A USA appeal court held that an insurer had no duty to indemnify its policyholder in a class action brought on behalf of alleged recipients of junk faxes. The class action claimed $500 in statutory damages for each of 44 000 unsolicited advertisement faxes sent between 2005 and 2008. The policy had a $1 000 deductible that applied to damages suffered by “one person or organisation”.
The wording of the deductible clause meant that the $1 000 limit did not apply to the claim as a whole but to each person faxed. As there was no evidence that any class member actually received multiple faxes, there was no duty to indemnify.
There was a duty to defend because the insurance company waived its right not to defend by taking four years to raise this issue. That waiver did not extend to the deductible endorsement. To hold that the deductible endorsement could be waived would, said the court, be like barring an insurer from asserting policy limits and create coverage where none existed under the policy in the first place.
A similar decision is likely in South Africa. Waiver requires a conscious abandonment of a right and it is unlikely that an insurer would consciously agree to raise its insured limits. In some circumstances estoppel may apply if the insurer’s conduct causes the insured to act to its prejudice.