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Last Updated: 17 January 2006
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
CASE NO: 646/04
In the matter between :
PIET VAN IMMERZEEL First
Appellant
STRAT POHL Second Appellant
and
SANTAM
LIMITED Respondent
______________________________________________________________________
Before: ZULMAN, STREICHER, NAVSA, MTHIYANE JJA & CACHALIA AJA
Heard: 21 NOVEMBER 2005
Delivered: 5 DECEMBER 2005
Summary: Professional negligence insurance – meaning of ‘claim first made’ –
notification of possibility of claim not ‘claim made’.
______________________________________________________________________
J U D G M E N T
______________________________________________________________________
STREICHER JA
STREICHER JA:
[1] This appeal is against a
judgment in the High Court, Pretoria in terms of which an action instituted by
the appellants against
the respondent, which action proceeded by way of a stated
case, was dismissed. The issue to be decided is whether an action instituted
by
Samancor against the appellants constituted ‘a claim first made’
against the appellants within the meaning of the
phrase ‘a claim first
made against the insured’ in an insurance policy issued by Aegis Insurance
Company Ltd in respect
of the period 1 March 1993 to 28 February 1994
(‘the 1993 policy’). Aegis acted as lead insurer on behalf of itself
and
other following insurers and the respondent assumed the rights and
obligations of Aegis in terms of the 1993 policy.
[2] At the relevant time
the appellants practised in partnership as consulting engineers. In terms of the
1993 policy the insurer
undertook to indemnify the partnership in respect of
–
‘Liability incurred in respect of the Practice which results in
a claim first made against the Insured during the Period of
Insurance
irrespective of when or where such liability arises.’
[3] The 1993
policy provided under the heading ‘Limit of Liability’ that the
liability of the insurer ‘for damages
and claimant’s costs and
expenses arising out of any one claim’ would not exceed
R1 000 000. In addition the
insurer undertook to pay the costs and
expenses incurred in the conduct of any claim with the consent of the insurer.
The additional
liability undertaken by the insurer was subject to the following
proviso:
‘However, if a payment in excess of the amount of indemnity
under this Insurance has to be made to dispose of a claim made against
the
Insured the Insurers liability in respect of such costs and expenses shall be
such proportion of the total costs and expenses
incurred as the amount of the
indemnity available under this Certificate bears to the total amount to dispose
of the claim.’
[4] During November 1993 Samancor instituted action
against the partnership in which action it claimed damages on the ground of the
partnership’s alleged breach of contract in failing to properly supervise
the construction of a water pipeline. The partnership,
with the consent of the
insurer, instructed attorneys to defend the action. The trial court granted
judgment in favour of Samancor
and a subsequent appeal by the partnership to
this court was dismissed.
[5] Aegis, together with other insurers, also
issued a certificate of insurance to the partnership in respect of the period 1
March
1991 to 29 February 1992 (‘the 1991 policy’). The wording of
the 1993 policy is identical to that of the 1991 policy
except that, in terms of
the 1991 policy, –
(a) the insurers’ liability in respect of damages costs and expenses arising out of any one claim as well as costs and expenses incurred in the conduct of any claim was limited to R1 000 000; and (b) the proviso to the undertaking in respect of costs and expenses quoted above did not apply.
[6] Some time before the action in the trial court was finalised the insurer notified the partnership that it contended that:
‘(a) The contract of insurance between the parties governing the partnership’s claim to indemnity from the insurer was the 1991 Certificate; and that
(b) In terms of the 1991 Certificate, the limit of indemnity was R1 000 000 inclusive of the costs and expenses incurred in the defence of the Samancor action and any subsequent appeal.’
Whilst
persisting in these contentions, the correctness of which the partnership did
not accept, the insurer agreed to continue to
fund the costs of contesting the
Samancor action and the costs of the appeal in order to facilitate the proper
conclusion of the
litigation between Samancor and the partnership.
[7] Both
policies contained a condition 2 which reads as follows:
‘The insured
shall notify the Insurers via Glenvaal, Griffiths & Armour (Proprietary)
Limited in writing as soon as practicable
of
(a) any claim or of the receipt of notice from any person of an intention to make a claim against the Insured.
(b) Any occurrence or circumstance of which the Insured shall become aware during the Period of Insurance which may possibly give rise to a claim under Section 1 or Section 2. Such notice having been given any claim to which that occurrence or circumstance has given rise which is subsequently made against the Insured after the expiry of the Period of Insurance shall be regarded for the purposes of this Certificate as having been made during the Period of Insurance in which so notified.’
(Section 1 deals with ‘civil liability’.)
[8] During May 1991
the appellants became aware that Samancor contended that the partnership
‘may have breached its obligations
towards Samancor'. On 4 June 1991 the
appellants, by letter of that date and in terms of condition 2(b), gave notice
to Glenvaal
of a potential claim by Samancor. Referring to the contract for the
construction of the water pipeline the partnership wrote:
‘Die
Aannemer, Coccianti Construction, het sy versekeraar genader vir die koste van
herstelwerk aan, of vervanging van, die
pyplyn, Die eise-bemiddelaar van die
versekeringsmaatskappy, Mnr R Beeby van Loss Limit Eise-bemiddelaars, het ons in
kennis gestel
dat ons firma moontlik deur die versekeraar aangespreek gaan word
as party tot die geskil. Volgens hul mening was daar moontlik nalatigheid
aan
ons kant ten opsigte van gebrekkige toesighouding, aangesien die deklaag
filmdikte nie voor installasie van die pyp gemeet is
om te verseker dat dit aan
die spesifikasie voldoen nie.
Hierdie skrywe dien slegs as `n kennisgewing
van `n moontlike eis. Ons sal u op hoogte hou van enige verdere
verwikkelinge.’
[9] The appellants agree that they could have claimed
indemnity from the insurer in terms of the 1991 policy but contend that they
were also entitled to do so in terms of the 1993 policy. The appellants
obviously preferred to claim in terms of the 1993 policy
because of the more
extensive cover provided by it.
[10] The court a quo dismissed the
appellants’ claim. It held that ‘once notification had been given on
4 June 1991 the
claim was deemed, both in terms of the plain wording of the
1991 and the 1993 certificate and in law, to have been made’.
The claim
was therefore not first made during the period of insurance of the 1993
policy.
[11] In terms of the 1993 policy the insurer agreed to indemnify the
partnership in respect of liability which ‘results in a
claim first
made’. The question to be decided is, therefore, whether the claim in
respect of the partnership’s liability
to Samancor was first made when
action was instituted, which occurred during the period of insurance of the 1993
policy, or whether
the claim was first made when written notification of the
possibility of such a claim was given during 1991. If the former was the
case,
as was submitted by the appellants, they should succeed. If the latter was the
case, as was submitted by the respondent, the
appeal should be dismissed.
[12] The natural meaning of ‘claim’ is ‘a demand for
something as due; an assertion of a right to something’
(The Shorter
Oxford Dictionary).[1] This definition
was also accepted, in respect of a ‘claims made’ policy, by Stocker
LJ in Thorman v New Hampshire Insurance Co. (U.K.) Ltd and Home Insurance
Co. [1988] 1 Lloyd’s Rep. 7 (CA) at 15. In the same case Donaldson LJ
at 11 agreed ‘that a claim within the meaning of the
policy was the
assertion by a third party against the insured of a right to some relief because
of the breach by the insured of the
duty referred to in section 1 of the policy,
i.e. professional negligence’.
[13] In Robert Irving & Burns (a
firm) v Stone and Others [1998] Lloyd’s Rep IR 258 (CA) at 261
Staughton LJ said that ‘in the ordinary meaning of the English language
the words
“claims made” indicate that there has been a communication
by the client to the [insured] surveyor of some discontent
which will, or may,
result in a remedy expected from the surveyor. There must, I say, be
communication.’ It was suggested that
this statement by Staughton LJ is
authority for the proposition that notification of a possibility that a claim
may be made constituted
a claim. I do not agree. Firstly, it is not clear what
Staughton LJ had in mind when he referred to an indication of discontent.
Secondly, the nature of the claim was not in issue in the case, the issue was
whether the claim had to be communicated in order to
constitute a ‘claim
made’. Thirdly, Staughton LJ, although he referred extensively to the
judgments in Thorman, did not express any disagreement with the meaning
ascribed to ‘claim’ in that case. In the circumstances I doubt that
Staughton LJ intended to ascribe a different meaning to
‘claim’.
[14] In this case no demand was made against the
appellants and they did not give the respondent notice of any demand. The
appellants
were merely notified of a possibility that a demand may be made in
the future. No assertion of liability on the part of the appellants
was made
either. The appellants were merely notified that there was a possibility of
negligence on the part of the appellants. In
the last paragraph of the letter it
was expressly stated that the letter only served as notification of a possible
claim i.e. that
the letter was not a notification of a claim.
[15] Counsel
for the respondent submitted that the phrase ‘claims first made’ in
the 1993 policy should not be given its
natural meaning but should be
interpreted so as to include the communication to the insured of a potential
claim. He submitted that
support for his submission is to be found in conditions
2(b) and 8 of the 1993 policies. He submitted, furthermore, that ‘claims
made’ policies such as the 1991 and 1993 policies would be unworkable if a
different interpretation were to be given to the
phrase.
[16] Condition 2(b)
requires the insured to give notice of any occurrence of which he may become
aware during the period of insurance
and which may possibly give rise to a
claim. The partnership became aware of such an occurrence during the period of
insurance of
the 1991 certificate and gave the required notice. Having given the
notice the Samancor claim eventually made against the partnership
is regarded
‘for the purposes of (the 1991 certificate) as having been made during the
Period of Insurance’. It is therefore
clear that in terms of the 1991
certificate the written notification on 4 June 1991 is to be regarded as the
making of a claim for
purposes of the 1991 certificate and not for other
purposes.
[17] The written notice given by the appellants was not given in
respect of an occurrence of which they became aware during the period
of
insurance of the 1993 policy. Condition 2(b) in the 1993 certificate, therefore,
does not apply. In any event the condition does
not provide that a notification
of an occurrence which may possibly give rise to a claim during a period of
insurance preceding the
period of insurance of the 1993 policy is to be
regarded, for purposes of the 1993 certificate, as a claim made during the
preceding
period of insurance.
[18] Counsel for the respondent submitted that
an interpretation of ‘claim first made’ which excludes the
notification
to the insured of the possibility of a claim would render
‘claims made’ professional indemnity policies unworkable in
that an
insured may not be able to secure insurance cover for a subsequent period
because of the possible claim which he will have
to disclose. However, it is for
this very reason that a condition such as 2(b) is included in professional
indemnity policies (see
MacGillivray on Insurance Law 10th ed
at para 28-81; Clarke The Law of Insurance Contracts 4th ed
at para 17-4D4; and Simpson Professional Negligence and Liability at para
5.97).
[19] Condition 8 provides as follows:
‘The Insurers will not
avoid this Certificate on the grounds
(a) of failure on the part of the Insured at any time to disclose to the Insurers facts material to the assessment of the risk. (b) that the Insured made an incorrect representation of a nature likely to have materially affected the assessment of the risk under this insurance
Provided that
(a) the Insured proves that such alleged non-disclosure or misrepresentation was innocent and free from fraudulent conduct or intent on the part of the Insured
(b) where the Insured could have notified
under any preceding insurance circumstances which could give rise to a claim any
indemnity
in respect thereof to which the Insured may be entitled under Section
1 shall not be greater or wider in scope than the indemnity
to which the Insured
would have been entitled under such preceding insurance.’
[20] Counsel
for the respondent submitted that condition 8 reflects an intention that
‘(w)here the insured notifies the insurer
of circumstances which could
give rise to a claim during a period of insurance, then any liability arising
from that claim is covered
by, and is restricted to, that certificate,
irrespective when the summons is served or liability is determined’.
I
do not agree.
[21] Condition 8 deals with the avoidance of the policy in the
event of a failure to disclose material facts or in the event of a
materially
incorrect representation. In the present case there is no allegation of such a
failure or incorrect representation. The
condition, therefore, does not find
application in the present case. The condition does not provide that in the
event of a disclosure
having been made the insured would not be entitled to
‘indemnity . . . wider in scope than the indemnity to which
the
Insured would have been entitled under such preceding
insurance’.
[22] In my view there is no reason why the word 'claim'
should not be given its natural meaning. The appellants were free to negotiate
more extensive cover in respect of periods subsequent to the insurance period in
which they had given notice of the potential Samancor
claim. They could have
negotiated such cover with the respondent or another insurer. In such
negotiations they were of course obliged
to disclose the potential claim. Such
disclosure was made to the respondent and it was up to the respondent to either
refuse to provide
extra cover, to provide extra cover at an appropriate premium
or to provide extra cover excluding liability in respect of the potential
claim.
It is common to find a condition in a ‘claims made’ policy which
expressly excludes ‘liability arising out
of any circumstances or
occurrences notified under any other policy attaching prior to the commencement
of the policy, or which were
known to the assured prior to the commencement of
the policy’ (see MacGillivray on Insurance Law 10th ed
at para 28-84). Such a condition is not contained in the 1993 policy. The policy
covers claims first made during the insurance
period of the 1993 policy. The
Samancor claim was first made during that period as the notification of a
potential claim did not
constitute the making of a claim. The result is that the
appellants were entitled to claim under the 1993 policy notwithstanding
the fact
that they could also claim a lesser amount in terms of the 1991 policy. There is
in my view no absurdity in this result
as was contended by the respondent to be
the case.
[23] The respondent contended in the alternative that it has
already discharged its obligations in terms of the 1993 policy i.e. its
liability to pay R1 000 000 in respect of the Samancor-claim for
damages and costs and its liability to pay the appellants’
costs and
expenses incurred in the conduct of the Samancor-claim.
[24] As stated above
the respondent agreed, whilst persisting in the contention that the appellants
were only entitled to indemnification
in terms of the 1991 policy, to fund the
costs of contesting the Samancor action and the costs of the appeal. The funding
so provided
amounted to R2 072 292. It is common cause that in terms
of the proviso to the undertaking by the insurer to pay the partnership’s
costs and expenses incurred in the conduct of a claim, which proviso is quoted
above, only an amount of R568 366 was payable
by the respondent in respect
of such costs. The respondent, therefore, overpaid an amount of
R1 503 926. The submission
of the respondent is that whereas it was in
terms of the 1993 policy obliged to pay a total amount of R1 568 366
to the
appellants it paid an amount of R2 072 292 to them.
[25] In
my view there is no merit in the submission. No portion of the amount paid by
the respondent was paid in respect of Samancor’s
claim for capital and
costs. The amount paid was paid in terms of an undertaking to fund the
proceedings. Not surprisingly the respondent
did not institute a counterclaim
for payment of the difference between R1 503 926 and the
R1 000 000 which was
payable in respect of such capital and
costs.
[26] For these reasons the following order is made:
(a) The appeal succeeds with costs. (b) The order by the court a quo is set aside and replaced with the following order:
‘The respondent is ordered to pay an
amount of R1 000 000 together with interest on the sum of
R1 000 000
calculated at the rate of 15,5% per annum from 30 June
1998, plus costs.’
________________
STREICHER JA
CONCUR:
NAVSA JA)
MTHIYANE JA)
CACHALIA AJA)
ZULMAN JA
[27] I have had the privilege of reading the judgment of my colleague
Streicher JA. Whilst I agree with his conclusions I prefer to
approach the
matter on the following basis.
27.1 It is common cause that the appellants
are entitled to indemnity from the respondent in terms of a professional
indemnity policy
issued on 6 March 1991 under a certificate of insurance no
01218/91 covering the period 1 March 1991 to 29 February 1992 (the 1991
policy);
27.2 The issue for determination in this appeal is whether the
appellants are entitled to indemnity from the respondent in terms of
both the
1991 policy and a policy issued on 4 March 1993 and embodied in certificate of
insurance no 01218/93 and covering the period
1 March 1993 to 29 February 1994
(the 1993 policy) and can choose which; and
27.3 If the 1993 policy applies,
the appellant’s claim for indemnity in an amount of R1 000 000
falls to be reduced.
[28] The court a quo (Motata J) held,
dismissing the appellant’s claim, that it was the 1991 policy that
applied. The appeal is brought with the
leave of the court a
quo.
[29] The parties, with the consent of the court a quo,
proceeded to trial only on the above issue. By agreement they placed their
evidence before Motata J by way of a stated case read
together with an agreed
bundle of documents. The following common cause facts emerge from the stated
case:
29.1 The appellants, a partnership of consulting engineers, contracted
the two policies with insurers led by the respondent who assumed
all the rights
and obligations in respect of the policies.
29.2 During May 1991, the
appellants became aware that a water pipeline which had been constructed in
Steelport had corroded. The
appellants had been appointed as Consulting Civil
Engineer by Samancor Limited (Samancor) in regard to the
construction.
29.3 The pipeline corroded as a result of insufficient
thickness in the protective coating lining its pipes. Samancor contended that
the appellants ‘may’ have breached their obligations towards
Samancor by failing to detect the defects in the pipeline
in the course of
supervision of its construction.
29.4 On 4 June 1991, in a letter of that
date, the appellant gave notice to Glenvaal, Griffiths and Armour (Pty) Limited
(Glenvaal),
acting on behalf of the respondent of the potential claim by
Samancor. The first sentence of the concluding paragraph of the letter
reads:
‘Hierdie skrywe dien slegs as ‘n kennisgewing van ‘n
moontlike eis.’
29.5 During November 1993, Samancor instituted action
in the High Court against the appellants and the contractors who constructed
the
pipeline.
29.6 Immediately after service of the summons on the appellants the
appellants handed the summons to Glenvaal.
29.7 In the Samancor action,
Samancor claimed damages from the appellants on the ground of their alleged
breach of contract in failing
to properly supervise the construction of the
pipeline.
29.8 On 30 June 1998 the High Court gave judgment in favour of
Samancor against the appellants for damages in an amount of R973 544,48
together with costs inclusive of the costs of two counsel and the qualifying
fees of two expert witnesses.
29.9 The appellants appealed to this Court. On
13 November 2000 the appeal was dismissed with costs, inclusive of the costs of
two
counsel, save that the order of the High Court was altered by the
substitution of an amount of R910 570,00 for the amount of
R973 544,48.
29.10 The liability of the appellants to Samancor totalled
R3 646, 000, 58 comprised as follows:
29.10.1 Capital R 910 570,00;
29.10.2 Interest on the aforesaid
capital at the rate of 15,5%
per annum calculated from
and including 30 June 1998
to and including date of
payment thereof. As at
30 June 2001 such interest
totaled R 423 415,00
29.10.3 Samancor’s taxed costs in
the High Court action R 1 113,327,66
29.10.4 Samancor’s taxed costs in
the appeal R 1 198 737,87.
29.11 The respondent paid the appellants’ costs and
expenses of the appellants in the action, counsel and expert witnesses incurred
in the conduct of the defence of the action and the subsequent appeal to this
Court, which costs and expenses totalled R2 072 292,48.
It did not pay
the capital amount or interest thereon.
29.12 The respondent whilst
contending that the 1991 policy governed the appellants claim to indemnity, the
limit of which was R1 000 000
inclusive of the costs and expenses
incurred in the defence of the Samancor action and any subsequent appeal, agreed
to continue
to fund the costs of contesting the said action and the costs of the
appeal ‘in order to facilitate the proper conclusion of
the litigation
between Samancor’ and the appellants, ‘the funds for the purposes of
which were not available to the’
appellants.
30.1 Conditions 2(a) and
2(b) in both the 1991 and 1993 policies are in identical terms. They provide as
follows:
‘2. The Insured shall notify the Insurers via Glenvaal, Griffiths & Armour (Proprietary) Limited in writing as soon as practicable of
(a) any claim or of the receipt of notice from any person of an intention to make a claim against the Insured.
(b) any occurrence or circumstance of which the Insured shall become aware during the Period of Insurance which may possibly give rise to a claim under Section 1 or Section 2. Such notice having been given any claim to which that occurrence or circumstance has given rise which is subsequently made against the insured after the expiry of the Period of Insurance shall be regarded for the purposes of this Certificate as having been made during the Period of Insurance in which so notified.’
30.2 Both the 1991 and 1993 policies
provide for a limit of indemnity of R1 000 000,00 and describe the
risk insured in
identical terms.
30.3 However the two policies differ in
their treatment of own costs and expenses. The 1991 policy includes these costs
in the limit
of indemnity of R1 000 000,00 whilst the 1993 policy adds
them to the limit of indemnity.
[31] Not surprisingly the appellants chose to
base their claim upon the 1993 policy as the extent of the indemnity provided in
it
is greater than in the 1991 policy. As I have already indicated, the
appellants contend that although they are also entitled to indemnity
in respect
of the 1991 policy, that they can choose the policy under which to
claim.
32.1 The respondent contends that having regard to the nature and
purpose of the 1993 policy and the relevant background circumstances
which were
probably present to the minds of the parties and which explain ‘the
genesis and purpose of the contract’:
32.1.1 Both the 1991 and 1993
policies are what are termed ‘claims-made’ policies;
32.1.2 The
claim was first made in the period of the 1991 policy;
6.1.3 The 1993 policy
covers only‘ claims first made’ during its currency;
32.1.4 The
parties could not have intended that a claim which was first made in 1991 was in
fact first made in 1993 which it submits
is, in effect, what the appellants
argue.
32.2 The respondent accordingly contends that the appellants’
claim is governed by the 1991 policy, with its lesser cover of
R1 000 000,00
inclusive of costs and expenses incurred in the defence of the Samancor action
and subsequent appeal, and not the 1993
policy which covers such costs. I do not
agree.
32.3 The respondent’s counsel has referred to a number of
English cases and leading English text books on Insurance Law where
the meaning
of, and the reasons for so called ‘claims first made’ in
professional indemnity policies such as the policies
under consideration are
discussed.[2] However in none of these
cases or text books are two distinct policies considered in the context of the
case before this court where
a ‘claim first made’ under one policy
is deemed to be a claim made under a later or another policy.
33.1 The
notification of 4 June 1991[3] during
the period of the 1991 policy of a ‘moontlike eis’ or potential or
circumstances likely to give rise to a claim
constitutes a notice in terms of
condition 2(b) of an ‘occurrence or circumstance’ during the period
of insurance which
may possibly give rise to a claim under the policy.
(See
for example the Canadian case of Moore v Canadian Lawyers Ins
Assn[4] referred to in Clarke-
The Law of Insurance Contracts [5])
This would entitle the appellants to claim under the 1991 policy.
33.2 In
November 1993 during the period of the 1993 policy the appellants gave notice to
Glenvaal of an actual claim made against
them.[6]
33.3 The fact that the
appellants are entitled to claim under the 1991 policy does not, in my view,
disentitle them from claiming
under the 1993 policy should they so choose, as
they indeed did. This notwithstanding the deeming provision set out in the
second
sentence of condition 2(b). The deeming provision, upon a proper
construction thereof, applies to a notice given during the period
of the 1993
policy and not to a notice given in another period under another policy such as
the 1991 policy. The 1991 and 1993 policies
are distinct and different policies
concluded at different times and for different periods and differing in certain
respects more
particularly regarding the extent of the cover afforded. There is
no direct reference whatsoever, as there could have been, in the
1993 policy to
the 1991 policy. I do not believe that one may legitimately infer or imply such
a reference. The insurer had it wished
to incorporate such a reference could
easily have inserted appropriate wording in the 1993 policy. It did not do so.
The 1993 policy
does not exclude claims previously made, neither is there a
proportional reduced premium in respect of double insurance. It was plainly
open
to the insurer when the 1993 policy was negotiated, either to refuse to insure
the appellants, or to increase the premium payable,
or not to change the premium
payable because of the notification that the appellants had given during the
currency of the 1991 policy
of a potential claim which in fact eventuated in the
actual claim notified during the period of the 1993 policy. There is no evidence
that they increased or changed the premium payable when issuing the 1993 policy.
Furthermore it would have been open to the appellants
to have sought insurance
cover from another insurance company after the expiry of the 1991 policy. Even
if they disclosed the fact
to the proposed new insurer that they had given
notice of a potential claim to their previous insurer and a new policy was
issued,
this would not have entitled the new insurer, in the absence of
appropriate wording, to invoke a condition such as condition 2(b)
to contend
that the notice given to its previous insurer was to be regarded as a notice of
‘first claim’ under the new
policy.
33.4 No notification was
given during the period of the 1993 policy in terms of condition 2(b) of an
‘occurrence or circumstance’
of which the appellants were aware. I
repeat that the notice which was given in November 1993 was a notice in terms of
clause 2(a)
of an actual claim.
34.1 The respondent also contends that the
proviso contained in General Condition 8(b) which is in identical terms in both
the 1991
and 1993 policies is of assistance in the interpretation of condition
2. I again do not agree.
The condition reads:
‘8. The Insurers will
not avoid this Certificate on the grounds ...
Provided
that
(a) ...
(b) where the Insured could have notified under any
preceeding insurance circumstances which could give rise to a claim any
indemnity
in respect thereof to which the Insured may be entitled under Section
1 shall not be greater or wider in scope than the indemnity
to which the
Insured would have been entitled under such preceding
insurance.’
34.2 The general condition is there, in my view, to cater
for non-disclosure of a claim or potential claim during a prior period of
insurance. If there was no disclosure but there was no increase in the cover
granted in the new period of insurance the fact of the
non-disclosure would be
irrelevant. If the cover was increased the non-disclosure would entitle the
insurer to limit its liability
to the cover provided in the first
period.
34.3 I accordingly do not believe that condition 8(b) is of
assistance or relevant in interpreting condition 2 and in deciding whether
the
1991 or 1993 policy is of application.
35.1 In the alternative the respondent
contends that in the event that it is found that the 1993 policy applies to the
appellants’
claim the reference to ‘such costs and expenses’
in the 1993 policy is a reference to the costs and expenses of the appellants
referred to in paragraph 3.11 above which totaled
R2 072 292,48.
35.2 The 1993 policy provides, under the heading
‘Costs and Expenses’ that:
Costs and Expenses
‘The Insurers will pay, in
addition to the Limit of Indemnity under Section 1, costs and expenses incurred
in the conduct of
any claim subject to the Insurers consent (such consent not to
be unreasonably withheld) in respect of any occurrence or circumstance
that has
given rise to or may reasonably be expected to give rise to a claim, which would
be indemnifiable in terms of Section 1.
However, if a payment in excess of
the amount of indemnity under this Insurance has to be made to dispose of a
claim made against
the Insured the insurers liability in respect of such costs
and expenses shall be such proportion of the total costs and expenses
incurred
as the amount of the indemnity this Certificate bears to the total amount to
dispose of the claim.’
The words underlined by me in the above
passage indicate the additional wording that appears in the 1993 policy but not
in the 1991
policy.
35.3 The aforesaid costs and expenses totaling
R2 072 292,48 were costs and expenses incurred by the appellants with
the
consent of the respondent in the course of contesting the Samancor action
and the appeal consequent
thereupon.[7]
35.4 The total
payment that had to be made to Samancor to dispose of Samancor’s claim
against the partnership was
R3 646 050,58.[8] The amount
of R3 646 050,58 exceeded the limit of the capital indemnity in the
1993 policy of R1 000 000,00 by
R2 646 050,58.
35.5 The
proportion of the limit of indemnity (R1 000 000,00) to the total
amount payable to Samancor to dispose of its
claim (R3 646 050,58)
according to the respondent was 1:
3,64605058.[9]
35.6 The respondent
therefore contends that its liability in respect of the costs and expenses of
R2 072 292,48 was the
above proportion i.e. R568 366,34,
expressed by the following equation:
1 000 000 :
3 646 050,58 (1:3 646 050,58)
568 366,34 :
2 072 292,48
(1 :3 646 050,58)[10].
35.7 The
respondent accordingly contends that its obligation to indemnify the appellants
in respect of their liability to Samancor
is limited to R1 000 000
less the extent by which the total amount actually paid by the respondent in
respect of own costs
and expenses (R2 072 292,48) exceeds its actual
liability in respect thereof of R568 366,34, viz. R1 503 926,14
(i.e. R2 072 292,48 minus R568 366,34). The aforesaid figure of
R1 503 926,14 exceeds the limit of indemnity
of
R1 000 000[11]. In the
premises, the respondent argues that it has already indemnified the appellants
by an amount R1 503 926,14 in excess
of the limit of indemnity, and is
not obligated to indemnify the appellants further. The argument is without
substance.
35.8 The 1993 policy grants two separate and distinct indemnities
to the appellants. An indemnity against liability for damages and
claimants
costs and expenses arising out of any one claim, in a sum not exceeding
R1 000 000. In addition to the aforesaid
sum of R1 000 000
an indemnity is granted in respect of ‘costs and expenses incurred (by the
insured) in the conduct
of any claim subject to the insurer’s
consent’. The proviso to this indemnity in respect of the
appellants’ own costs and expenses is that ‘if a payment in excess
of the amount
of indemnity under this Insurance has to be made to dispose of a
claim made against the Insured the Insurer’s liability in
respect of such
costs and expenses shall be such proportion of the total cost and expenses
incurred as the amount of the indemnity
available under this Certificate bears
to the total amount to dispose of the claim.’
35.9 The
respondent’s calculations set out above appear to be correct. However, the
appellants were in terms of the 1993 policy
entitled to be indemnified by the
insurer in the two respects referred to above and in two
amounts:
35.9.1 R1 000 000 in respect of the capital amount of
damages, interest and costs which the appellants were ordered to pay
to
Samancor;
35.9.2 An amount of not less than R568 366,48 in respect of
the appellant’s own costs and expenses incurred in defending
themselves
against the claim of Samancor.
35.10 As appears from the stated
case,[12] the respondent paid the
appellant’s costs and expenses of the second defendant in the action [a
firm of attorneys who were
also sued by the appellants but who play no part in
this appeal] incurred in the conduct of the defence of the Samancor action and
the subsequent appeal to this court. The appellants were accordingly not
entitled to any further indemnity in that regard.
35.11 As the respondent
made no payment to or for the benefit of the appellants to indemnify them
against the capital amount of damages,
interest or their own costs and which
amount is in excess of R1 000 000,00 it follows that the respondent
was in breach
of its obligations arising from the 1993 policy and was obliged to
indemnify the appellant by payment to them of a limited sum of
R1 000 000.
---------------------------------------
R
H ZULMAN
JUDGE OF APPEAL
[1] See also Boshoff v South
British Insurance Company Ltd 1951 (3) SA 481 (T) at
485B.
[2] Robert Irving &
Burns v Stone and Others [1998] IRLR258 (CA), Friends Provident Life
& Pensions Limited v Sirius International Insurance Corporation [2005]
IRLR 135 (Q) at 141-142 and Tioxide Europe Limited v CGU International
Insurance PCL [2005] IRLR 114 (Q) pp 121-122 and 126. See for example
Clarke The Law of Insurance Contracts (supra) pp 17-4D to 17-4E, pp
17-36/5, 17-39, and 17-40 to 17-41, Simpson (Gen Ed) Professional Negligence
and Liability (LLP loose-leaf edition) paras 5-37 and 5.97, Legh-Jones et
al Mac Gillivray On Insurance Law (10th edition para 28-81` on p
862
[3] See para 3.4
above
[4] (1992) 95 DLR
(4th) 365
[5]
4th Ed 2002 page 174D4 footnote
5
[6] See para 3.6
above
[7] See para 3.11
above
[8] See para 3.10
above
[9] Stated case para
8.6.5
[10] Stated case para
8.6.6
[11] Stated case paras
8.6.7 and 8.6.8
[12] Para 5.20 of
the stated case
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