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Cedric Stephens | Court knocks down no-report-no-pay claims practice

Published:Monday | May 6, 2019 | 12:11 AM
The Supreme Court in Kingston.
The Supreme Court in Kingston.


Today’s piece is part two of my March 10 ‘Garbage in, Garbage out’ column.

Garbage was used twice as metaphors. The first described an insurer’s argument. The second was a one-word opinion about its decision not to settle a third party’s claim. The rationale: they had no legal duty to do so. The policyholder caused the collision. He had failed to report it after eight months.

Policyholders are generally required to give full details in writing within 30 days.

An insurance source told me after the article was published that there are some companies who use the no-report-no-pay argument as part of on-going and unethical efforts not to pay the claims of innocent victims. This action, though unlawful, maximises earnings to which senior executives’ compensation packages are tied.

Revised regulatory guidelines that mandate fair treatment of policyholders and other claimants are ignored in the process and regulators and victims are clueless.

Last Monday – quite by chance – I discovered that local puisne judge, Justice S. Bertram Linton, made an important ruling in a case two years ago. His judgement applies to victims of no-report-no-pay claims. To my non-legal mind, that ruling is as significant to these kinds of claims as Julian J. Robinson v Attorney General was to the constitutionality of The National Identification Registration Act and the fundamental rights and freedoms of Jamaican citizens.

The former case, unlike the latter, did not receive any publicity.

The practice continues, as the reader from Montego Bay found out earlier this year.

The case was Kirk Burford v Advantage General Insurance Company Limited. Burford was the claimant and Advantage General the defendant. The nine-page judgement caught my attention like gunshots. I have been crying out like a lone voice in the wilderness for about 15 years: the no-report-no-pay argument is wrong. It is contrary to law. Justice Linton’s legal arguments were beautiful music to my ears.

Facts of the case

The Claimant was injured in a motor vehicle accident. He instituted a claim (2012 HCV 05250) against Tina McKain and Derval McKain to recover damages for negligence. Notice of proceedings was served on the defendant on September 24, 2009.

A default judgement was granted in the claimant’s favour and damages were assessed in the following terms:

• General damages of $1.5 million interest at 3 per cent annum from November 13, 2012 to June 12, 2014;

• Special damages of $16,500 with interest at 3 per cent per annum from February 26, 2009 to June 12, 2014; and

• Costs were summarily assessed at $80,000.

The judgement debt, or court-ordered payment, went unsatisfied. Mr Burford sought to be compensated by Advantage General under the Motor Vehicles Insurance (Third-Party Risks) Act, MVITPRA.

On February 22, 2017 when the matter came up for hearing, the parties agreed to proceed via submissions. The court ordered that: the claimant’s attorney file and serve written submissions on or before March 24, 2017; the defendant is permitted to file its submission in response on or before April 19, 2017; and that judgement would be delivered on June 1, 2017.

The parties agree to proceed based on written submissions.

Because neither party complied with the time-table, the court moved to honour its obligation.

Kirk Burford’s claim

The claimant asked the court for a declaration that the defendant is obligated to pay the judgement debt by virtue of MVITPRA as well; that an order that the defendant pays the said amount within seven days of the date of the declaration be granted.

He sought compensation based on the fact that the motor vehicle owned and operated by Tina and Derval McKain at the time of the accident was insured by Advantage General.

He also claimed the defendant neither sought to be excluded from liability nor has the debt been satisfied.

Insurance company response

Advantage General’s response to the claim was: they insured the vehicle; that no report was made to them until "2 years after the accident and after a claim had been filed in the Supreme Court” and they were unable to verify the circumstances surrounding the accident.

The company also said they were unable to inspect the vehicle to confirm the damages done to it and cross-reference these with the injuries the claimant claims to have suffered; and there was uncertainty about the exact location of the accident.

Based on an analysis of the information to court, from MVITPRA, and the authorities, the judge found that:

• An insurance company can seek to avoid third-party liability where at the time of entering the insurance contract there was material non-disclosure of relevant information or misrepresentation by the insured which would have caused an inability to properly assess their risk: Section 18(3) of Motor Vehicles Insurance (Third-Party Risks) Act;

• An insurance company can also avoid liability where after an accident it can be shown that the liability is not one covered under the policy of insurance notwithstanding section 18(1) of the act; and

• An Insurance company may not avoid third party liability by relying on the fact that their insured breached a condition of the insurance policy after the accident, for example, failing to report the matter to them.

The judgement

According to paragraph 14 of the judgement, Section 8(1) of MVITPRA provides that:

“Any condition in a policy or security issued or given for the purposes of this act, providing that no liability shall arise under the policy or security, or that any liability so arising shall cease, in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy or security, shall be of no effect in connection with such claims as are mentioned in Subsections (I), (2) and (3) of Section 5; provided that nothing in this subsection shall be taken to render void any provision in a policy or security requiring the person insured or secured to repay to the insurer any sums which the latter may have become liable to pay under the policy or security and which have been applied to the satisfaction of the claims of third-parties.

“Therefore, the fact of a specified event occurring or not occurring after the accident has no bearing on the third party’s claim,” the court ruled.

The court declared that the insurance company must pay the judgement.

So, nearly a decade after legal proceedings began, the company was forced to settle the claim of the innocent victim.

The no-report-no-pay practice is wrong. It must stop!

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: