INSURANCE: THE RISK OF NOT REPORTING
Having your insurance claim repudiated is particularly galling if you’ve been meticulously paying out hefty premiums for years. But take care to comply strictly with all the terms and conditions of your policy contract - not doing so can cost you dearly.
R600k down for not reporting
Take for example the recent and widely-reported case of a motorist down R608 772 (plus interest and legal costs) after the High Court upheld his insurance company’s repudiation of a claim for accident damage to his Audi R8 Quattro. His mistake? He had failed to advise them of two previous accidents.
The motorist had never had any intention of claiming for the two prior accidents, but that was irrelevant. What sunk him was the particular wording of his policy which required him to –
•“…..inform us immediately of any changes to your circumstances that may influence whether we give you cover, the
conditions of cover or the premium we charge” and
•“…..report your claim or any incident that may lead to a claim to us as soon as possible, but not later than 30 days,
after any incident. This includes incidents for which you do not want to claim but which may result in a claim in the
future”.
That’s pretty clear, and as insurance is a contract based on “utmost good faith”, a high standard of honesty is required of both parties. Finding that a “reasonable man” would have concluded that the insurer “may” (not “would”) have been influenced by knowledge of the two incidents in giving cover or in setting conditions or premiums, the Court held that the motorist’s failure to report them “amounted to a material non-disclosure or breach of the terms of the policy”.
What’s “material”?
Every policy will have its own wording, but yours is likely to impose reporting requirements on you similar to the ones quoted above. Regardless, and notwithstanding subsequent media statements by insurance companies and others to the effect that only “material” incidents need be reported, why take a chance? Although the onus would be on your insurer to prove that your non-disclosure is indeed “material”, you really don’t want to risk the cost and aggravation of asking a court to decide who is right and who isn’t. And even if reporting an incident exposes you to a possible premium increase (reportedly unlikely for “isolated minor incidents”) that’s surely a small price to pay for not having to fight a major claim rejection down the line.
So, what to do?
It’s probably best to err on the side of caution. Report all incidents, even minor ones, within the required time frames. And keep proof that you did so.
OWNERS ASSOCIATION LEVIES – “NO BENEFIT, NO PAY”?
No way! As a member of an Owners Association (“Home Owners Association” if it’s a residential property development), you have almost certainly contracted in your purchase agreement to pay all levies raised by the Association, regardless of whether or not you actually benefit from being part of the development.
To illustrate – in a recent High Court case, the owner of an undeveloped plot of land in an upmarket office park was sued by the Office Park Owners Association for some R200,000 in unpaid levies. The Court accepted that he hadn’t benefitted at all from being part of the park (benefits accrued only to developed properties) but nevertheless ordered him to pay the levies in full plus interest and costs on the “attorney and client” scale. He was, held the Court, contractually bound to pay the levies, and could not withhold payment.
MINORITY SHAREHOLDERS: YOUR PROTECTION FROM OPPRESSION
How do you as a minority shareholder protect yourself from abuse of position by directors who were voted in by the majority shareholders? You can’t vote them out of office, nor can you control voting at shareholder meetings.
Our law comes to your rescue here, allowing any shareholder or director to apply to court for relief against any conduct by a company, its directors or other controlling officers/entities, that is “oppressive” or “unfairly prejudicial”, or that “unfairly disregards” your interests. Note that the motive for the conduct in question is irrelevant - what counts is the effect that it has on other members.
And, if you succeed in proving such conduct, the court has wide discretionary powers to assist you.
A case in point
Thus in a case recently before the Supreme Court of Appeal, a minority shareholder alleged that two directors appointed by the majority were guilty of misconduct such as “breaches of fiduciary obligations, misappropriation and misuse of assets, misrepresentations, fraud, unauthorised use of company funds and denying [the minority shareholder] its entitlements as a shareholder”.
Despite denials by the directors, the Court came to the minority shareholder’s assistance by ordering the appointment of two independent directors (one a senior advocate, the other a senior auditor) to consider an investigation into these allegations.
STRIKE VIOLENCE – TRADE UNION IN TROUBLE
“The time has come in our labour relations history that trade unions should be held accountable for the actions of their members. For too long trade unions have glibly washed their hands of the violent actions of their members.” (Labour Court, below)
Our Constitution provides strong protections for the right to strike, and it is thus extremely easy to go on a protected strike. But this right is subject to the limitation that strike action must always be peaceful and unarmed.
The upshot is that our courts will robustly shield lawful strikers from any unlawful action by employers (see “Footnote: The other side of the coin” below), but they will also penalise both violent strikers and, in appropriate cases, any trade unions involved.
Thus in a matter recently before the Labour Court, a union and its members had been interdicted by the Court from continuing with an unprotected strike; from harassing, threatening, assaulting or intimidating any non-striking employees; from carrying any weapons; from blocking the employer’s access road; and from coming within 300 metres of the employer’s premises.
When the strike nevertheless continued with numerous incidents of violence and damage to property (including the stoning of vehicles and buildings, brandishing of weapons, setting a delivery truck alight and preventing vehicles from entering the employer’s premises) the employer asked the Court to –
• Hold the union and members guilty of contempt of court
• Fine the union
• Imprison the guilty employees for 180 days
The request for imprisonment of the employees was dropped after those directly involved in the violence were disciplined and dismissed, but the union and its officials were held to “have not taken sufficient steps to dissuade and prevent their members from continuing with their violent and unlawful actions”.
The result - a R500k fine
The Court held both the union and its office bearers in contempt, imposed a hefty R500,000 fine on the union, and ordered it to pay the employer’s legal costs on the punitive attorney and client scale.
Employers faced with strike violence should lose no time in seeking a court interdict, and then in enforcing it.
Unions should take adequate steps to dissuade and prevent their members from violent action.
Footnote: The other side of the coin
In next month’s issue we’ll look at a case where an employer’s dismissal of strikers was held to be automatically unfair and thus punished with substantial (15 month) compensation awards.
BONDHOLDERS – CAN YOUR DEBTOR DELAY LIQUIDATION?
Debtors faced with liquidation often ask their creditors for time to realise their assets “to best advantage” rather than by “forced sale”. But per a recent High Court decision, creditors are not obliged to wait.
A property-owning company, defending itself against a liquidation application brought by the bondholder, was found to be “commercially insolvent” but nevertheless asked the Court to exercise its discretion to refuse the order “because the applicant is more than covered by abundant security in respect of its claim. Liquidation will simply result in the forced sale of assets which far exceed any claim that the applicant has against the respondent.”
In rejecting the debtor’s request and granting a liquidation order to the bondholder, the Court commented: “To my mind however this misses the point, which is that it is the applicant which is entitled to payment without further delay. It is not that the applicant should have to wait indefinitely for payment so that the respondent can realise its assets to its own greatest advantage in the normal course. The fact that the applicant holds security for its claim makes no difference since the security itself does not automatically translate into immediate payment.”
Of course corporate debtors might still in appropriate cases be able to seek protection in the form of business rescue - provided that they qualify and are able to formulate a rescue plan that is both genuine and viable. Take advice in doubt.
THE JULY WEBSITES: ARE YOU AN ENTREPRENEUR? AND 10 MISTAKES TO AVOID
“SMEs have been identified globally as the key drivers of creating wealth, reducing poverty and facilitating jobs. In South Africa, it is reported that SMEs contribute 40% of GDP and 60% of the workforce in formal employment.” (SAVCA - South African Venture Capital & Private Equity Association)
In other words, we need every new entrepreneur we can get.
But are you cut out for it? Test your entrepreneurial aptitude by taking a minute to fill out the questionnaire “Are You an Entrepreneur?” on Forbes Magazine’s website at www.forbes.com.
Then read Alex Genadinik’s “10 Mistakes to Avoid When Starting Your Business” on News24Voicesices at http://voices.news24.com.
Have a Great (and entrepreneurial) July!
Having your insurance claim repudiated is particularly galling if you’ve been meticulously paying out hefty premiums for years. But take care to comply strictly with all the terms and conditions of your policy contract - not doing so can cost you dearly.
R600k down for not reporting
Take for example the recent and widely-reported case of a motorist down R608 772 (plus interest and legal costs) after the High Court upheld his insurance company’s repudiation of a claim for accident damage to his Audi R8 Quattro. His mistake? He had failed to advise them of two previous accidents.
The motorist had never had any intention of claiming for the two prior accidents, but that was irrelevant. What sunk him was the particular wording of his policy which required him to –
•“…..inform us immediately of any changes to your circumstances that may influence whether we give you cover, the
conditions of cover or the premium we charge” and
•“…..report your claim or any incident that may lead to a claim to us as soon as possible, but not later than 30 days,
after any incident. This includes incidents for which you do not want to claim but which may result in a claim in the
future”.
That’s pretty clear, and as insurance is a contract based on “utmost good faith”, a high standard of honesty is required of both parties. Finding that a “reasonable man” would have concluded that the insurer “may” (not “would”) have been influenced by knowledge of the two incidents in giving cover or in setting conditions or premiums, the Court held that the motorist’s failure to report them “amounted to a material non-disclosure or breach of the terms of the policy”.
What’s “material”?
Every policy will have its own wording, but yours is likely to impose reporting requirements on you similar to the ones quoted above. Regardless, and notwithstanding subsequent media statements by insurance companies and others to the effect that only “material” incidents need be reported, why take a chance? Although the onus would be on your insurer to prove that your non-disclosure is indeed “material”, you really don’t want to risk the cost and aggravation of asking a court to decide who is right and who isn’t. And even if reporting an incident exposes you to a possible premium increase (reportedly unlikely for “isolated minor incidents”) that’s surely a small price to pay for not having to fight a major claim rejection down the line.
So, what to do?
It’s probably best to err on the side of caution. Report all incidents, even minor ones, within the required time frames. And keep proof that you did so.
OWNERS ASSOCIATION LEVIES – “NO BENEFIT, NO PAY”?
No way! As a member of an Owners Association (“Home Owners Association” if it’s a residential property development), you have almost certainly contracted in your purchase agreement to pay all levies raised by the Association, regardless of whether or not you actually benefit from being part of the development.
To illustrate – in a recent High Court case, the owner of an undeveloped plot of land in an upmarket office park was sued by the Office Park Owners Association for some R200,000 in unpaid levies. The Court accepted that he hadn’t benefitted at all from being part of the park (benefits accrued only to developed properties) but nevertheless ordered him to pay the levies in full plus interest and costs on the “attorney and client” scale. He was, held the Court, contractually bound to pay the levies, and could not withhold payment.
MINORITY SHAREHOLDERS: YOUR PROTECTION FROM OPPRESSION
How do you as a minority shareholder protect yourself from abuse of position by directors who were voted in by the majority shareholders? You can’t vote them out of office, nor can you control voting at shareholder meetings.
Our law comes to your rescue here, allowing any shareholder or director to apply to court for relief against any conduct by a company, its directors or other controlling officers/entities, that is “oppressive” or “unfairly prejudicial”, or that “unfairly disregards” your interests. Note that the motive for the conduct in question is irrelevant - what counts is the effect that it has on other members.
And, if you succeed in proving such conduct, the court has wide discretionary powers to assist you.
A case in point
Thus in a case recently before the Supreme Court of Appeal, a minority shareholder alleged that two directors appointed by the majority were guilty of misconduct such as “breaches of fiduciary obligations, misappropriation and misuse of assets, misrepresentations, fraud, unauthorised use of company funds and denying [the minority shareholder] its entitlements as a shareholder”.
Despite denials by the directors, the Court came to the minority shareholder’s assistance by ordering the appointment of two independent directors (one a senior advocate, the other a senior auditor) to consider an investigation into these allegations.
STRIKE VIOLENCE – TRADE UNION IN TROUBLE
“The time has come in our labour relations history that trade unions should be held accountable for the actions of their members. For too long trade unions have glibly washed their hands of the violent actions of their members.” (Labour Court, below)
Our Constitution provides strong protections for the right to strike, and it is thus extremely easy to go on a protected strike. But this right is subject to the limitation that strike action must always be peaceful and unarmed.
The upshot is that our courts will robustly shield lawful strikers from any unlawful action by employers (see “Footnote: The other side of the coin” below), but they will also penalise both violent strikers and, in appropriate cases, any trade unions involved.
Thus in a matter recently before the Labour Court, a union and its members had been interdicted by the Court from continuing with an unprotected strike; from harassing, threatening, assaulting or intimidating any non-striking employees; from carrying any weapons; from blocking the employer’s access road; and from coming within 300 metres of the employer’s premises.
When the strike nevertheless continued with numerous incidents of violence and damage to property (including the stoning of vehicles and buildings, brandishing of weapons, setting a delivery truck alight and preventing vehicles from entering the employer’s premises) the employer asked the Court to –
• Hold the union and members guilty of contempt of court
• Fine the union
• Imprison the guilty employees for 180 days
The request for imprisonment of the employees was dropped after those directly involved in the violence were disciplined and dismissed, but the union and its officials were held to “have not taken sufficient steps to dissuade and prevent their members from continuing with their violent and unlawful actions”.
The result - a R500k fine
The Court held both the union and its office bearers in contempt, imposed a hefty R500,000 fine on the union, and ordered it to pay the employer’s legal costs on the punitive attorney and client scale.
Employers faced with strike violence should lose no time in seeking a court interdict, and then in enforcing it.
Unions should take adequate steps to dissuade and prevent their members from violent action.
Footnote: The other side of the coin
In next month’s issue we’ll look at a case where an employer’s dismissal of strikers was held to be automatically unfair and thus punished with substantial (15 month) compensation awards.
BONDHOLDERS – CAN YOUR DEBTOR DELAY LIQUIDATION?
Debtors faced with liquidation often ask their creditors for time to realise their assets “to best advantage” rather than by “forced sale”. But per a recent High Court decision, creditors are not obliged to wait.
A property-owning company, defending itself against a liquidation application brought by the bondholder, was found to be “commercially insolvent” but nevertheless asked the Court to exercise its discretion to refuse the order “because the applicant is more than covered by abundant security in respect of its claim. Liquidation will simply result in the forced sale of assets which far exceed any claim that the applicant has against the respondent.”
In rejecting the debtor’s request and granting a liquidation order to the bondholder, the Court commented: “To my mind however this misses the point, which is that it is the applicant which is entitled to payment without further delay. It is not that the applicant should have to wait indefinitely for payment so that the respondent can realise its assets to its own greatest advantage in the normal course. The fact that the applicant holds security for its claim makes no difference since the security itself does not automatically translate into immediate payment.”
Of course corporate debtors might still in appropriate cases be able to seek protection in the form of business rescue - provided that they qualify and are able to formulate a rescue plan that is both genuine and viable. Take advice in doubt.
THE JULY WEBSITES: ARE YOU AN ENTREPRENEUR? AND 10 MISTAKES TO AVOID
“SMEs have been identified globally as the key drivers of creating wealth, reducing poverty and facilitating jobs. In South Africa, it is reported that SMEs contribute 40% of GDP and 60% of the workforce in formal employment.” (SAVCA - South African Venture Capital & Private Equity Association)
In other words, we need every new entrepreneur we can get.
But are you cut out for it? Test your entrepreneurial aptitude by taking a minute to fill out the questionnaire “Are You an Entrepreneur?” on Forbes Magazine’s website at www.forbes.com.
Then read Alex Genadinik’s “10 Mistakes to Avoid When Starting Your Business” on News24Voicesices at http://voices.news24.com.
Have a Great (and entrepreneurial) July!
IN THIS ISSUE - JULY 2013