The meaning of “reject” or “repudiate” in insurance matters
The basis of your agreement with an insurer
A valid contract is an agreement entered into by two or more parties who have the intention of creating legal obligations. The agreement is recognised by law as being binding on the parties. The terms and conditions stipulated within a contract determine the parties’ obligations towards each other. Unfortunately, in some cases, parties will neglect their obligations, thus creating a breach of contract.
The purpose of the contract is to ensure that the parties honour the promises that they have made to each other. The law provides mechanisms for the enforcement of promises when they are broken. Additionally, legislation regulates the conclusion and performance of agreements to ensure parties appropriately conduct themselves.
The South African Insurance Association (SAIA) is a representative body of the non-life insurance industry. They have compiled a list of standardised terminology of the 50 most common terms used in personal-lines insurance policies and which are potentially confusing. They provide the following definitions for the terms “Reject” and “repudiate”:
- Reject (see also Repudiate) If an insurer rejects a claim, the insurer has refused to pay the claim or any part of the claim, in terms of the policy.
- Repudiate (also see Reject) If an insurer repudiates a claim, the insurer has rejected the claim, which could be for various reasons. It has the same meaning as the definition of Reject.
“Rejection of claim” or “denial of liability”
While the use of the phrases “repudiation of a claim” and “repudiation of liability” are common in the insurance industry, it is preferable and correct to use the terms “rejection of a claim” and “denial of liability”. That is because there is specific meaning to the term “repudiation” of a contract. Repudiation is a breach of a contract by the one party that justifies cancellation by the innocent party. Repudiation is conduct which exhibits the clear and unequivocal intention of the party concerned to no longer be bound to the contract.
When an insurer is entitled to, and does, avoid a policy because of the insured’s material misrepresentation or non-disclosure, avoiding the contract is not a breach of the contract. In these circumstances the insurer does not repudiate the contract. The insurer denies liability in respect of the claim because the policy has been avoided by reason of material misrepresentation or non-disclosure.
When an insurer rejects a claim relying on application of an exclusion clause, or because the claim does not fall within the operative clause of the policy, that is not a repudiation of the contract. In these circumstances the insurer does not deny the existence of the contract of insurance but denies liability under the contract.
Speak to an attorney
If you have been informed by your insurer that your claim has been repudiated or rejected or that they do not accept liability, it would be prudent to seek legal advice about your options. Feel free to contact us at Paul du Plessis Attorneys on 012 809 1588 or send an e-mail to firstname.lastname@example.org with your questions.
Written by Dané du Plooy