Pretoria man ordered to pay R1.5m back to Discovery Insure over fraudulent claim

File Picture: Simphiwe Mbokazi/African News Agency/ANA

File Picture: Simphiwe Mbokazi/African News Agency/ANA

Published Jun 14, 2023

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Pretoria – The Supreme Court of Appeal has ordered a Pretoria man to pay back R1.5 million to Discovery Insure with interest of over 10% after the court found that the insurer did not have to honour the claim because part of the claim was fraudulent.

Pretoria homeowner Tshamunwe Masindi took out cover insuring household contents and property.

The policy provided, among other things, that if damages resulted into his residence unsuitable for human habitation, Discovery would be obliged to compensate him for the resultant damage to the buildings and household contents, and, where applicable, to reimburse him for his out of pocket expenses incurred for what the policy described as emergency accommodation.

The policy further provided, among other things, that if any portion of a claim lodged with the company by the client was fraudulent, the insurer would be entitled to cancel the policy and reclaim all amounts paid.

On November 11, 2016, Masindi submitted a single claim for losses caused by storm damage to his house.

In court papers, Discovery said the claim was made up of two components, repair costs to Masindi’s residence and damage to household contents, while the second component was for emergency accommodation.

“Consequently, at various times between 7 December 2016 and 25 May 2017, Discovery paid to the respondent the aggregate amount of R1 594 980.12 in settlement of both components of the claim,” read the court documents.

The insurer explained that from the money paid, R675 000 was for emergency accommodation, which they argued that it was tainted by fraud.

Meanwhile, the sum of over R927 000 which was paid for damages caused by the storm, was untainted by fraud and therefore legitimate.

When evidence of the fraud came to light, Discovery notified Masindi that his policy will be cancelled and the insurer will therefore be claiming back all the money paid to him.

When he failed to pay back the money, the insurer approached the South Gauteng High Court in Johannesburg where the judge ruled that Discovery was not entitled to repayment of the full amount.

The high court held that Discovery was entitled to repayment of only that portion of the claim that was tainted by the undisputed fraud.

Unhappy with the decision, Discovery Insure approached the SCA to compel Masindi to pay back every cent.

Deputy President of the SCA, Xola Petse together with Judge Mokgere Masipa presided over the matter and ruled in favour of Discovery.

The judges said the high court’s interpretation overlooked the fact that there was clause that explicitly stated that upon breach of terms, Discovery would be entitled to terminate the policy and recoup money paid to Masindi.

“We consider that Discovery was entitled to a refund of all the moneys previously paid out by it to the respondent (Masindi) and, thus, to the relief it sought in the high court. In these circumstances the appeal should, therefore, succeed,” the judges said.

Masindi was ordered to pay the insurer R1 594 980.12 plus interest of 10.25% per annum calculated from June 8, 2017 to date of final payment.

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