CR354 Credit insurance / Retrenchment

Credit insurance / Retrenchment

Credit insurance – complainant dismissed from employment for alleged misconduct – insurer’s liability excluded in case of “fair dismissal” – complainant proving his dismissal was unfair – exclusion only came into play if policyholder retrenched, or lost income while self-employed or engaged in protected strike


1. The complainant was dismissed from his employment on disciplinary grounds, and was without work for four months. He appealed internally against his dismissal, and the outcome of the appeal was that his dismissal was held to be unfair. He was reinstated in his job.

2. The complainant lodged a claim in terms of his credit protection policy, which covered a loan he had taken. The claim was turned down. The insurer told the complainant that he was not entitled to claim because he had not been retrenched, and had been reinstated.

3. The complainant referred to an extract from the contract which read: “No amount shall be payable in respect of unemployment occurring due to your resignation, retirement or the acceptance of a voluntary retrenchment, the expiry of a non-renewable fixed term contract or a contract of temporary or casual nature; any form of retirement or fair dismissal of your contract of employment.” The complainant stated: “It was therefore clear to me that should I prove my dismissal was unfair, then the insurer would be obliged to honour my claim… Now that I have proved that I had been unfairly dismissed, the insurer ducks the bullet and refuses to accept liability”. He maintained that he had suffered hardship, being without income for four months.


1. The complainant’s policy provided a benefit to a policyholder on the happening of three, and three only, defined situations when employment or income was lost, other than for health reasons. These three situations or events were “Retrenchment”, “Loss of Income when Self-employed” and “In the event of a Protected Strike”. To qualify for a benefit the complainant’s situation would have to fall within the definitions of one of these defined insured events.

2. It was clear from the content of the appeal hearing documents that the circumstances of the termination of his employment did not constitute retrenchment as defined (it was a disciplinary matter). His involuntary unemployment was not “as a direct result of new technology being introduced by your employer, re-organisation by your employer or expectation of adverse conditions by your employer and resulting in staff reductions” (the definition of retrenchment in the policy). He himself stated that “it is common cause that I was not retrenched”. He was also not self-employed when he lost income, or involved in a strike. He therefore did not qualify for any of the benefits payable on the occurrence of the defined insured events.

3. The policy lists certain “Exclusions applicable to strike, retrenchment and/or loss of income when self-employed”. If any of these events had in fact occurred, liability would nevertheless be excluded , “in respect of unemployment occurring due to your resignation or the acceptance of voluntary retrenchment; the expiry of a non-renewable fixed term contract or a contract of temporary of casual nature; any form of retirement or fair dismissal in terms of your contract of employment”. In other words, if the insured person’s retrenchment, loss of income when self-employed or in the event of a strike also falls under any of these excluded situations, no benefit is payable. It is necessary in the first instance, however, that the reason for the loss of employment must be one of the three defined insured events, before the exclusion can come into play.

4. Loss of employment for alleged misconduct is not an insured event covered by this policy, and therefore the complainant could not receive any benefit for loss of employment for this reason, whether the termination of his employment was fair or unfair, or whether he was reinstated or not.

5. The exclusion in the case of “fair dismissal in terms of your contract of employment” meant, for example, that if the contract of employment precluded strike, it might be a fair dismissal to terminate an employee who had gone on strike, and the insurer’s liability would be excluded.

6. We made a provisional ruling against the complainant, setting out the above reasoning.


7. The complainant accepted our provisional ruling.

September 2014