Insurance: SCA orders homeowner to refund R1.64m claim

A Pretoria homeowner was ordered by the SCA to refund Discovery R1.64m, plus other costs it paid him for a genuine storm damage and household contents insurance claim, because part of the claim related to emergency accommodation was fraudulent, says a Moneyweb report. Judges of the SCA upheld with costs Discovery’s appeal against the Gauteng High Court (Pretoria) judgment handed down in September 2021.

The court ordered Tshamunwe Masindi to refund Discovery R1 594 980.12. Discovery opened the case against Masindi on 14 December 2017. Masindi took out insurance with Discovery during May 2016 in terms of which he insured, among other things, his residential property in Pretoria and household contents. The policy covered repairs to Masindi’s house and damage to household contents while also making provision for alternate emergency accommodation in the event the insured property was damaged, and as a result, became uninhabitable. The material terms of the policy were that if any claim or part thereof was fraudulent, Discovery would have the absolute right to cancel the policy retrospectively from the date of the reporting of the incident or the actual date of the incident, in which event the insured would forfeit all the benefits under the policy from the date of cancellation.

A storm on 11 November 2016 damaged Masindi’s house and household contents and made the residence uninhabitable. Masindi claimed for the repairs to his insured residence, compensation for damages to the household contents and reimbursement for the emergency accommodation expenses. Discovery paid the claim in full but subsequently discovered that part of the claim relating to emergency accommodation was fraudulent. This, notes the Moneyweb report, resulted in Discovery cancelling the policy retrospectively from 11 November 2016 and reclaiming the full amount it had paid out by way of compensation to Masindi. However, the High Court held that Discovery was not entitled to repayment of the full amount claimed but only that portion of the claim that was tainted by the undisputed fraud.

It held that Masindi had acquired accrued rights to the payment of the genuine portion of his claim and that those rights remained intact and unaffected by the subsequent fraud. The SCA, however, held that clause 5.13, which deals with fraudulent claims, is clear and unambiguous and effect must therefore be given to it. It said that if effect was not given to this clause, the underlying purpose that the clause was designed to serve – to protect Discovery against fraudulent claims and discourage attempts by insured persons to gain undue advantage by lodging falsely inflated claims – would be undermined.