Misrepresentation – insured wrongly informed by insurer’s client service department that claim was covered – liability of insurer for post-contractual misrepresentation – compensatory award.
The insured held a policy covering functional impairment. He had a stent implanted and enquired per e-mail from the insurer’s client service department whether his claim was covered. He was told that his enquiry had to be referred to the underwriting department. Having consulted with the underwriting department, client service confirmed per e-mail that the implantation of a stent was indeed covered under the functional impairment benefit. When the claim was brought to the attention of the claims department they made an about-turn. They informed the insured that his claim did not fall under the benefit in question because there was no functional impairment. The insurer refused to pay. The insured objected and asked us for assistance.
The insured could not dispute the insurer’s explanation that the claim did not qualify in terms of the provisions of the policy. However, he relied strongly on the e-mail advising him that the claim was covered and contended that the insurer could not go back on its word. The insurer in turn admitted that the complainant was provided with the wrong information but denied that, as a result, it incurred contractual liability. The insurer also denied that the employee who sent the e-mail had any actual or ostensible authority to amend the policy.
The e-mail clearly was not an acknowledgment of debt and neither could it be construed as an amendment of the terms of the policy. It simply was bad advice amounting to a post-contractual misrepresentation.
We explained to the complainant that a misrepresentation is seen as a wrongful act or delict. It is conduct that should never have happened. Consequently the insurer had to compensate the insured in order to put him in the financial position in which he would have been in had no representation been made. However, in the present case there was no evidence that the insured was financially worse off because of the misrepresentation.
We also pointed out to the complainant that a person, like the complainant, who had been misled is not entitled to be placed in the financial position in which he would have been had the representation been true. This meant that the insurer could not be compelled to pay a claim which never existed. Conversely, if an insurer wrongly advised the insured that he had no claim, the existence of a valid claim would not be affected by the wrong information. In short, misrepresentation has no bearing on the existence or non-existence of a contractual claim.
Where an insurer made a misrepresentation it admittedly may be estopped from relying on the true facts (such as that there was no claim) but only if the insured, as a result of the false impressions, acted to his prejudice. Because of an absence of proof of any prejudice this doctrine could not be relied on in this instance.
Although the giving of the wrong information in the circumstances did not ground a delictual claim for damages, it nevertheless caused distress for the insured. Such conduct was not befitting the reputation of the insurer and neither was it the norm of the insurance industry. Hence we suggested to the insurer that this was a suitable case for compensation under our rule 3.2.5.
The parties settled the dispute on the basis that the insurer had to pay an amount of R2500 as compensation for the non-patrimonial harm resulting from its bad service.