LegalOmbudsman

A settlement reached between parties in full and final settlement of any claim should rarely be set aside.

The position is no different when a matter is before OSTI. The simple reason is that it is in the public interest that disputes, once settled, stay settled and that settled disputes are not easily reopened by a party who has second thoughts.

Mr H claimed for home contents that were stolen during a break-in at his residence. Mr H intimated a claim with his insurer and a settlement offer was tabled by the insurer. Reduced settlements were offered for items that Mr H could not provide proof of quantum and ownership for and certain electronic items were deemed to have been stolen after being left in the open. These items were excluded from the settlement.

The dispute arose, according to the insured, from the fact that the policy held with the insurer had effectively been cancelled by the insurer and a new policy had incepted. Mr H was not aware of The new policy or the new policy wording due to the fact that notification of the new policy wording had been sent to an incorrect email address by the insurer.

While considering Mr H’s complaint, it was noted that the offer tabled by the insurer was in full and final settlement. It was also noted that the offer had been accepted by Mr H and Mr H had entered into an agreement of settlement with the insurer.

Therefore, during the consideration of the complaint by OSTI, it became necessary to consider whether there were any grounds for setting aside the agreement made in full and final settlement of  The claim.

It was found that Mr H would only be entitled to have the agreement set aside if he could show that the insurer’s factual statements of the claim, provided at the time of settlement, were wrong. In deciding to settle, Mr H had taken the risk that the insurer’s allegations were in fact untrue/incorrect. Mr H could have referred the matter to OSTI or could have issued summons against the insurer in order to disprove any facts, but by settling he agreed to forego this opportunity and could not reserve the right to try again at a later stage. If the latter were the case, no settlement would ever be final.

The position would have been different if factual statements advanced by the insurer and relied on by Mr H, were fraudulent. OSTI could however find no evidence of fraud on the part of the insurer. It was apparent that Mr H intended to settle, notwithstanding the possibility that the claim had been incorrectly determined by the insurer.

An insured who has made an allegation of incorrect settlement against an insurer but decided in the end not to have it tested before entering into an agreement of loss, should not be allowed to revive the allegation as a basis for setting aside the settlement whenever he so chooses. There was no duress, undue influence or material mistake when Mr H entered into the agreement with the insurer and therefore the settlement agreement could not be set aside by OSTI.

Where an insured requires urgent relief from the insurer, but where there is a dispute regarding the quantum of settlement, the insured is free to try to negotiate an interim payment with the insurer. Such a settlement is not in full and final settlement and the insured must take care to delete the words such as “full and final” from any document signed for such an interim settlement. It must be noted however that an insurer is not obliged to accept such an interim settlement offer from an insured.

Many insurers labour under the incorrect impression that where the insured accepts an offer in full and final settlement, it removes any dispute from the jurisdiction of OSTI. Although OSTI may not always be willing to set aside a full and final settlement, OSTI can still consider such a dispute and explore the circumstances under which the settlement was reached.

OSTI informed the insured in this matter that it could not set aside the settlement agreement.

  • Please note that each matter is dealt with on its own merits and no precedent is created by the findings in these matters. The case studies are intended to provide guidance and insight into the manner in which OSTI deals with complaints.

[Newsletter of the Ombudsman for Short Term Insurance]

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