Supreme Court on the Determination of the Value of a Car Under a Comprehensive Insurance Policy
The Supreme Court by majority decision has held that an insured party is entitled to determine the value of his insured car and that the value although not being the actual value of the car will not render void the insurance contract. This is because the value determined by the insured party will not be considered as a misrepresentation on the part of the insured party.
In Kwame Asamoah v SIC Insurancethe plaintiff initiated proceedings at the High Court against the defendant for recovery of GH¢116,200.00 being the insured/claim/replacement cost for his Chevrolet vehicle which was stolen under a comprehensive insurance policy with the defendant. The plaintiff had insured the vehicle for GH¢116,000 at an agreed premium of GH¢5,759. The defendant company sought to repudiate its liability on several grounds. For purposes of this article, the defendant contended that, the plaintiff had inflated the value of the vehicle far in excess of the value declared at the port of taking delivery of the vehicle because of which he paid a lower custom duty thereby perpetrating fraud on the state which required an annulment of the insurance contract.
The High Court entered judgment for the plaintiff and on appeal to the Court of Appeal by the defendant company, the Court of Appeal held that the plaintiff had an insurable interest in the property but ruled that the defendant was entitled to avoid the contract for non-disclosure of some material facts and also for behaviour that bordered on fraud and forgery of official documents. The plaintiff appealed to the Supreme Court and the main issue for determination was whether the value of a car under an insurance contract was a material term which if not accurately disclosed could void an insurance contract.
In the court’s lead judgment written by Baffoe-Bonnie JSC, he defined an insurance contract as a “contract whereby one person, called the Insurer, undertakes, in return for the agreed consideration, called the premium , to pay to another person, called the Assured, a sum of money or its equivalent, on the happening of a specified event”. The court was of the view that the “duty payable on a vehicle is not based on values declared by the importer but rather on values decided by the state”. Consequently, the sum assured under an insurance contract is the value placed on the property by both the insurer and the assured. The assured sum may be influenced by factors such as the cost of the vehicle, shipping cost, registration and licensing, parts replacement cost, reconditioning and upgrade cost as well as profit margin if the vehicle is for sale. “In any event customs duty paid on the vehicle was based on the assessment done by the [Customs Excise and Preventive Service] relative to what they assessed to be the value of the vehicle at the time the vehicle was being cleared from the port. It had nothing to do with the value placed on the property by the assured, and for which the insurance company computed and asked the assured to pay a premium”.
The Court stated that when a party decides to take up a comprehensive insurance contract for a vehicle, “he has in mind the value that he wants in the case of the occurrence of the event. It is for the insurer to decide whether or not to assume the risk and at what premium. Premiums are fixed based on sum assured and the nature of the risk being undertaken. A higher assured sum definitely commands a higher premium”.
Under most insurance contracts, the insurance company is entitled to avoid the contract on grounds of fraud or misrepresentation of material facts. The test of materiality has been laid out as “everything is material which will guide a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions.” The questions raised by the court determining the issue of materiality on the case was:
- Is the fact of the value given and the custom duty paid thereon, relevant to the comprehensive insurance?
- Would its disclosure or non-disclosure have affected the insurance company’s preparedness to enter into the agreement on the same terms and conditions?
The court answered both questions in the negative. The court explained that material factors for purposes of insurance contract of this nature will include for example whether “the vehicle had been previously involved in a serious accident; or if the vehicle was originally left wheel drive and same has been converted to right wheel; or if the vehicle has undergone massive body or engine repairs, etc”. These disclosures are essential as they are likely to increase the risk the insurance company is undertaking. His lordship was of the view that the “non-disclosure would not lead to annulment of the contract if the event that triggers the claim is unrelated to the undisclosed facts, as in this case, where the claim is for the snatching of the vehicle by armed robbers”.
The Court concluded that in accordance with the classical definition of an insurance contract, the defendant company undertook, in return for the agreed consideration of the amount of GHC5,759.00, to pay the plaintiff an amount of GH¢116,000 on the happening of certain events including armed robbery. Once, the plaintiff had paid his premium and event for which the policy was taken has occurred, it was time for the defendant company to honour its promise.
PS: Insurers have an option to accept or decline a risk. When in doubt of the value of the vehicle, queries and probes should be made at the underwriting stage and not when a claim is being made.
 DLSC 3307 retrieved at: https://dennislawgh.com/case-preview?id=%5B2018%5DDLSC3307&searchType=title&srb=
Seriously, did SIC go to court on this matter? SMH. This was a clear case of bullying if u ask me. How do u repudiate a claim under such condition as to the value of the car? Our claims officers ( in the insurance industry )need better understanding of this business .
This often generate disputes between brokers and insurers.
Any idea when the cited case was decided?
21ST NOVEMBER, 2018
Four options are available for indeminifying a claimant: repair, replace, cash payments(ie cheque) & re instatement.
When insurers suspect fraud due to overinsurance, the most appropriate option is to replace, ie. buy the claimant his car which might cost cheaper than the insured value.
Well noted, then I think the company should include it in the contract that in case the vehicle is stolen or burnt to ashes, the company shall replace the stolen or burnt vehicle by purchasing a new car worth the sum insured. Else the owner may become adamant that he’s only interested in cash/cheque payment and nothing else. There are a lot of material facts that needs to be disclosed by both parties at inception.
Four options are available for indeminifying a claimant: Repair, replace, cash payments (cheque) & re instatement
When insurers suspect fraud due to overinsurance, the most appropriate option is to replace ie. buy the claimant his car which might cost cheaper than the insured value
Excellent judgement! A lot of insurance companies have been ripping clients off for too long. All they care about is the premium forgetting that the client aside obliging to the mandatory requirements for motor insurance, has his/her interest to be served in the event of an incident. More of these !
At the time of underwriting all these must be considered
These insurance companies are cheats.
When they were collecting the big premium from the client, did they remember the do called full disclosure ?
Now that they have to pay, they’re playing smart.
The court should charge them some fees for the insured.
Good judgment by Baffoe Bonnie
If the insurer had doubts on the sum insured for that particular vehicle, why didn’t they communicate to the insured and ask for a revision in the sum insured before the contract was effected?
Defendant erred big time in their argument. This indeed has been happening in the industry when some insurers in their quest to repudiate liability will rope in irrelevant attachments and conditions at the time of claim.
Customs Duty has nothing to do with Insurance Claim .
Market Value test was more appropriate, however, because cars are not manufactured in Ghana and sources of acquisition are different , the test sometimes could also be defeated. But still could have been the best method to apply.
The other area I know the court will disgrace insurers is when it comes to the application of “Depreciation “ ?
Can we clearly define the insurance principle of Utmost Good Faith and it’s application to claims as a basis for repudiation?
I think that principle must be revisited.
Insurance companies in Ghana, specifically SIC, fail to acknowledge that it’s the owner who determines the value of his car, given that the cars are not manufactured in Ghana. Like the Supreme Court ruled, the insurance company’s option is to decline to insure and not to say what the value is. How dare you tell me the value of my car, were you there when I bought and shipped it.
Once SIC and for that matter insurance companies get a premium for a stated value and clients pay, the deal is done.
Are these companies aware of the thousands of minor accidents clients refuse to claim? They’re even luck.
I have a claim with best Assurance. After declaring my car a constructive total loss,they have used tonaton and olx to determine the value of my car which is less than than the insured value.
Did you accept what they offered you?
If not, what did you do?