The Policyholder Protection Rules dealing with rejection of claims require insurers to notify a policyholder, in writing, of a decision to reject or dispute a claim or the quantum claimed, twice if submissions are made by the policyholder.
Where an insurer has rejected a policyholder’s claim, the insurer must notify the policyholder of its decision within 10 days, giving its reasons for the rejection and providing the policyholder not less than 90 days after the date of the notice to make representations. The insurer then has 45 days after considering the policyholder’s representations to notify the policyholder of its final decision whether to reject the policyholder’s claim or dispute the quantum.
If the broker is a non-mandated intermediary or a binder holder with claims authority to act on behalf of the insurer in dealing with claims, they will also have to comply with the provisions requiring that proper notice is delivered to the policyholder within the prescribed time periods.
Whilst the rules do not prescribe the method of delivery of the notice nor is the word “notify” defined, the accepted practice (and the usual requirement of brokers) is that the broker, as the intermediary, accepts communication in terms of the insurance contract on behalf of the policyholder.
The Constitutional Court in Sebola v Standard Bank of South Africa recently dealt with what constitutes delivery of a notice in terms of section 129 of the National Credit Act, 2005. The court held that a default notice in terms of a credit agreement, for example a mortgage bond, is deemed to have been sufficiently delivered if the notice is sent by registered post to the address specified in the credit agreement and it can be proved that the notice was delivered to the correct post office, unless the consumer produces evidence to the contrary.
This ruling was extended by the Cape Town High Court in Nedbank Limited v Binneman which deals with a situation where the notice is “returned to sender”. The court held that if the consumer chooses a single address for delivery of legal documents and the notice is delivered to the post office of the designated address, this will constitute sufficient proof of delivery unless the consumer can show non-delivery.
More recently, a judgment of the Kwazulu Natal High Court of Absa Bank Limited v Mkhize contrary to what the Cape High Court said, held that where the notice has reached the correct post office but is returned unclaimed, this is an indication that that the notice did not reach the consumer.
The court went on to add that credit providers should do more than merely send a notice by registered post. For instance, the notice should also be sent by ordinary mail or to any other address of the consumer that the credit provider is aware of.
These judgments will have far-reaching consequences not only for credit providers but for businesses in general. Not only must the notice be sent, but the credit provider needs to do more to ensure that the consumer receives the notice.
In the insurance context, if the policyholder has chosen the broker as the address for the policyholder, notice to the broker will constitute sufficient notification to the policyholder. The broker will have to ensure that the notice reaches the policyholder and that the time limits are kept, otherwise, they open themselves up to claims by policyholders where the insurer has rejected the claim and the time limitation periods have expired.
Insurers will also need to change the way in which claims rejection are communicated to policyholders. This can helped by, for example, requiring the policyholder to specify in the claim form the address for service of insurers’ decision to accept, reject or dispute the claim. If the claim is submitted telephonically, the claims handler should ask the policyholder for the service address and record the call.
Insurers should also consider putting a chosen physical and electronic address (as is in most credit agreements) in the policy schedule giving the policyholder’s address for the delivery of notices. Otherwise they face the burden of showing a court that the policyholder received the notice.
Having a chosen address in the policy schedule will make it easier for insurers to identify the service address of the policyholder.
It is also in the interests of insurers to ensure that the notice is communicated timeously to the policyholder. The Policyholder Protection Rules provide that despite the expiry of the time bar period, the policyholder may request the court to condone non-compliance with the clause if the court is satisfied that good cause exists for the failure to institute legal proceedings within the prescribed period and that the clause is unfair to the policyholder. It will be more difficult for the policyholder to show good cause if the insurer can show that the notice was delivered to a chosen address.
Brokers need to be more cautious when dealing with claims rejection notices from insurers and ensure timeous notification to policyholders. Insurers also need to put procedures in place to ensure proper delivery of the notices to the policyholder for purposes of calculating the required periods.