Legal Shield given clean bill of health

THE largest legal services insurance firm in Namibia, Legal Shield Namibia, has been placed back under the control of its board of directors and Managing Director.

Legal Shield emerged from more than four months of a provisional curatorship on Wednesday last week, when High Court Judge Kato van Niekerk released the provisional curators who have been in control of the company from their duties and ordered that the company’s board of directors and Managing Director be reinstated and have their powers restored. The company’s return to the control of its own board and MD Quinton van Rooyen did not happen without another hitch, though.Patrick Kauta, representing the Chief Executive Officer of the Namibia Financial Institutions Supervisory Authority (Namfisa), first tried to persuade the court on Tuesday to prolong the provisional curatorship by a further three weeks.Kauta told the Judge that Namfisa CEO Frans van Rensburg, who was on leave and could not be reached as the matter went to court, had not given him instructions on an agreement that the Legal Shield provisional curators and Van Rooyen were claiming to have reached with Van Rensburg at a meeting the previous Friday.According to that agreement, Van Rooyen and the provisional curators, retired Chief Justice Johan Strydom and former Sanlam Namibia Managing Director Bob Meiring, had agreed that the provisional curatorship under which Legal Shield had operated since March 31 could come to an end last week, Legal Shield’s counsel, Dave Smuts SC, informed the court.Namfisa obtained a court order placing Legal Shield under the control of a provisional curator – at first Meiring alone was carrying out that function, before Strydom joined him in that capacity on May 12 – on March 31, after a bitterly-fought court battle between it and the company.With that court order, Legal Shield became the first financial institution in Namibia since Independence to have been placed under curatorship.Last week the company emerged from that test with a clean bill of health, courtesy of a report compiled by Meiring and Strydom.The company still has a Namfisa sword hanging over it, though.With Kauta not in a position to confirm that Van Rensburg had agreed to the withdrawal of a Short-term Insurance Act notice that Van Rensburg in his capacity as Registrar of Short-term Insurance had issued to Legal Shield, Judge Van Niekerk decided not to include a withdrawal of that notice in the order that she granted on Wednesday.The provisional curators had recommended that the notice should also be withdrawn.In the notice, Van Rensburg informed Legal Shield that he intended to withdraw the company’s registration as a short-term insurer if it did not implement a host of directives that he had addressed to it since late 2003.Many of those directives had already been implemented before the curatorship started, and the provisional curators have addressed the remainder, with the result that all Van Rensburg’s directives have either been satisfied or substantially complied with, Strydom and Meiring state in their final report as provisional curators that was submitted to the High Court last week.They reported that the company’s financial position was strong, systems controlling money received from policyholders conformed to the applicable requirements, and that Legal Shield was a viable and healthy business.One of the concerns that had in the first place prompted Namfisa’s curatorship application was the rate at which claims by Legal Shield policyholders were being turned down by the company.However, the provisional curators found on this score that the repudiation of claims before the start of the curatorship and thereafter did not differ significantly, and that where claims had been turned down, it had been done reasonably and correctly and in terms of the policy agreements between Legal Shield members and the company.In fact, under the control of the company’s own management during the 2004/05 financial year, some 13 per cent of claims were turned down, it was found.Under the control of the provisional curators, this repudiation rate varied between a high of 25 per cent in May and a low of 7 per cent in August up to the time that their report was compiled.Legal Shield MD Van Rooyen commented over the weekend that the company was considering taking legal action to recover the damages that it claims to have suffered during the months of the provisional curatorship.The company has not shown the sort of growth that it had experienced previously, it has had some policy cancellations, and because of the provisional curatorship it has not been able to launch new products like before, and the damages from this would have to be recovered from someone, he said.The company’s return to the control of its own board and MD Quinton van Rooyen did not happen without another hitch, though.Patrick Kauta, representing the Chief Executive Officer of the Namibia Financial Institutions Supervisory Authority (Namfisa), first tried to persuade the court on Tuesday to prolong the provisional curatorship by a further three weeks.Kauta told the Judge that Namfisa CEO Frans van Rensburg, who was on leave and could not be reached as the matter went to court, had not given him instructions on an agreement that the Legal Shield provisional curators and Van Rooyen were claiming to have reached with Van Rensburg at a meeting the previous Friday.According to that agreement, Van Rooyen and the provisional curators, retired Chief Justice Johan Strydom and former Sanlam Namibia Managing Director Bob Meiring, had agreed that the provisional curatorship under which Legal Shield had operated since March 31 could come to an end last week, Legal Shield’s counsel, Dave Smuts SC, informed the court.Namfisa obtained a court order placing Legal Shield under the control of a provisional curator – at first Meiring alone was carrying out that function, before Strydom joined him in that capacity on May 12 – on March 31, after a bitterly-fought court battle between it and the company.With that court order, Legal Shield became the first financial institution in Namibia since Independence to have been placed under curatorship.Last week the company emerged from that test with a clean bill of health, courtesy of a report compiled by Meiring and Strydom.The company still has a Namfisa sword hanging over it, though.With Kauta not in a position to confirm that Van Rensburg had agreed to the withdrawal of a Short-term Insurance Act notice that Van Rensburg in his capacity as Registrar of Short-term Insurance had issued to Legal Shield, Judge Van Niekerk decided not to include a withdrawal of that notice in the order that she granted on Wednesday.The provisional curators had recommended that the notice should also be withdrawn.In the notice, Van Rensburg informed Legal Shield that he intended to withdraw the company’s registration as a short-term insurer if it did not implement a host of directives that he had addressed to it since late 2003.Many of those directives had already been implemented before the curatorship started, and the provisional curators have addressed the remainder, with the result that all Van Rensburg’s directives have either been satisfied or substantially complied with, Strydom and Meiring state in their final report as provisional curators that was submitted to the High Court last week.They reported that the company’s financial position was strong, systems controlling money received from policyholders conformed to the applicable requirements, and that Legal Shield was a viable and healthy business.One of the concerns that had in the first place prompted Namfisa’s curatorship application was the rate at which claims by Legal Shield policyholders were being turned down by the company.However, the provisional curators found on this score that the repudiation of claims before the start of the curatorship and thereafter did not differ significantly, and that where claims had been turned down, it had been done reasonably and correctly and in terms of the policy agreements between Legal Shield members and the company.In fact, under the control of the company’s own management during the 2004/05 financial year, some 13 per cent of claims were turned down, it was found.Under the control of the provisional curators, this repudiation rate varied between a high of 25 per cent in May and a low of 7 per cent in August up to the time that their report was compiled.Legal Shield MD Van Rooyen commented over the weekend that the company was considering taking legal action to recover the damages that it claims to have suffered during the months of the provisional curatorship.The company has not shown the sort of growth that it had experienced previously, it has had some policy cancellations, and because of the provisional curatorship it has not been able to launch new products like before, and the damages from this would have to be recovered from someone, he said.