The Supreme Court of Appeal, in the case of King Price Insurance Company Ltd v Concise Consulting Services (Pty) Ltd  ZASCA 42 (13 April 2021), once more highlights the need for clear and unambiguous policy construction.
In this matter, the Insured, a company registered in accordance with the laws of the Republic of South Africa, comprehensively insured a motor vehicle with the Insurer in terms of a contract of insurance (“the Policy”). The regular driver of the motor vehicle noted on the Policy was an employee of the Insured. Following a motor vehicle collision involving the insured vehicle, the Insured’s Managing Director telephonically lodged a claim with the Insurer. The Policy required that true and complete information must be provided to the Insurer. During the claims process, the Insured’s Managing Director informed the Insurer that it would need to obtain details of the incident from the employee, as he was the only person who had knowledge of the incident and how it occurred. The assessor appointed by the Insurer to investigate the incident conducted numerous telephonic interviews with the Insured’s employee. Upon completion of the investigation, and on the advice of the assessor, the Insurer repudiated the claim on the basis that during the validation of the claim, the Insured’s employee supplied dishonest information.
The Insured then instituted proceedings in the Magistrate’s Court. In defence of the action the Insurer relied on the provision of fraud and dishonesty in the policy which provided that the Insurer will reject a claim if the Insured, or anyone acting on the Insured’s behalf submits a claim, or any information or documentation relating to the claim, that is in any way fraudulent, dishonest or inflated. The magistrate hearing the matter found that the Insured’s employee was dishonest and dismissed the Insured’s claim. In reaching its conclusion, the court held that the Insured’s employee was acting on behalf of the Insured when such dishonest representations were made. Consequently the Insurer was entitled to repudiate and cancel the Policy.
On appeal to the Full Bench of the High Court, the judgment, a quo was set aside in its entirety. The High Court reasoned that the Insurer bore the onus of establishing a balance of probabilities that the Insured had made or supplied fraudulent information with the willful intent to defraud the Insurer. The High Court found that the Insurer had failed to discharge such burden because the Insured’s employee was not acting on behalf of the Insured when the employee provided the dishonest information.
Unhappy with the outcome of the High Court Appeal, the Insurer approached the Supreme Court of Appeal (SCA). In the appeal, it was common cause that the employee’s representations were dishonest. However, the SCA drew a distinction – in light of the policy wording – between the submission of a claim and the subsequent validation process that took place after the claim had been duly lodged. In this regard, the SCA held that the validation process was not a requirement for the lodging of a claim and was done entirely at the election of the Insurer. Notwithstanding this, the primary focus of the SCA turned to the wording of the fraud and dishonesty provision in the policy, and more specifically, whether or not the employee was acting on behalf of the Insured when such dishonest representations were provided during the validation process.
Based on the evidence before the SCA, and in particular the testimonies of the Insured’s Managing Director and the employee, the SCA held that the Managing Director had not requested that the employee fabricate any information or act dishonestly. Rather, in providing the dishonest information, the employee did so for the protection of his own interests as he was seeking to avoid adverse consequences from his employer.
Having regard to the Policy, the SCA held that the use of the wording of ‘acting on behalf of’ in terms of the insurance contract signified the concept of agency. As the Insured’s employee was only a witness to the incident, the Insured’s employee could not be held to be an agent of the Insured and, in turn, could not be acting on behalf of the Insured when providing dishonest information. Of course, the SCA recognized that the words ‘acting on behalf of’ do not in all instances denote the concept of agency. Such wording may be interpreted, in appropriate instances, to have a broader meaning of acting for the benefit of or in the interests of another, albeit not as an agent.
However, the SCA held that, to the extent that the wording was ambiguous, it must be interpreted against the Insurer. Consequently, although dishonest information was indeed provided by the employee, the SCA held that the employee was nonetheless not acting on behalf of the Insured, and accordingly, the submission of dishonest information and/or conduct by the employee could not be attributed to the Insured.