The Supreme Court of Appeal recently considered the effect of a partially fraudulent claim, which was discovered after the claim was paid. Overturning the High Court’s decision, the Supreme Court of Appeal found that, on the terms of the policy, the insured had to repay even the valid portion of the claim.
The decision serves as a warning to insureds not to inflate claims and will be welcomed by insurers in an environment where fraudulent claims are on the rise.
Background
Mr Masindi’s policy with Discovery Insure Limited covered specified risks to his home and its contents. The policy also covered his expenses in securing “emergency accommodation” if damage to his home made this necessary.
Mr Masindi submitted a claim to Discovery after his home was damaged in a storm on 10 November 2016. He claimed for damage to his home and its contents (R972 597.67), and the costs of emergency accommodation (R675 000.00), supported by invoices from a hotel.
After paying the claim, Discovery learned that Mr Masindi did not stay at or pay any money to the hotel. Discovery cancelled the policy with retrospective effect from the date of the storm, but Mr Masindi refused to repay the claim, prompting Discovery to institute legal action.
The fraud was not in dispute during the trial. Only the effect of the fraud was in dispute, which required an interpretation of the policy.
The policy
The relevant clause in the policy provided that:
“All benefits in terms of this [policy] in respect of...
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