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2 Drakenstein sues the first defendant, Guardrisk, on Guardrisk’s repudiation of
two claims under an insurance policy taken out on Drakenstein’s behalf by the
second defendant, AON. The second of the two claims was for fire damage to
a switchgear room and a substation at the Parys electricity substation.
Guardrisk repudiated much of the Parys fire claim, on the basis that the
switchgear had been underinsured, and the substation had not been covered
by the policy at all. In an unsigned “agreement of loss” issued to Drakenstein
on 27 March 2019, Guardisk tendered to indemnify Drakenstein for a fraction
of the sum claimed on the policy.
3 In due course, Drakenstein sued for the full amount it said was due to it in
respect of the Parys fire. Guardrisk defended the action. One of Guardrisk’s
pleaded defences was that the summons commencing Drakenstein’s action
had been issued more than twelve months from the date on which its claim
had been “rejected”, in the sense given to that word under clause 7 of the
insurance Policy Wording. This meant that the claim was time-barred.
4 In its replication, Drakenstein sought to escape the time-bar clause by
pleading five contentions, each in the alternative to the other. It was first
pleaded that Guardrisk had, contrary to Rule 17.6.3 (e) of the Policy Holder
Protection Rules, 2017, made under the Short Term Insurance Act 53 of 1998,
failed timeously to inform Drakenstein of the time-bar clause. Drakenstien
says that failure means there is good cause to condone Drakenstein’s non-
compliance with the time-bar clause under Rule 17.6.9 of the Rules. Second,
Drakenstein alleged that, by drawing Drakenstein’s attention only to the
provisions of the Prescription Act 68 of 1969 in its post-claim correspondence,
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Guardrisk had impliedly waived the right to rely on the time-bar clause. Third,
it was said that Guardrisk is estopped from relying on the time-bar clause
because the reference to the Prescription Act alone was itself a representation
that Guardrisk did not intend to rely on the time-bar clause, and because
Drakenstein relied on that representation reasonably and to its detriment.
Fourth, it was contended that to hold Drakenstein to the time-bar clause would
be contrary to public policy. Fifth, Drakenstein pleaded that its attention had
not been drawn to the time-bar clause, that it never intended to be bound by
it, and that it is, as a result, not so bound.
5 Drakenstein later sought leave to amend its replication to add a sixth
contention. The contention was that, because Guardrisk offered to pay some
of Drakenstein’s claim, the claim was not in fact “rejected” within the meaning
of Clause 7, and that the time-bar clause does not apply for that additional
reason.
6 Guardrisk objected to the amendment on the basis that by offering to settle
Drakenstein’s claim for less than the amount Drakentstein sought, Guardrisk
had in fact “rejected” the balance of the claim. There was no difference, in
substance, between the rejection of a claim under clause 7 of the Policy
Wording, and a repudiation of part of a claim. Guardrisk must simply be taken
to have rejected that part of the Parys fire claim it repudiated. Guardrisk
argued that to allow Drakenstein to plead that the Parys fire claim had not
been “rejected” would permit Drakenstein to contradict its earlier averment that
Guardrisk had repudiated the bulk of the Parys fire claim. The contradiction
arises, Guardrisk says, because “rejected” and “repudiated” mean the same
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thing. To allow Drakentsein to contradict itself in this way would render its
replication either excipiable or vague and embarrassing.
7 The question, then, is really whether the word “rejected” in clause 7 of the
Policy Wording means only to refer to a claim “rejected outright” or whether it
can also refer to a claim that was partially repudiated. Mr. Fagan, who
appeared for Drakenstein, relied upon a decision of this court in Hurwitz’s
Trustee v Salamander Fire Insurance Company 1917 TPD 216
(“Salamander ”). In that matter, at page 220, Bristowe J held that a “rejection”
in the context of a time-bar clause in an insurance agreement means a “total
and not partial rejection”. Its meaning cannot extend to cover the payment of
part of a claim and the rejection of the rest.
8 Mr. Stockwell, who appeared for Guardrisk, pointed out that Bristowe J had
not meant his conclusion to extend to a situation in which an insurer rejects
the claim as a whole but offers a token payment in settlement of any dispute
that might arise from that rejection. That, Mr. Stockwell contended, is what
happened in this case. The agreement of loss was really a tender to
compromise. The claim was rejected, but a token amount was tendered to
settle the claim. Drakenstein does not accept that construction of the
agreement of loss. It says that, at least in respect of the switchgear room, its
claim was not rejected but reduced on the basis that the switchgear had been
underinsured.
9 At this stage, I need not take a view on that controversy. It seems to me to be
enough that there is a colourable difference of opinion about the meaning of
the agreement of loss, on which evidence will have to be heard. Once I accept
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that Drakenstein’s construction of the agreement of loss may be sustained on
the evidence, I must also accept in principle that Drakenstein may consistently
plead that the Parys claim was partially repudiated, but not “rejected” for the
purposes of clause 7 of the Policy Wording. Whether Drakenstein is right will
depend on the meaning to be attributed to the agreement of loss, and to clause
7 of the Policy Wording, in the context of the evidence as a whole. It follows
that Drakenstein’s amendment will render its replication neither excipiable nor
vague and embarrassing.
10 I accept the possibility that, even if Drakenstein’s construction of the
agreement of loss is correct, the Policy Wording might mean that any
repudiation of any portion of a claim on the policy is per se a rejection of that
portion of the claim. This would be inconsistent with what is said in
Salamander , but the question of whether there really is a difference between
the rejection and a partial repudiation of Drakenstein’s claims does not turn
exclusively on that precedent. The question can in truth be resolved only by
interpreting the Policy Wording itself – that is, by attributing meaning to the
word “rejection” in clause 7 of the Policy Wording in the context of the
insurance agreement as a whole and the circumstances surrounding the
conclusion of that agreement. The decision in Salamander is of course
material to that exercise. But the exercise cannot sensibly be completed until
evidence has been led. Until then, Drakenstein is perfectly entitled to contend
that the “rejection” of its claim was not synonymous with its partial repudiation.
The contention may not survive contact with the proven facts, but that
possibility should not deprive Drakenstein of the right to advance the
contention at trial.