FST case summary involving Cillié and Ombud for Financial Services Providers and others

By Shamaa Sheik

The following matter was heard in the Financial Services Tribunal on 5 December 2019:

Cillié (Applicant); and Ombud for Financial Services Providers (1st Respondent), and National Risk Managers (2nd Respondent), and Affinity Retrenchment (3rd Respondent) – case number: FAB17/2019

Fast facts

Financial Sector Regulation Act 9 of 2017 – application for reconsideration – voluntary retrenchment – exclusionary clause – interpretation

Summary

Background

The applicant in this matter had brought an application to reconsider a decision of the Ombud for Financial Services Providers (the Ombud) in December 2018.

The applicant had taken out an Affinity Retrenchment Insurance Policy with National Risk Managers (Second Respondent) for a period of three months which commenced in June 2017 (the Policy). In terms of the Policy, the Second Respondent indemnified the applicant in the event of retrenchment.

Source of the dispute

In August 2017, the Applicant claimed to have completed documentation to extend the period of cover from three months to six months as provided for in the Policy. The Applicant claimed that the Policy covered the initial period of three months plus a further three months owing to the extension. The Second Respondent disputed that the period of cover was ever extended and argued that the Policy only covered the initial period of three months.

When the applicant was retrenched in October 2017, he lodged a claim with the Second Respondent where he claimed cover for a period of 6 months. In November 2017, the Second Respondent paid the Applicant a sum equivalent to a month’s cover in terms of the Policy, and submitted that the payment was made in good faith pending its full investigation of the claim.

After this initial payment, the Second Respondent refused to make further payments and rejected the applicant’s claim in its entirety, citing that its investigations conducted after payment had established that the Applicant:

claimed for retrenchment before the expiry of the waiting period prescribed by the Policy;
was not entitled to claim for more than three months, and
accepted voluntary retrenchment which was excluded in terms of the Policy.

The Applicant then referred the dispute to the Ombud in December 2017, after which it was dismissed in May 2018, and again in December 2018, the Ombud conducted its further investigations.

The following issues were before the Tribunal for determination:

First, whether the Policy was for three or six months;
secondly, whether the applicant’s claim was lodged prematurely before the expiry of the waiting period; and
thirdly, whether the Applicant accepted voluntary retrenchment.

Period of cover

The Tribunal found that there was no clear evidence that the extended period was not subject to a waiting period. Accordingly, the Ombud’s decision to not address the dispute regarding the extended cover on the basis that it was subject to a waiting period could not be sustained.

The extended period resulted from the existence of the Policy but made no provision regarding the method of its inception. It was found that the Policy made no reference regarding what the Applicant ought to have done to take advantage to extend the policy period. It was clear that the Applicant had to apply for such an extension and had in fact done so.

The Tribunal was unable to determine what prevented the Applicant from enquiring or confirming that the extended cover had incepted and to pay adjusted premiums accordingly. The Applicant had neglected to finalise the extended cover that would have met the procedure for acceptance of the intended cover.

Following the evidence, the Tribunal agreed with the Ombud that the extended cover never incepted and accordingly, that the matter is concerned with the initial period of three months.

The waiting period

The Tribunal was not persuaded by the Second Respondent’s argument that the Applicant had known that he was going to be retrenched within the waiting period.

The argument did not impair the Applicant’s contention that he first knew of the retrenchment outside the waiting period and as a result, the Second Respondent was not in a position to repudiate payment of the Policy claim on this basis.

On this issue, the Tribunal found that in the circumstances the Second Respondent failed to prove that the Applicant knew that he would be retrenched within the waiting period.

Voluntary retrenchment

The Second Respondent maintained that the Applicant’s claim was repudiated based on the exclusionary provision in the Policy that prevented an insured person from claiming on the Policy where such person accepted voluntary retrenchment.

Several arguments in support of this stance were presented by the Second Respondent and counsel. However, the Tribunal found that the Policy provided no definition nor any form of guidance regarding what voluntary retrenchment is.

The Tribunal stated that the Policy provided no clarity on how the parties intended the Policy to operate, and that the words 'accepts a voluntary retrenchment' needed to be further probed.

To determine the intention of the parties at the time of signing the Policy, the ordinary rule relating to the interpretation of contracts was applied by –

ensuring that the use of language, if clear, must be given effect to;
giving plain, ordinary and popular meaning to the words used unless the context indicates otherwise; and
ensuring that any provision purporting to limit an obligation to indemnify must be restrictively interpreted because it is the duty of the insurer to clarify the particular risk that it seeks to exclude.

In the present circumstances, it was evident that the Applicant and the Second Respondent did not intend the words 'accepts a voluntary retrenchment' to exclude cover in the instance where the Applicant was retrenched without any choice of accepting another position within his former employ.

The Tribunal rejected the Second Respondent’s stance that it had made payment for the first month of cover as a gesture of good faith and found that the payment was made because the Policy provides for it. The Tribunal highlighted that there was nothing preventing the Second Respondent from repudiating the claim if it was not satisfied that the conditions for payment had not been met.

In the circumstances, it was found that the Second Respondent did not have a valid basis on which to repudiate payment of the Applicant’s claim for the remaining two months of the initial period.

Order

The application was remitted for reconsideration and no order as to costs was made.

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The law

Financial Sector Regulation Act 9 of 2017 – s 230

Cases referenced

Nthite v Reitzer Pharmaceuticals (Pty) Ltd [2014] ZALCJHB 326
South African Transport and Allied Workers Union obo Mlotsa and Others v Grindrod (Intermodal) [2016] ZALCJHB 429
Witbooi v Leandra Transport CC 2010 JDR 1507 (WCC)

Full text of the FST Decision - GG Cillé v FAIS Ombud and others