The Supreme Court of Appeal recently set aside the judgment of the Pretoria High Court in the matter of Napier v Barkhuizen which held that time barring clauses in insurance contracts (which typically require the insured to institute proceedings against the insurer within a time period which is far shorter than the three year prescriptive time period) are in violation of certain provisions of the Bill of Rights, specifically section 34 of the Bill of Rights being the right of access to the courts. Section 34 provides as follows:
Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.
Time barring clauses limit the common law position and potentially restrict access to the courts where an insured fails to institute proceedings against the insurer within the time period specified. These provisions may be found in both long-term (life and disability) and short-term insurance policies.
The Supreme Court of Appeal affirmed the general principle that “contractual terms are subject to constitutional rights” and found that factors such as a markedly inferior bargaining position on the part of the insured may contribute to a finding that the contractual provision is against public policy (which now has a context in the Constitution itself) and therefore may be struck down by the courts. In this particular matter there was little evidence before the Court to establish that these factors were present. The kind of test the courts may use in future was set out as follows:
“All this would bear on the critical question, which is whether the plaintiff in effect was forced to contract with the insurer on terms that infringed his constitutional rights to dignity and equality in a way that requires this court to develop the common law of contract so as to invalidate the term.”
In this particular matter there was no basis for the Court to invalidate the time barring clause. The Court then turned its attention to the issue of right of access to the courts and found that:
“The plaintiff’s claim arose because of a voluntary arrangement with the insurer: one that entitled him, against payment of a premium, to insurance in respect of his vehicle, on the conditions set out in the policy. The insurer’s defence therefore did not superimpose a time-bar on a pre-existing entitlement: it arose from the very agreement that defined the ambit of the right in creating it.”
Effectively, although the Bill of Rights applies to contractual arrangements, your starting point ought to be the four walls of the contract itself and the rights that the contract creates. The Pretoria High Court sought to go beyond the contract itself and confer rights that simply did not exist:
“The approach the learned judge took implies that the plaintiff had a pre-existing right to insurance, which the time-bar unfairly and improperly impeded by requiring him to institute his claim within 90 days. That in my respectful view is wrong. The only right to insurance the plaintiff enjoyed was the one he acquired from the contract; and this required, as a precondition of its enforcement, that he institute his claim within that period. Failing this, he acquired no right at all. To afford him a different and larger right is to create a contract for the parties to which neither agreed.”
Ultimately the Court found that “there is nothing to suggest that the plaintiff did not conclude the contract with the insurer freely and in the exercise of his constitutional rights to dignity, equality and freedom. This leads to the conclusion that constitutional norms and values cannot operate to invalidate the bargain he concluded.” The appeal accordingly succeeded.
The importance of this decision is the imperative that you familiarise yourself with the provisions of your insurance policies and, in particular, any time barring provisions. If you fail to act timeously you will forfeit your right to claim!
Here is a copy of the judgment: