Extension clauses in motor-vehicle insurance policies

Transcription

1 JP van Niekerk Extension clauses in motor-vehicle insurance policies Can the authorized driver compel the insured owner to claim from the insurer? In Fielding v Jacobs NO & another (2005 JDR 1445 (C)), the trial court had held, arguably quite correctly and in line with recent authority, that an extension clause in a motor-vehicle insurance contract was a stipulation between the insurer and the insured owner in favour of the authorized driver as a third party. That was not contradicted by the fact that the stipulation contained a procedural arrangement that only the insured could claim against the insurer and that the third party s rights against the insurer therefore had to be enforced by the insured for and on behalf of the third party. (In short, the third party has a legal right to indemnification, but no locus standi or capacity to enforce that right against the insurer.) More contentious was the decision that, on the facts before the court, the third-party driver could not compel the insured owner to enforce its rights against the insurer by submitting a claim for an indemnity on the insurance contract, as no tacit term to that effect could be read into the agreement between the insured and the third-party driver as to the use of the vehicle. Hence the appeal (on behalf) of the third party to the Supreme Court of Appeal in Jacobs NO v Braaff (SCA 24 November 2006 (case no 603/2005) unreported). The facts in Jacobs NO v Braaff The facts, very briefly, were that a son (HF Braaff) negligently drove his father s (FJ Braaff s) insured motor vehicle and caused a collision in which a passenger (Fielding) in the vehicle was severely injured and in which the son himself was killed. The injured passenger claimed damages in an amount of more than R jointly and severally from the executor of the son s estate (Jacobs) and from the insured father. She alleged in her particulars of claim that the son had been driving the vehicle at the time of the accident with his father s authority, wholly or partly on his behalf or in his interest, and subject to his retention of the right to control the manner in which the vehicle was being driven. ISSN

2 The executor denied the passenger s material allegations and had a third-party notice served on the father. In support he alleged that prior to the date of the accident, the father had insured the vehicle with an insurer (Santam) and that the insurance was operative at the date of the accident. He further relied on two clauses in the relevant insurance contract. The one clause extended (subject to certain conditions not relevant to the present case) the cover afforded the father as insured against liability to third parties driving the vehicle on the order or with the permission of the insured. The executor alleged that the son had used and driven the insured vehicle with his father s permission as the clause required and that the insurer was therefore obliged to indemnify the son as authorized driver in respect of the damages claimed by the injured passenger. The other clause relied on by the executor provided that the policy conferred no rights against the insurer on any person but the insured and that any extension of the insurer s liability to any person other than the insured did not confer on such person any right to institute a claim on the policy ( geen reg om n eis ingevolge hierdie polis in te stel nie ), the intention being that in all cases the insured had to claim for and on behalf of such person. The executor alleged that it was a tacit or implied term of the agreement between the son and the insured father as to the use of the vehicle (and pursuant to which the son used and drove the vehicle with the father s permission) that in the event of a circumstance arising under which the son became liable for damages to another party arising from his use of the vehicle, the father would claim the indemnity contemplated in his insurance contract. Despite this obligation on the father to claim the indemnity on behalf of the son, and despite a demand, the father had failed to do so. The executor therefore sought an order compelling the father to claim from the insurer an indemnity on behalf of the deceased son in respect of the damages claimed by the passenger from the son s deceased estate. While the son s liability for the plaintiff s damages (but not the quantum) had been settled by agreement between the passenger and the executor, the latter proceeded in the trial court to compel the father to claim from the insurer. The main issue between the executor and the father concerned the terms upon which the son was driving the vehicle at the time and, more specifically, whether he did so with his father s permission, whether there existed an agreement between father and son as to the use of the vehicle, and, if there was such an agreement, whether it extended to the son the indemnity afforded the father under the latter s policy. The trial court dismissed the executor s claim. It held that the father had granted the son permission to use the car, but that the extension clause in the policy did not afford the son as authorized driver the right to enforce a claim against the insurer in the face of a refusal by the insured father to assist him, as was required by the policy. The executor took this decision on appeal. The decision on appeal On appeal, the court (per Heher JA; Navsa, Nugent, Conradie & Ponnan JJA concurring) did not regard it as necessary to consider the correctness of the finding of the trial court concerning the right of the son as third party to rely on the procedural measure contained in the second clause relied upon by the executor. It thought that [t]he appeal turns on the terms of the agreement between father and son. First, Heher JA restated some general and wellestablished principles concerning tacit terms: they were no more than unexpressed contractual provisions emanating from the parties common intention; 84 ISSN

3 they were inferred by the court from the express terms of the contract and from surrounding circumstances; and they included not only terms which the parties actually had in mind but failed to express, but also terms which the parties (whether or not they actually had them in mind) would have expressed had those terms been drawn to their attention. In the present case the evidence suggested that the term argued for by the executor should in fact be read into the contract between the son and the father as a tacit term. The father s own evidence was crucial in this regard. It showed that the son was a student, not in employment and maintained by his father in whose house he lived. The son had a driver s license but no car of his own although he was permitted to use his father s vehicle if he obtained permission in advance. The father had always regarded his motor-vehicle insurance policy as one that would protect himself, his wife, and his children in the event of a motor-vehicle accident, also when one of them was driving. He had made the members of his family aware of the existence of insurance cover for their benefit. He admitted that in the event of an accident within the terms of the policy, he would have had no hesitation in invoking the benefits, especially if in doing so he could obviate the need for a member of his family to become involved in litigation. The authorized driver has a legal right to an indemnity against claims by other parties Given these circumstances, the court thought that this was pre-eminently a case where, had a disinterested hypothetical bystander asked the father and son at the time when the son arranged to borrow the vehicle for the journey on which the accident occurred, what would happen if the son was involved in an accident while driving and a claim was made against him by another party, they would both without hesitation have answered that there existed insurance cover and that a claim would be submitted to the insurer. Thus, the Supreme Court of Appeal held, the executor had proved in the trial court that the agreement to lend the car to the deceased [son] included, as a tacit term, an undertaking to submit any claim against the deceased arising in the course of his driving of the vehicle to the insurer for the indemnification of the deceased. There was no reason why the executor of the deceased estate should not be allowed to call on the father to submit his (the son s) claim to the insurer. As a result, the executor s appeal succeeded with costs. The order of the trial court was set aside and replaced with an order instructing the father to submit a claim to the insurer for an indemnity in respect of the damages claimed by the passenger against the son s deceased estate. Some comment Three aspects of the decision may be commented on very briefly. In the first instance, as far as the position of the third party (the son, as authorized driver) as against the insurer is concerned, it is submitted that even though the Supreme Court of Appeal declined to consider the correctness of the approach of the trial court to the issue, the ultimate view expressed there was (despite some doubtful formulations of the relevant principles) not only correct but actually supported by relatively recent authority. The decisions in McClain v Mohamed & Associates [2003] 3 All SA 707 (C) and Unitrans Freight (Pty) Ltd v Santam Ltd 2004 (6) SA 21 (SCA) arguably established that a third-party beneficiary (the authorized driver) has a legal right to, and the insurer a legal obligation to pay, an indemnity against claims by other (fourth) parties. The provision that only the (named) insured is entitled to enforce any ISSN

4 claim for indemnification against the insurer is merely a procedural measure disentitling the third party from any right of enforcement (any right to claim or locus standi), but it does not contradict the intention to benefit the third party or negative the latter s legal entitlement to the indemnity. One need only stress that in claiming against the insurer in this regard, the insured owner will be enforcing not his own right against the insurer (although, of course, the insured may well have a right of his own as well, such as for an indemnity against damage to the insured vehicle) but that of the third-party driver. Both are actually insured the one a named insured, the other a third-party insured. But the insurer justifiably wishes to deal only with a party known to it (the contracting or named insured), hence the procedural requirement that the claims of all others who may qualify for indemnification by virtue of the extension clause be chanelled through that insured. Secondly, as far as the position of the third party (the son, as authorized driver) as against the insured is concerned, it is submitted that the decision of the trial court was incorrect and hence that the decision on appeal is correct. The agreement between the father (the insured) and the son (the authorized driver) as to the use of the insured vehicle, it may be suggested, did indeed contain a tacit term to the effect that given that the son as authorized driver was entitled to an indemnity against the insurer, the father as insured would assist him in enforcing that right against the insurer in the manner required by the insurance contract. That is so, irrespective of the nature of that agreement, that is, whether it is regarded as one of mandate or as one involving a (gratuitous) loan. Of course, the nature of the contract may have a bearing on whether or not a tacit term of the nature contended for may be read into the agreement. Likewise, the relationship between the parties is of prime importance in determining whether or not such a term could be read into their agreement. And here the close, familial relationship between the parties may well have been crucial. Further, in postulating the father and son s tacit agreement to the term contended for by the executor that the father would in appropriate circumstances assist the son in recovering an indemnity from the insurer one should not confuse the father s subsequent refusal to assist (the son s estate) with the possibility of an earlier tacit consent to provide such assistance. Thirdly, the Supreme Court of Appeal mentioned in passing what role the insurer might have played in the instant case. It observed that the father did not offer any explanation for his refusal to assist the executor of his deceased son s estate in enforcing his claim against the insurer. He had merely stated that he had left the matter in the hands of his insurer. It was clear from his evidence, the court observed, that he had neither sympathy nor any liking for the passenger and was not unhappy to see her without remedy against the insurer (or, more correctly, without any remedy against the indigent estate of the son given that the latter had no remedy against the insurer). However, it was suggested on behalf of the executor that in all probability the insurer itself was the mind behind the father s opposition, and the insurer s representative had actually stated in an affidavit that he handled the claim on behalf of the insured father. In the present case, it seems, the insurer may well have been joined or have intervened in the proceedings, hence the need of the trial court to determine its liability towards the son as authorized driver and the latter s entitlement to an indemnification against the insurer. Given that the insured father s position as against the insurer would, or should, not have been affected had he assisted in enforcing his son s claim, it appears that the insurer was the only party that stood to benefit from the refusal to provide such assistance. 86 ISSN

5 However, the court found it unnecessary to determine this issue. But it tellingly still ventured the comment that if the insurer were behind the insured father s opposition and refusal to assist in the enforcement of his son s claim, such conduct is reprehensible given the insurer s undertaking in the policy (not to mention the slogan which is printed on the company s letterhead Actions speak louder than words. Dis wat ons doen wat tel ). JP van Niekerk: University of South Africa, Pretoria ( [email protected]) ISSN