Car Wash Incident: How a Simple Car Wash Cost R1.3 Million

The recent case of Caroline Woodley highlights the critical importance of understanding your insurance policy, particularly when leaving your vehicle or any other valuable asset, in the custody of service providers.

 

Whether for cleaning, repairs or storage, there are risks involved that policyholders must be aware of to avoid devastating financial consequences.

 

Caroline Woodley’s Story

 

In September 2024, Caroline Woodley left her seven month old Ford Everest (valued at R1.3 million) at a carwash in Ballito, KwaZulu-Natal.

 

While she was at work, someone called the carwash pretending to be sent by her to collect the vehicle. The carwash manager handed over the keys to this person, who paid for the service and drove off with the car.

 

When Caroline Woodley discovered her vehicle was stolen, her insurer (CIB, underwritten by Guardrisk) rejected her claim based on a “trickery clause” in her policy. This clause stated:

 

“The policy does not cover loss directly arising from or caused by or resulting from any fraudulent scheme, trick or device practiced on you or any person having custody of your property.”

 

The insurer also stated: “It was negligent of her to leave her keys and vehicle unattended there.”

 

From the client’s perspective, this assessment may seem disconnected from everyday practice. The vehicle was not unattended, as it was in the care of the car wash. Additionally, leaving keys with service providers for vehicle movement during cleaning is common practice and calling this negligent may not have been an appropriate comment. Consider another scenario – what should a client do when they take their vehicle in for a service? The keys and possession of the car have to be handed over to the service provider in order for them to perform the service, it was no different in this case.

 

While she eventually received partial compensation through a public liability claim against the carwash’s insurer, she was left with a significant credit shortfall on her vehicle finance.

 

This case raises important questions about custodial responsibility, insurance cover and client expectations.

 

Custodian Liability and Disclaimers

 

When you leave your vehicle, or any asset for that matter, with a service provider for cleaning, servicing or repairs, that party has a presumed liability in South African law. Custodians are responsible for safeguarding the property and are liable for acts of negligence while it is in their care. However, most custodian type service providers attempt to limit their liability through disclaimers or indemnity clauses, which are largely ineffective as one cannot contract out of gross negligence or the duty of care in South Africa, based on our common law and the CPA Act.

 

Despite this legal protection, clients should always read disclaimers carefully and ensure that the service provider has adequate liability insurance. This step is crucial because inadequate liability insurance on their part could leave you responsible for the whole loss if something goes wrong.

 

The “Trickery Clause”

 

Most South African insurance policies include a “trickery” or “false pretenses” exclusion. This clause typically states that insurers will not cover losses resulting from fraudulent schemes practiced on you and some insurers specifically extend this to include any third party holding custody of your property.

 

In Caroline Woodley’s case, while she herself was not tricked, the carwash manager was. Contractually, the insurer was correct in rejecting her claim because her policy explicitly stated that if “any other person” (in this case, the carwash manager) was tricked while having custody of her property, the policy would not respond.

 

Our View

 

While we agree that insurers are contractually correct in rejecting this loss based on her policy wording, we believe there is room for improvement in how such exclusions are applied. The inclusion of “or any other person” in these clauses creates an onerous situation for clients paying comprehensive premiums on insured assets. When clients purchase comprehensive motor insurance cover, is it not reasonable for the insuring public to expect cover for events like this, especially since the fraud occurred while property was entrusted to a third party?

As risk advisors, we believe that insurers should consider removing the “or any other person” wording from these exclusions, perhaps at a premium or as an extension. This could serve two purposes, one, it would ensure the issue is properly discussed and underwritten before the loss and two, insurers could set sustainable risk premiums for this extension based on empirical data from events relating to trickery and the like. At the end of the day, insurance should never be a “zero sum game”.

 

In cases like Caroline’s, where we believe she acted responsibly by using what appeared to be a legitimate service provider, the insurer could have paid her claim and then pursued recovery from the negligent custodian (in this case, the carwash) and we would not be writing this article.

 

This perspective aligns with client expectations and reflects what we believe comprehensive motor insurance should cover. However, we stress that our view is somewhat anecdotal as we would need sight of the full policy wording, policy schedule and specific circumstances to provide a definitive view.

 

What If the Car Wash Had No Insurance?

 

Another critical issue arises, what if the car wash had no liability insurance or if their insurer rejected their claim?

 

In such cases:

• Your insurer would still reject the claim based on the trickery clause
• You would then have no choice but to sue the car wash directly, a legal battle that could take years and involve substantial legal costs and which you may end up losing

 

This scenario highlights why:

• verifying that any service provider you entrust with your property has adequate liability insurance is critically important.
• consulting with a professional risk advisor is crucial as, not only will they be able to advocate for you in cases like this, but they will ensure you have the best product for your risk and highlight the key exceptions etc., ensuring you make an informed insurance decision

 

Understanding Your Policy

 

Never assume comprehensive motor insurance will cover all your losses – the fact is, no insurance policy covers everything. It is crucial that you understand your insurance policy

 

At a minimum, you should always familiarize yourself with:

 

1. Insured Events: What specific circumstances are covered
2. Exclusions or Exceptions: What is explicitly not covered (like a trickery clause).
3. General Conditions: Requirements and conditions that must be met for cover to apply.

 

A qualified risk advisor can help you manage these complexities by highlighting critical clauses and explaining their implications.

 

However, even the best risk advisor cannot replace your responsibility as a client to ask enquiring questions and to read and understand your policy.

 

The Bottom Line

Entrusting your vehicle, or any valuable asset, to service providers comes with inherent risks that require careful consideration.

 

To protect yourself:

• Always verify that custodian service providers have adequate liability insurance.
• As far as possible, make a conscious effort to choose service providers with a proven track record, a solid reputation of treating their customers fairly and who employ proper risk management practices.
• Read disclaimers and fine print carefully.
• Understand your own insurance policy’s exclusions and conditions.

 

By taking proactive steps and working with a professional risk advisor, you can minimize risks and ensure you are properly protected against unforeseen losses.

 

Ultimately, understanding your policy and dealing with reputable service providers, who have adequate liability insurance cover, is your best safeguard against costly surprises.