bodlani and attempted to explain why she responded to Moses Bodlani in the manner she did. She appreciated that the explanation she gave to the court did not make sense in the light of the question posed by Moses Bodlani, which had nothing to do with claims submitted by her.

[17] The plaintiff is a well-educated person. She understood and appreciated the nature and purpose of the telephonic discussion she had with Moses Bodlani. For instance, she never said that she did not know what the word ‘regularly’ meant. As shown above she said in her trial particulars that as from 1999 until 2001 she did “not own or regularly drive any vehicle.” Any suggestion that there was a misunderstanding between the plaintiff and Moses Bodlani is rejected.

[18] The law relating to the repudiation of a contract of short-term insurance is governed by the provisions of s 53 of the Short-term Insurance Act 53 of 1998 which came into effect on 1 August 2003. Its precursor was s 63 (3) of the Insurance Act 27 of 1943 which was inserted in the said Act by s 19 of Act 39 of 1969.

As it then stood s 63 (3) of Act 27 of 1943 reads as follows:

Notwithstanding anything to the contrary contained in any domestic policy or any document relating to such policy, any such policy issued before or after the commencement of this Act, shall not be invalidated and the obligation of an insurer thereunder shall not be excluded or limited and the obligations of the owner thereof shall not be increased, on account of any representation made to the insurer which is not true, whether or not such representation has been warranted to be true, unless the incorrectness of such representation is of such a nature as to be likely to have materially affected the assessment of the risk under the said policy at the time of issue or any reinstatement or renewal thereof.”

[19] In Qilingele v South African Mutual Life Assurance Society [1992] ZASCA 189; 1993 (1) SA 69 (A), the insured made a false representation in a life insurance policy. The insurer repudiated the policy on the ground of the misrepresentation made and the trial court dismissed the action with costs. On appeal to the Appellate Division Kriegler AJA (as he then was) held that the test formulated in the judgment in Mutual and Federal Insurance Co Ltd v Oudtshoorn Municipality 1985 (1) SA 419 (A) does not apply in a case involving s 63 (3) of the Insurance Act 27 of 1943. Kriegler AJA held that the Oudtshoorn Municipality case deals with the common law duty of non-disclosure of material information, whereas Qilingele deals with a straight forward misrepresentation covered by the Act. In interpreting s 63 (3) Kriegler AJA said that concepts of reasonableness do not enter the picture.

[20] In Clifford v Commercial Union Insurance Co of SA Ltd [1998] ZASCA 37; 1998 (4) SA 150 Schutz JA commented on the test formulated in Qilingele and found that it is a subjective test which is in stark contrast to the objective test of the reasonable man laid down in the Oudtshoorn Municipality case, and refused to follow it.

[21] Since the Qilingele judgment s 53 of the Short-term Insurance Act has been amended by Act 17 of 2003 by the substitution of subsection 1 thereof, which came into operation on 1 August 2003. The subsection applies to the present matter. It provides as follows:

“53 Misrepresentation and failure to disclose material information

(1) (a) Notwithstanding anything to the contrary contained in a short-term policy whether entered into before or after the commencement of this Act, but subject to subsection (2)-

(i) the policy shall not be invalidated;

(ii) the obligation of the short-term insurer thereunder shall not be excluded or limited; and

(iii) the obligations of the policyholder shall not be increased,

on account of any representation made to the insurer which is not true, or failure to disclose information, whether or not the representation or disclosure has been warranted to be true and correct, unless that representation or non-disclosure is such as to be likely to have materially affected the assessment of the risk under the policy concerned at the time of its issue or at the time of any renewal or variation thereof.

  1. The representation or non-disclosure shall be regarded as material if a reasonable, prudent person would consider that the particular information constituting the representation or which was not disclosed, as the case may be, should have been correctly disclosed to the short-term insurer so that the insurer could form its own view as to the effect of such information on the assessment of the relevant risk.”

[22] The subsection makes no distinction between a misrepresentation and a non-disclosure of material information. The same principle applies to both, namely that the misrepresentation or non-disclosure is to be judged in accordance with the standard of a reasonable, prudent person. This is the test formulated in the Oudtshoorn Municipality case.

[23] Mr Paterson conceded that the plaintiff made a misrepresentation of a material fact to the insurer, but submitted that it did not induce the insurer to issue a policy to the plaintiff. He argued that the insurer’s representative, Moses Bodlani, aware of the equivocal nature of the plaintiff’s insurance history as set out in the proposal for insurance, nevertheless decided to grant the plaintiff a 4-year no claims bonus. Mr Paterson submitted therefore that the misrepresentation did not induce the insurer to enter into the contract. Mr Paterson also conceded though that the misrepresentation of the plaintiff did not entitle the plaintiff to a four-year no claims bonus.

[24] In the Clifford matter Schutz JA after discussing the first requirement of materiality that the insurer has to prove, stated at 156G-I that:

The second thing that the insurer must prove is inducement, in other words causation, also in a delictual context. Notwithstanding that the word materiality has been used (or misused) in some decisions to convey inducement, the two concepts are distinct and must not be confused. Thus it is possible that an insured guilty of material non-disclosure or misrepresentation may be able to show that it had no effect on the underwriter: Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501 (HL) ([1994] 3 ALL ER 581) at 551 (AC). (Nonetheless, as Lord Mustill points out in the passage immediately following, once materiality has been established the insured is likely to face an uphill struggle in trying to demonstrate that his non-disclosure or misrepresentation bearing this stamp had no effect.) The materiality or otherwise of a circumstance should be a constant: something apart from the subjective characteristics, actions and knowledge of the individual underwriter which may be relevant to inducement as a particular case: at 533H-534A. ”

[25] Moses Bodlani was induced to grant the plaintiff the 4-year no claims bonus and a premium lower than would otherwise have been the case, on the faith of the misrepresentation made by the plaintiff. To the extent necessary, the requirement of inducement has been proved.

[26] It follows that the defendant has discharged the onus resting on it by showing that the plaintiff made a material misrepresentation relevant to the assessment of the risk which induced the defendant to allow her a 4-year no claims bonus in terms of the insurance contract.

[27] Accordingly, the plaintiff’s action must fail. It is dismissed with costs.