An appeal bench decision sets the cat amongst the pigeons in the realm of material non-disclosure.

The well-known judgment in Jerrier v OUTsurance dealt with whether OUTsurance was entitled to reject Jerrier’s claim for accidental damage to his insured Audi R8 sports car. The reason for the rejection was non-disclosure of two previous motor incidents for which Jerrier had not claimed. The appeal court, overturning the earlier ruling in this matter, held that OUTsurance was not entitled to reject the claim.

The previous incidents were a pothole collision causing damage to a rim and a collision with a bakkie which resulted in a memorable altercation between the insured and the bakkie’s driver in Beach Road, Amanzimtoti (and an expensive repair bill to the insured vehicle).

Jerrier’s version was that he elected not to claim for what he regarded as two low-value incidents in order to preserve his “OUTbonus”.

The court held that Jerrier’s failure to report the two previous incidents did not entitle OUTsurance to avoid liability for loss sustained in a later, unrelated incident. His intention by not notifying was to preserve the reward of a refund through his OUTbonus. The non-disclosure was not material and did not entitle OUTsurance to reject.

The court affirmed the principle that an insurance contract does not require a higher standard of good faith. The duty of disclosure hinges on materiality and the distinction between good faith and bad faith. There is no special category to be applied to insurance contracts.

The lower court was mistaken in placing emphasis on the policy requirement that the insured immediately report a change in circumstances and any accident within 30 days, even if he did not intend to claim in future.

The OUTsurance “plain language” wording was found not to be as simple or worded in plain language as the insurer may have believed. The OUTsurance policy is not similar to other conventional policies, which are subject to annual renewal and the completion of an annual questionnaire. The OUTbonus incentive is a distinguishing feature from other policies and its effect cannot be ignored.

This judgment should cause insurers to reflect on their wordings. Innovative and differentiating features such as no-claim bonuses may affect the application of usual principles of insurance law.