Know Your Policies – Time Barring and Prescription

It’s useful to understand your policy.

Prescription and Time Barring Clauses in South African Insurance

What Are Prescription and Time Barring Clauses?

• Prescription is a legal principle under South African law (Prescription Act 68 of 1969) that extinguishes a claim after a certain period, generally three years from when the claim arises, making it unenforceable in court.
• Time barring clauses are contractual provisions in insurance policies that set a shorter, stricter deadline—often 180 days (6 months)—within which the insured must initiate legal action against the insurer after a claim rejection. If the insured fails to act within this period, they lose the right to challenge the insurer’s decision.
  
  

How These Clauses Work

• After an insurer rejects a claim, the policyholder typically has a limited time (e.g., 180 days) to start legal proceedings.
• If the policyholder misses this deadline, the insurer can rely on the time bar clause to dismiss the claim, even if the claim might have merit.
• The Prescription Act’s three-year period applies if no time bar clause exists or after the contractual time bar period expires.
• Lodging a complaint with the Ombudsman for Short-term Insurance (OSTI) suspends the running of both prescription and the contractual time bar period until the complaint is resolved.
  
  

What Policyholders Need to Do to Comply

• Read and understand your policy’s time bar clause carefully to know the exact deadlines for taking legal action if a claim is rejected.
• Act promptly after claim rejection: If dissatisfied, consider lodging a complaint with OSTI before the time bar period expires to suspend the deadline.
• Keep all communication records with the insurer, including rejection letters that specify time bar deadlines.
• Seek legal advice early if you intend to dispute a claim rejection to ensure timely action.
• Be aware that failure to comply with the time bar clause may result in losing your right to claim, even if your claim is valid.
• If you miss the deadline, you must show good cause for non-compliance to courts or OSTI, but this is rarely successful unless exceptional circumstances exist.
  
  

Summary

Policyholders should be vigilant about these deadlines to avoid losing valid claims due to procedural time limits.