By Omoh Gabriel, Business Editor
Seventeen insurance companies operating in the country have accused the PTO of under insuring its risk and the matter has pitched the 17 companies against NIACOM. The PTO it was learnt under-insured the risk by taking a cover for N750 million for its property valued at $15 million (about N2 billion) shown on its sales invoice.
Based on this a disputed multimillion naira final claim from Reliance Telecommunications Limited on the insurance has arose anger and bad blood letting between National Insurance Commission, the regulatory body for the insurance industry with the insurance companies accusing NAICOM of bias. In a letter dated March 7, 2005, Naicom had ordered Standard Alliance Insurance Plc and 16 others including Central Insurance, Nem Insurance, Hallmark Assurance to pay N630 million to Reliance Telecommunications within 30 days ending April 6 following a complaint by the private telecom operator (PTO).
However, the group of insurers, led by Standard Alliance to co-insure Reltel risk of N750 million, has refused to obey the regulator’s order, arguing that Naicom has no power to make such order and that Naicom did not even give them fair hearing before making the order.
The matter took a twist when acting on behalf of the 17 insurers, the legal firm of Professor Bayo Osipitan wrote Naicom on March 23 to reject the order on the grounds that the “commission lacks the power to unilaterally adjust the claim (filed by Reltel), award the sum of six hundred and thirty million naira to the insured and compel its clients to pay same within 30 days.
According to the legal firm, “The nature of the dispute between our clients and insured, namely, the quantum of indemnity which the insured is entitled to under the policy, is not within the competence of your commission to resolve.
“Under the policy such disputes should be referred to Arbitration failing which the same would be resolved by a court of competent jurisdiction.”
The letter also argued that Naicom’s order did not take into account interim payment of N71 already made to the PTO. Reliance Telecommunications had filed a claim of N930 million for damage by fire of a switch in the company’s transmitter on Victoria Island in 2004. The insurers made an interim payment of N71 to keep the insured in business while working out a damaged claim, an action that is consistent with industry practice.
The insurance companies are claiming that based on valuation of the lost switch by experts and the loss adjuster’s report, they (insurers) arrived at a final settlement payment of about N116.5 million, which means Reltel would be entitled to a balance of about N46.5 million.
According to the insurers, the value of the loss was reduced because investigations found that Reltel lost only one switch to the fire, and not two as reported in the original claim, Naicom had faulted the insurers on the issue of penalty against the insured for under-insuring, accusing them of negligence for not carrying out adequate pre-loss survey to ascertain the true value of the risk before assuming it.
But the insurers sought refuge under the principle of utmost good faith which obliges parties to a policy to full and truthful disclosure of all material information to a contract. Retel rejected the offer and reported the matter to the Nigerian Insurers Association (NIA) and Naicom under the management of Oladipo Bailey.
NIA reportedly agreed with the position of the insurers while Naicom did not take a decision before Bailey was replaced. Records show that Reltel had made claims for damage to its equipment in 2002 for which the insurers paid N7.5 million out of goodwill because the item damaged was not covered under the policy. The company made another claim in 2003 and was paid N41. In the letter to Naicom, solicitor to the insurers called the regulator’s attention to this claim history and stressed the need for caution in dealing with the present claim..
