Adjudication by Ombudsman Takaful Motor
The Participant’s claim for loss arising from theft of his motorcycle was repudiated by the Takaful Operator on the ground that there was a delay of 23 days to notify the loss to the Takaful Operator in breach of condition 2 (a) of the Certificate.
The case manager handling this dispute gave his recommendation favouring the Takaful Operator. The Participant who did not accept the recommendation has now referred the dispute for Adjudication by the Ombudsman.
The issue to determine here is to see whether there was such a breach and consequently whether based on the facts of this case the repudiation by the Takaful Operator was justified.
Condition 2 of the Certificate provides as follows:-
2 - Accidents and Claims Procedures
- We must be notified in writing or by phone in either case with particulars of the vehicle involved, date of accident and, if possible, a brief description of the circumstances of the accident within the specific time frame as follows after an event which may become the subject of a claim under this Certificate:-
- Within seven (7) days if you are not physically disabled or hospitalised following the event.
- Within thirty (30) days or as soon as practicable if you are physically disabled and hospitalised as a result of the event.
- Other than i) and ii), a longer notification period may be allowed subject to specific proof by you.”
The loss adjuster’s report revealed the following salient points:-
1) The Participant lodged a police report on the same day his motorcycle was stolen.
2) Police investigation revealed that the theft was genuine and have not implicated the Participant in any way.
3) Participant’s reason for the 23 days delay in notifying the claim to the Takaful Operator was due to his busy work schedule.
A preliminary assessment was given by the Ombudsman to the Takaful Operator during a meeting on 29/03/2017 to reconsider the claim on the following grounds :-
The delay was only 23 days. Participant lodged police report the same day his motorcycle was stolen and he thought that filing a police report was sufficient. Participant also informed that the delay was also due to his nature of work whereby he had to go outstation for work during the time. It was brought to the attention of the Takaful Operator that this is a genuine case of theft as confirmed by the police as well as the loss adjusters investigation report and that a Takaful Operator should not repudiate a claim on technical breaches where there is no prejudice to them. However, the representative of the Takaful Operator said he will reconsider if the Participant can provide some proof of going outstation for work. As a result of which OFS liaised with the Participant on the matter and the Participant produced his employer’s letter confirming that the Participant was outstation during the stated time period. However, the Takaful Operator was not satisfied with this and requested further documents from the employer but was unable to obtain due to constraints of Personal Data Protection Act. Hence, they maintained their decision.
Adjudication and reasons
It cannot be denied that the claim is repudiated merely on the ground of delay of 23 days in notifying the Takaful Operator. If there is any prejudice in the delay, the loss adjusters report should reveal. In fact that is the very reason why the Takaful Operator appoints a loss adjuster to do the investigation. However, based on the loss adjuster’s report in this case there appears to be no prejudice to the Takaful Operator. Further, it confirms that this is a genuine case of theft with no implication on the Participant. A delay of 23 days is not an inordinate delay in our view.
While the Takaful Operator has every right to reject a claim for failing to comply with the conditions of the Certificate, condition 2(a)(iii) of the certificate does give a discretion to the Takaful Operator to allow a claim if it exceeds the time allowed. It is here that the Takaful Operator should exercise its discretion in a given case to protect the interest of Certificate holder while promoting a positive image of the industry. In this respect it is pertinent to refer to Bank Negara Malaysia’s Guidelines on Claims Settlement Practices – BNM/RH/GL004/17 para 3.4.2 (b) which states :-
A Takaful Operator should not repudiate a claim on technical breaches of warranty or certificate condition which are not material or unconnected to the circumstances of loss unless it has prejudiced the interest of the Takaful Operator or has exceeded time bar as provided under the law.
In the factual matrix of the present case it falls squarely within the above guideline. The present case has not exceeded the time bar and breach by the Participant is technical in nature which is unconnected to the circumstances of the loss and without any prejudice to the Takaful Operator. In this respect it is pertinent to note that Judicial authorities have held that Bank Negara Malaysia’s Guidelines has force of law. (Diana Chee Vun Hsai v Citibank Bhd (2009) 5 MLJ; Affin Bank Bhd v Datuk Ahmad Zahid Hamidi (2005) 3 MLJ 361)
It cannot be doubted that the Bank Negara Malaysia Guidelines were put in place in order to prevent injustice to Certificate holders such as in the present case. It is a matter of policy and it is for the good of the country that all Takaful Operators in the country should adhere to the Guidelines since Bank Negara Malaysia being the Central Bank is the regulatory body entrusted to put in place and implement the minimum standards to be observed by the Takaful Operators in order to protect the interest of Certificate holders.
The Terms of Reference of the Ombudsman for Financial Services (OFS) provides that in deciding a dispute the OFS will do what in its opinion is fair and reasonable in all the circumstances, having regard to each of the following:
i) the terms and conditions of any contract
ii) any applicable law; regulations; guidance issued by Bank Negara Malaysia as well as Industry best practices; and
iii) to have regard to, but without being bound, by previous decisions of the OFS
One of the main difference between the OFS and a court is that OFS decides each case in accordance with what it considers to be fair and reasonable in the circumstances of the particular case. In the case of R (on the application of IFG financial services Ltd) v Financial Ombudsman Services (2005) EWHC 1153, the English court expressly supported the right of the Ombudsman to make an award which differs from that which a court would make, as long as it is fair and reasonable in all the circumstances of the case. This decision was approved by the English Court Of Appeal in R V FOS (2008) EWCA Civ 642.
It must be remembered that ‘fair and reasonable’ is the key consideration in OFS terms of reference. Thus being more able to provide redress for consumers, than the strict legal approach offered by the courts.
In view of the above circumstances, we adjudicate this dispute in favor of the Participant.
The Takaful Operator is required to pay the claim to the Participant within 14 days from the date of receipt of this Adjudication.