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Claim repudiated on the grounds that certain security requirements had not been met

A broker whose licensing history revealed a series of "inexplicable" facts had a complaint against him upheld by the Ombud for Financial Services Providers because of his failure to properly advise his client of security requirements during a change of insurers.

Michael George Meiring t/a Eco Sure was the regular short term insurance broker for his client Warwick Vernon Kaywits.

During the course of the investigation of the complaint by the Ombud's office, Kaywits died and the complaint was then pursued by his wife Soraya Kaywits, as executrix in his deceased estate.

Kaywits complained to FAIS Ombud Charles Pillai Pictured right) that when Meiring moved his short-term insurance policy from Auto and General Motor and Household Insurance Company (Auto and General) to Santam Insurance Limited (Santam) on 1 November 2004, he failed to properly advise Kaywits of Santam's security requirements.

Thus when Kaywits had a burglary at his house on 24 November 2006 the claim was repudiated on the grounds that certain security requirements set out in the Santam policy had not been met with.

During investigation by the Office of the FAIS Ombud, it was established that in October 2004 the deceased had asked the respondent to obtain a short-term insurance quotation from Santam for cover similar to that provided by Auto & General as he wanted to move over to Santam.

Respondent had used the information in the Auto & General policy to obtain the Santam quotation. The deceased accepted the quotation and a new policy was issued by Santam with effect from 1 November 2004.

When the burglary took place at the deceased's house on 22 November 2006, the burglar/s had gained access to the premises through an external door that did not have a security gate.

The deceased's claim was rejected on the basis that when the quotation was applied for he had said he had security gates on the external doors of his house when in fact he did not.

In his determination, the Ombud noted that the one significant difference  between the questions asked by Auto and General and those asked by Santam relating to security measures in place at the deceased's house was that the former asked only whether all opening windows, including louvers and fanlights, were fitted with burglar bars.

In an e-mail dated 15 March 2006 to respondent, Johan van Manen, the Broker Consultant of Auto & General, said he had listened to the voice log of the conversation between the deceased and their consultant when the policy was sold.

The question asked by the consultant and the deceased's answer were recorded in the policy schedule as well.

Van Manen said the deceased was not asked if he had security gates installed as that was not a requirement of Auto & General.

Santam, however, asked not only whether all opening windows and louvers were fitted with burglar bars but in addition, whether security gates were fitted to all external doors. As a result, the Santam quotation, which was issued thereafter states under "House contents":

"Safety measures: Burglar bars
Safety measures: Burglar bars & security gates."

The questions relating to burglar bars and security gates and the answers in the affirmative were recorded in Santam's policy schedule as well.

Meiring said when respondent took over as the deceased's broker they together went through his Auto & General policy schedule and the deceased had confirmed "that all the cover and security was in place".

When they obtained the Santam quotation they "worked from his latest policy document from Auto & General".

He said on 29 October 2004 "the quotation was discussed with the client, as well as all the terms, conditions, excesses applicable and so forth".

However, a perusal of the record respondent kept of consultations with the deceased shows nothing was mentioned about the alleged discussion of the quotation with the deceased - more specifically, the terms and conditions.

The Ombud said: "Santam had the additional question about security gates. Nowhere does Meiring mention that he pertinently drew the deceased's attention to that important fact and that he asked him for a response before he obtained the quotation.

"Instead, he says he obtained the quotation based on information in the Auto & General policy schedule.

"Since the latter policy did not have that question the only reasonable conclusion I can draw is that either Meiring or the responsible staff member of the respondent answered the question without confirming the true facts with the deceased. This was at best negligent and at worst reckless."

The Ombud upheld the complaint since the respondent had failed in his duty to ensure proper disclosure to the insurer and ordered the parties to settle the quantum. The deceased had alleged that his loss amounted to R23 614, 77.

In the event they failed to reach agreement, the complainant was entitled to approach the Ombud again to determine the same.

Turning to Meiring's licence history, the Ombud raised as a concern certain issues relating thereto.

It turned out that when Meiring applied for his licence on 29 September 2004, just before the deadline set by the Minister of Finance- he had asked for a licence under the name of 'Ecosure CC' - in other words in the name of a close corporation i.e. a juristic person.

However, when the FAIS Ombud attempted to confirm this, he was advised by CIPRO - the companies registration office - that no close corporation was registered under that name.

However a licence was granted to Meiring as Ecosure CC in terms of the FAIS Act.

Pillai stated: "It is, therefore, clear that although an FSP licence was purportedly granted to a non-existent close corporation, in effect it was Meiring who was the applicant..."

Pillai went on to say that ...'in May 2006 Meiring applied for Ecosure CC to be changed to Brainwave Projects 927 CC t/a Ecosure as the authorised FSP. (Brainwave Projects 927 CC is in fact a registered close corporation.)

This was granted by the Registrar of Financial Services Providers on 26 June 2006. The trading name of Brainwave Projects 927 CC was changed to 'Avantus' in 2007.

Commenting on the effect of these changes, Pillai said: "What was not in fact a registered close corporation was issued a licence as if it was a juristic entity.

"That non-juristic entity was purportedly granted a change in its licence name to that of a close corporation. Whether this was legally permissible is something the Registrar will have to investigate.

"What is inexplicable, however, is how it came about that an FSP licence was issued to what turns out to have been a non-existent entity.

"A copy of this determination is being sent to the Registrar for him to take such action as may be deemed necessary," Pillai said.