IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Case number: 5421/2023
In the matter between:
THE COLLECTION AT D’ARIA (PTY) LTD Plaintiff
and
CROSS POINT BROKERS (PTY) LTD Defendant
and
SANTAM LTD Third party
Case number: 5422/2023
And in the matter between:
THE COPPER CLUB EATERY TYGER
WATERFRONT (PTY) LTD Plaintiff
and
CROSS POINT BROKERS (PTY) LTD Defendant
and
SANTAM LTD Third party
Coram: Van Zyl, AJ
Heard on: 28 October 2025, final submission s made on 4
November 2025
Judgment: : 24 February 2026
Summary: Interpretation – insurance policy – claims-made policy concluded
between defendant and third party – alleged negligent conduct occurred in 2019 but
claim only made and notified to third party during period of 2021 policy – 2021 policy
containing Covid-19 liability exclusion – 2021 policy the operative one – defendant
not entitled to indemnification from third party
___________________________________________________________________
ORDER
Under case number 5421/2023:
1. The defendant’s interlocutory application for the variation of the separation
order dated 19 February 2025 is granted , and that order is varied by the
introduction in paragraph 3.1 thereof, immediately after the words
"paragraphs 22 to 24, inclusive ", of the bracketed words " (but excluding
paragraph 24.11)".
2. Each party shall pay its own costs incurred as a result of the interlocutory
application.
3. The separated issue is determined in the third party’s favour, and the
defendant’s claim against the third party for indemnification is dismissed.
4. The defendant shall pay the third party’s costs in relation to the third party
proceedings, including counsel’s fees taxed on Scale C.
Under case number 5422/2023:
5. The defendant’s interlocutory application for the variation of the separation
order dated 19 February 2025 is granted , and that order is varied by the
introduction in paragraph 3.1 thereof, immediately after the words
"paragraphs 22 to 24, inclusive ", of the b racketed words " (but excluding
paragraph 24.11)".
6. Each party shall pay its costs incurred as a result of the interlocutory
application.
7. The separated issue is determined in the third party’s favour, and the
defendant’s claim against the third party for indemnification is dismissed.
8. The defendant shall pay the third party’s costs in relation to the third party
proceedings, including counsel’s fees taxed on Scale C.
JUDGMENT
VAN ZYL, AJ:
Introduction
1. In each of the two actions serving before this co urt a separated issue has
been identified 1 for determination as between the defendant and the third
party. The se separated issues are identical , and the matters were therefore
heard together. The question is whether the defendant is indemnified by the
third party in respect of each of the plaintiffs’ claims against the defendant, in
terms of the defendant’s professional indemnity insurance policy with the third
party.
2. The relevant facts are largely common cause. The defendant conducts the
business of a financial service provider as contemplated in the Financial
Advisory and Intermediary Services Act 37 of 2002. It is an insurance
intermediary (or broker), which assists its clients in entering into short -term
insurance policies with product suppliers.
3. The plaintiff in each of the actions operates a restaurant business, and is a
1 By way of a court order dated 19 February 2025.
client of the defendant’s. The third party is the defendant’s professional
indemnity insurer under professional indemnity agreements concluded
between the defendant and the third p arty concluded in, respectively, 2020
and 2021. As will be discussed in due course, the principal question , having
regard to the nature of the policies, is whether the 2020 policy or the 2021
policy is the operative one in relation to the defendant’s clai m for
indemnification against, in turn, the plaintiffs’ claims against the defendant.
The origin of the proceedings in the two actions
4. It is common cause that the defendant and each of the plaintiffs concluded an
oral mandate in September 2016, in terms of which the plaintiffs appointed
the defendant as their insurance intermediary. On 4 June 2019 the
defendant, acting under such mandate, procured commercial insurance
policies on the plaintiffs’ behalf with Renasa Insurance Company Ltd, for the
period 4 June 2019 to 1 June 2020 ("the Renasa policy").
5. The Renasa policy did not include a so-called extended business interruption
clause. This type of clause was considered in the matter of Cafe Chameleon
CC v Guardrisk Insurance Co Ltd,2 and in the appeal fr om that judgment in
Guardrisk Insurance Co Ltd v Cafe Chameleon CC.3 The extended business
interruption clause in those matters read as follows:
"Infectious Diseases / Pollution / Shark Attack / Additional Interruption Extension
Loss as insured by this Se ction resulting in interruption or interference with the Business due
to:
…
(e) notifiable Disease occurring within a radius of 50 kilometres of the Premises
…
Special Provisions
(a) Notifiable Disease shall mean illness sustained by any person resulting fro m any
human infectious or human contagious disease, an outbreak of which the competent
local authority has stipulated shall be notified to them, but excluding Human Immune
2 [2020] 4 All SA 41 (WCC).
3 2021 (2) SA 323 (SCA).
Virus (HIV}, Acquired Immune Deficiency Syndrome (AIDS) or an AIDS related
condition."
6. Although there are variations in the different policies within this sphere , the
quoted extended business interruption clause is typical of the clause which
was not included in the Renasa policy.4
7. As a result of the Covid -19 pandemic, a disease which b ecame notorious at
the beginning of 2020, and the official "lockdown" measures which were
imposed in South Africa to combat the disease, 5 many businesses, including
restaurant businesses such as th ose of the plaintiffs, were for a considerable
period of ti me prohibited from trading inside their business premises, and
thus suffered substantial revenue losses. Amid the pandemic, and as a result
of widespread litigation arising therefrom, Renasa produced and distributed a
general information brochure essential ly to explain that its policies did not
contain an extended business interruption clause, and that its clients were
thus not indemnified against losses suffered as a result of the pandemic. The
defendant forwarded a copy of that brochure to the plaintiff s on 9 June 2020.
This followed a telephonic conversation between each of the plaintiffs and the
defendant in which the defendant informed the plaintiffs that their commercial
insurer was not in a position to indemnify them for Covid-19-related losses.
8. On 1 June 2020 the third party gave notice to policyholders and other
relevant persons, including the defendant, of the variation of the standard
wording of its insurance policies (including professional indemnity insurance
policies such as the one concluded between the defendant and the third
party) by the introduction thereto, with effect from 1 September 2020, of an
exclusion clause which excluded the obligation to afford indemnification in
respect of “any claim, loss, liability, damage, cost, expense, judg ment or
award of any kind whatsoever which is or is alleged to be directly or indirectly
award of any kind whatsoever which is or is alleged to be directly or indirectly
4 The third party was one of the insurers in South Africa which did include an extended
business interruption clause in certain of its commercial policies. The clause as it appeared in
those policies is partially quoted in para 33 of the majority judgment in Ma-Afrika Hotels (Pty)
Ltd and another v Santam [2021] 1 All SA 195 (WCC).
5 See, for example, the discussion in Guardrisk Insurance Co Ltd v Cafe Chameleon CC supra
paras 5-9.
caused by, based upon, contributed to, arising from or is in any way, directly
or indirectly, related to” Covid-19.
9. On 17 December 2020 the Supreme Court of Appeal (SCA) held in Guardrisk
that insurers were obliged to indemnify their insured under an extended
business interruption clause for losses suffered by them as a result of official
measures taken to combat the Covid -19 pandemic.6 However, because the
Renasa policy did not contain an extended business interruption clause, the
plaintiffs did not enjoy such right of indemnification in respect of their losses.
10. On 19 and 20 January 2021 the plaintiffs complained via email to the
defendant about the fact that the def endant had on 4 June 2019, instead of
procuring for each of the plaintiff s a commercial insurance policy which
contained an extended business interruption clause, procured the Renasa
policy which did not contain an extended business interruption clause. The
plaintiffs informed the defendant that they had suffered losses as a result of
the pandemic, and expressed concern about their lack of insurance cover for
those losses. This complaint, ultimately framed as a breach by the defendant
of the plaintiffs’ mandate to it, was subsequently embodied in the particulars
of claim in each of the main action s for damages instituted by the plaintiffs
against the defendant.
11. The defendant challenged the plaintiff s’ complaints for reasons ultimately set
out in its plea s in the main action s. In summary, the defendant adopted the
stance that as on 4 June 2019 no reasonable insurance intermediary could
have foreseen the impending Covid-19 pandemic and its consequences, and
of the law as it ultimately came to be expounded in Guardrisk.
12. The plaintiff s cancelled their Renasa policies on 8 February 2021, and
caused letters of demand to be sent to the defendant on 30 June 2021. The
defendant forwarded the demand to the third party’s underwriter 7 on 1 July
defendant forwarded the demand to the third party’s underwriter 7 on 1 July
6 Guardrisk affirmed the conclusion that had been reached on 17 November 2020 in Ma-Afrika
Hotels (Pty) Ltd and another v Santam supra.
7 SHA Risk Specialists (Pty) Ltd.
2021. The defendant’s claim for indemnification was repudiated by the third
party, via its underwriter, on 13 September 2021.
13. The plaintiffs instituted the main action s against the defendant during March
2023. The defendant joined the third party to each of the actions during June
2023, on the basis that it was obliged to indemnify the defendant against the
plaintiffs’ claims. The third party dispute s its liability to indemnify the
defendant, and it is this issue that has been separated and falls for
determination at this stage. The defendant asserts a contingent right to claim
indemnification from the third party, effectively as an application for
declaratory relief.8
The issues for determination
14. Various issues arise for present purposes.
15. The first issue is whether the defendant's claim for indemnification by the third
party is excluded under an exclusion clause in the 2021 policy entitled
"Covid-19 / Infectious Disease Exclusion ”, or whether the 2020 policy, which
does not have the exclusion clause, is the operative one.
16. The second issue is whether the defendant complied with certain disclosure
and reporting obligation to the third party under either of the policies and, if
not, whether the third party was on that account entitled to repudiate the
defendant's claim for indemnification.
17. The third issue, which arises if this court finds that the third party is liable to
indemnify the defendant, is what the limit is of the indemnity to which the
defendant is entitled.
18. The principal issue is essentially whether the 2020 or t he 2021 policy (or
both) is applicable. This essentially turns on the following aspects:
8 Magic Eye Trading 77 CC t/a Titanic Trucking and another v Santam Ltd and another 2022
(6) SA 120 (SCA) paras 20-22.
18.1 The distinction between claims-made insurance policies and loss-
occurrence policies. This distinction is important to demonstrate
whether the defendant should be successful or non-suited in both
actions as against the third party. Once the nature of the relevant
policy has been identified, the rest of the puzzle falls logically into
place. In the present matter, the nature of the polic ies is not
common cause.
18.2 The r elevance of the defendant's reliance on the r etroactive (or
retrospective) date of cover in the policies.
18.3 The defendant’s argument to the effect that the period of
insurance for the 2021 policy (1 September 2020 to 31 August
2021) includes the period of insurance of the 2020 policy (1
September 2019 to 31 August 2020).
The professional indemnity relationship between the defendant and the third
party
The 2020 policy
19. The defendant and the third party concluded this professional indemnity
insurance agreement on 1 September 2019. The agreement consisted of a
policy schedule (or certificate of insurance) and a general policy wording.
According to the 2020 policy schedule , the period of insurance under the
policy was from 1 September 2019 to 31 August 2020 , and the retroactive
date of cover was 1 September 2008 . The limit of cover was a total of R7
million, comprised of damages, expenses , and costs, including defence
costs.
20. Section A of the 2020 policy wording is titled "Professional Indemnity". It
provided cover under certain insuring clauses, inter alia as follows:
"We will indemnify You:
1. Legal Liability
Against all sums that You become legally liable to pay as compensatory
damages including Claimant ’s costs for any Claim first made against You
during the Period of Insurance as a result of any negligent act, negligent
error, negligent omission or negligent breach of contract committed by You or
by any consultant, sub -contractor or agent for whose acts of omissions You
are liable in connection with the per formance of any Professional Business
Activity.
2. Defence Costs
For all Defence Costs."
21. The insured event stipulated in the 2020 policy wording was any " negligent
act, negligent error, negligent omission or negligent breach of contract
committed" by the def endant. It is common cause that t he insured event
which occurred in the present matter s was the defendant's conduct on 4
June 2019 in procuring for the plaintiff s the Renasa policy, which did not
contain an extended business interruption clause, in allege d breach of the
plaintiffs’ mandates to the defendant.
The 2021 policy
22. On 21 July 2020 the defendant completed a professional indemnity
insurance renewal application, with a view to renewing the 2020 policy. On
the renewal form the defendant indicated that it was unaware of any
circumstances that could give rise to a claim for indemnification under the
policy with the third party. The renewal application culminated in the
conclusion of the 2021 policy , consisting of a policy schedule and general
policy wording . According to the 2021 policy schedule , the period of
insurance under the policy was from 1 September 2020 to 31 August 2021.
The retroactive date remained 1 September 2008 , and the limit of cover
was R8 million (inclusive of all damages, costs and expenses, including
defence costs).
23. Again, section A of the 2021 policy wording is entitled "Professional
Indemnity", containing the same insuring clauses as the 2020 policy. The
2021 policy wording contained, however, an exclusion clause entitled
"Covid 19 / Infectious Disease Exclusion". That was the provision of which
the third party had given notice to stakeholders (including the defendant)
on 1 June 2020.
24. The exclusion clause appear s as clause 7 under the heading "General
Exceptions" in section A of the 2021 policy wording, as follows:
“Notwithstanding anything to the contrary in this Policy, this Policy does not
provide any indemnity whatsoever for any claim, loss, liability, damage, cost,
expense, judgement or award of any kind whatsoever whic h is or is alleged to be
directly or indirectly caused by, based upon, contributed to, arising from or is in
any way directly or indirectly related to:
1. Severe acute respiratory syndrome coronavirus 2 (SARS -CoV-
2) or any variant or mutation of such Virus; and/or
2. Coronavirus disease (COVID-19) or any variant or mutation of
such disease; and/or
3. Any Infectious or Communicable Disease (whether
asymptomatic or not), virus, bacterium, parasite and/or
microorganism; and/or
4. Any epidemic, pandemic or health emergency declared or
classified as such by the World Health Organization or any
national, regional or local governmental authority; and/or
5. Any fear or threat of 1, 2, 3, or 4 above, whether actual or perceived.
For the purposes of this exclusion an Infectious or
Communicable Disease 's any infection or disease which can
be transmitted by means of any substance or agent from any
organism to another organism where:
a. the substance or agent includes, but is not limited to,
a virus, bacterium, parasite or other organism or any
variant or mutation thereof, whether deemed living or
not, and
b. the method of transmission, whether direct or indirect,
includes but is not limited to, airborne transmission,
bodily fluid transmission, transmission from or to any
surface or object, s olid, liquid or gas or between
surface or object, s olid, liquid or gas or between
organisms, and
c. the infection, disease, substance or agent can cause
or threaten damage to human health or human
welfare or can cause or threaten damage to,
deterioration of, loss of value of, marketability of or
loss of use of any property.
If the Insurers allege that, by reason of this exclusion, this Policy does not provide any
indemnity, the burden of proving the contrary shall rest upon the Insured.”
25. The defendant emphasises the definition of "period of insurance" under the
2021 policy, namely: "Period of insurance [means] The period shown in the
Schedule and9 any other period for which We have accepted Your
premium”.
26. The defendant argues that this definition means that, independently of the
retrospective date of indemnit y cover stated in the 2021 policy schedule,
the period of insurance under the 2021 policy included in the period of
insurance stated in the 2020 policy schedule (19 September 2019 to 31
August 2020). This is because, so the defendant contends, it had paid the
premium due both under the 2021 and the 2020 policy. I shall return to this
aspect in due course.
Is the 2020 policy or the 2021 policy the applicable one?
The defendant’s arguments
27. As indicated, t he insured event in respect of which the defendant seeks
indemnification from the third party occurred on 4 June 2019, a few months
prior to the commencement date (1 September 2019) of the 2020 policy .
The defendant, in taking onto account the retroactive date under the policy,
argues that the period of i nsurance under the policy ran from 1 September
2008 to 31 August 2020 . The defendant contends that, on this basis, it
acquired a right under the 2020 policy to be indemnified by the third party
against any liability incurred by it as a result of the insured event.
9 Defendant’s emphasis.
28. The defendant accepts that the third party's correlative obligation to
indemnify the defendant could only arise when a claim was actually made
against the defendant for damages suffered by a claimant as a result of the
insured event. It (t he defendant) contends that it had properly discharged
its notification obligation to the third party in respect of that claim when it
forwarded the letter of demand to the third party’s underwriter on 1 July
2021.
29. The defendant argues that, had the plaintiffs made their claims against the
defendant for losses suffered as a result of the insured event and the
defendant had reported that claim to the third party before the end of the
period of insurance under the 2020 policy (31 August 2020), there would
have been no suggestion that the third party might repudiate its liability to
indemnify the defendant. The argument goes, however, that the plaintiffs
could not before 31 August 2020 have made a claim against the defendant,
because the Guardrisk judgment in the S CA was only delivered on 17
December 2021, and it was only at that point conclusively established that
insurers were obliged to compensate their insured under an extended
business interruption clause. Thus, the plaintiffs did not suffer loss before
31 August 2020 as a result of the insured event, and they could not allege
before 31 August 2020 that the defendant was liable to them for losses
suffered as a result of the insured event.
30. In relation to the 2021 policy, the defendant argues that the insured eve nt
stipulated in the 2021 policy wording was the defendant's act on 4 June
2019 in procuring for the plaintiff s the Renasa policy, which did not contain
an extended business interruption clause. The defendant says that the
insured event still occurred during the period of insurance under the 2021
policy (1 September 2008 to 31 August 2021 , on the defendant’s version ).
The defendant had, for the reasons stated earlier, already acquired a right
The defendant had, for the reasons stated earlier, already acquired a right
under the 2020 policy to be indemnified by the third party agains t any
liability incurred by it as a result of that insured event. Therefore, so the
argument goes, the defendant has a right to indemnification under the 2021
policy too (despite the existence of the exclusion clause), because the
period of insurance under the 2021 policy included in the period of
insurance stated in the 2020 policy schedule (19 September 2019 to 31
August 2020).
31. This is a creative argument, but it does not reflect the correct nature of the
policies, and it elevates the retroactive date to something that it is not. I
turn to discuss these aspects.
The defendant’s interlocutory application in relation to the nature of the policies
32. As indicated, the nature of the professional indemnity insurance policy
(whether the 2020 or the 2021 policy) is not common cause between the
defendant and the third party . The third party maintains that it is a so-
called claims-made policy. The defendant says that it is not.
33. The order separating the issues, which were granted on 19 February 2025,
was done by agreement between the parties. In terms of paragraph 3.1 of
the order, the separated issue was to be decided on the common cause
facts set out in paragraphs 22 to 24 of the founding affidavit in the
separation application (the third party was the applicant in that application),
together with such further facts, if any, upon which the parties agreed or
which the court could take judicial notice of. The parties did not agree on
any other facts.
34. The defendant subsequently realised that it had overlooked a m istake in
the founding affidavit in relation to what the common cause facts entailed.
It happened as follows: in the third party’s pleas to the defendant’s third
party notices and annexures, the third party alleged that "the insurance
contract between the defendant and the third party is a claims made policy
in terms of clause 2(b) under Claims Conditions of the policy ". The
defendant did not initially replicate to the third party's plea and thus, in
terms of Rule 25(2), the allegation was deemed to have been denied. In a
replication later delivered the allegation is not specifically addressed and,
thus, deemed to be denied.
35. In September 2024 the third party delivered a document styled "Third
Party's List of Admissions". One of the admissions sought wa s whether
the defendant admitted that "the insurance contract between the defendant
and the third party is a claims made policy in terms of clause 2(b) under
Claims Conditions of the policy. " In its response, delivered in October
2024, the defendant replied that:
"17.1 The policy between the defendant and the third party provided that the third
party would indemnify it against all sums that it would become legally liable
to pay as compensatory damages (including costs) for any claim first made
against it during the period of insurance as a result of any negligent act,
error, omission or breach of contract by itself, its consultant, sub -contractor
or agent, in the performance of any professional business activity.
17.2 Save as aforesaid the admission sought in this paragraph is not made."
36. The defendant thus merely paraphrased an extract from the policy wording
forming part of each of the policies. The defendant clearly declined to
admit that the policy is a “claims made policy in terms of clause 2(b) under
Claims Conditions of the policy ", as postulated by the third party in its
request for admissions.
37. The separation application followed. In paragraph 24.11 of its founding
affidavit in the separation application, after reference in paragraphs 22 and
23, respect ively, to the admissions sought by the third party and the
defendant’s response thereto, the third party state d that it was common
cause between the parties that "the basis of indemnification in terms of the
2020 and 2021 policy is claims made ". This allegation was clearly
incorrect. I accept that the mistake was innocently made, resulting from a
bona fide but careless misreading of the defendant's response to the
request for admissions.
38. The defendant agreed that it would be appropriate to separate the issues,
38. The defendant agreed that it would be appropriate to separate the issues,
as contemplated in the separation application. Accordingly, the defendant’s
attorney d id not have instructions to oppose the application , and did not
scrutinise the founding affidavit in the application as closely as he should
have done. Most of the facts relevant to the dispute between the defendant
and the third party were indeed common cause, and the defendant’s
attorney assumed that the third party had correctly set them out in its
founding affidavit. He did not then notice the allegation made in paragraph
24.11 of the founding affidavit, towards the end of the third party 's list of
common cause facts.
39. The separation order was granted by consent on the basis as set out in the
founding affidavit, including the erroneous allegation in paragraph 24.11.
The mistake was discovered later, when the parties unsuccessfully
attempted to establish a statement of agreed facts.
40. As the third party did not subsequently consent t o the variation of the order
in this respect, the defendant launched the interl ocutory application, which
was heard together with argument on the separated issue . The third party
opposed the application essentially on the basis that the defendant was not
entitled to withdraw an admission , and delivered an answering affidavit .
During argument, however, the opposition was not too vigorously pursued,
probably because there was a realisation that both parties had had a hand
in the state of affairs. There was no dispute that the separation order was
itself an interlocutory o rder, and th at this court has the competence to
reconsider such order and to vary the separation order on good cause
shown.
41. In the circumstances, to achieve a proper ventilation of the issues, I am
inclined to grant the defendant’s application for the variation of th e
separation order. The matter was in any event argued on the basis of the
order as varied. The variation would (and did) not preclude the third party
from submitting that the 2020 policy and the 2021 policy are claims -made
from submitting that the 2020 policy and the 2021 policy are claims -made
policies, but merely compelled it to sustain any such submission, and to
establish the consequences thereof, with reference to the schedules and
policy wording.
The difference between claims-made policies and loss-occurring policies
42. This is a pivotal aspect. In repudiating the defend ant’s claim, the third
party accepted that the 2021 policy was the operational one, and stated its
views as follows:
"6.1 The policy [i.e., the 2021 policy] excludes all claims directly or indirectly related to
Covid-19. This claim arises from or is dire ctly or indirectly related to Covid-19. It is
of no moment [that] when the claim arose against the insured or the period during
which the claimant suffered Covid -19 losses or that the claimant's loss arose
before the Covid -19 exclusion was introduced to th is Policy. The Covid -19
exclusion is an absolute exclusion , meaning it excludes all claims, costs and
expenses related to Covid-19 whenever and howsoever arising.
6.2 This is a 'claims made' Policy and therefore the Policy period which responds to
the claim is the Policy that is active (in force) when the claim is made against the
Insured and when the Insured reports the claim to Insurers . Stated differently, the
Policy period prior to 1 September 2020 (containing no Covid -19 exclusion) has
lapsed or expired and the only Policy which may respond to the claim is the Policy
which is active when the Insured reports a claim to Insurers. It follows then that
the Policy which took effect from 1 September 2020 (containing the Covid -19
exclusion) finds application to the current claim for indemnification.
6.3 In the result, this Policy cannot indemnify any claim related to Covid- 19."
43. Professional indemnity insurance policies can (apart from other
delineations and limitations) be structured on either a claims-made basis or
a loss-occurring basis.10
44. A claims -made policy , simply put, provides coverage based on when a
claim is made (and usually notified) to the insurer, rather than when the
underlying alleged unprofessional or negligent act or omission occurred. 11
In other words, the policy must be active at the time the claim is made for
In other words, the policy must be active at the time the claim is made for
coverage to apply. If a claim is brought against the insured during the
10 See the discussion in Reinecke et al South Afr ican Insurance Law (LexisNexis, 2013) at
pp540-544, in particular paras 25.37, 25.47 and 25.48.
11 See the discus sion on terms to this effect in Reinecke et al General Principles of Insurance
Law (LexisNexis, 2002) at paras 316-318.
policy period, the claim will be covered subject to the policy’s terms, even if
the alleged negligent ac t took place years prior (provided it occurred after
any retroactive date).
45. If the policy has expired or lapsed by the time a claim is lodged, no cover is
available, even for acts that occurred while a previous policy was in force.
Claims-made policies often includ e provisions requiring prompt notification of
claims or even potential claims during the policy period.
46. In the present matter, a claim is defined in both of the policies as a “demand
by a Claimant (including their costs) for compensation or damages or the
assertion of a right or rights against ” the insured. In Van lmmerzeel and
another v Santam Ltd 12 the SCA held that the word "claim" must be given its
ordinary meaning. The phrase "claims made" indicates that there has been a
communication by the client (t he plaintiffs in the present matters) to the
insured (the defendant) of some discontent which will, or may, result in a
remedy expected from the insured. In other words, there has been a
communication by a third party such as the plaintiffs to the defendant about a
right to some relief because of conduct by the defendant, as described in and
covered under the policies.
47. Loss-occurrence policies, on the other hand, link coverage to the timing of
the conduct or event that gives rise to the claim . Coverage is determined
by when the incident occurred , and not by when the claim is notified or
submitted. If the wrongful act or loss -causing event occurred during the
policy period, an occurrence -based policy will cover the claim even if the
claim is made years afte r the policy has expired . The policy in force at the
time of the incident is therefore the one that will respond to any future claim
arising from that incident.
48. Unlike claims -made policies, occurrence -based (or loss -occurrence) policies
do not require a retroactive date. The period of insurance itself defines the
do not require a retroactive date. The period of insurance itself defines the
12 2006 (3) SA 349 (SCA) paras 12-13, and 22.
window of covered events. These policies also typically lack the stringent
"notice of claim within a specified period" requirements of claims -made
policies, even though timely notice of the occurr ence is usually still required
as a condition. The insurer's exposure is essentially "locked in" at the time of
the occurrence, in that the insurer remains on risk for claims brought even
long after the expiry of the policy's term.
49. The defendant, in empha sising the date when the insured event occurred (4
June 2019), suggests that the 2020 and 2021 policies are of the loss -
occurrence type. It criticises the third party for characterising the policies as
claims-made policies and, so the defendant argues, as cribing contractual
terms to the policies based on such characterisation. In other words, the third
party "reverse engineers" terms of the policies from the character ascribed by
it to the policies. The defendant contends that this approach is impermissibl e.
The third party must find the terms upon which it relies in the policy wording
as it stands, and not in anything that is inferred or deduced from the asserted
character of a "claims made" policy. There is no term in the policy wording
and the policy schedule of either policy which describes it as a "claims made"
policy, or which defines that concept.
50. The defendant contends that there is no term in the 2020 policy wording and
the 2020 policy schedule which provides that the policy will not respond in
respect of an insured event which occurs during the period insurance of the
2020 policy but only results in a claim against the insured after that period of
insurance has expired. Concomitantly, there is no term in the 2021 policy
wording and the 2021 policy schedule which provides that the 2021 policy will
not respond in respect of an insured event which occurred during the period
of insurance of the prior 2020 policy (and gave rise thereunder to a right of
of insurance of the prior 2020 policy (and gave rise thereunder to a right of
indemnification), but which results in a claim mad e against the insured only
after the period of insurance of the prior 2020 policy has expired. The only
pertinent condition in the 2021 policy wording is that a claim arising from an
insured event must be "first made" during the period of insurance of the 2021
policy - and that condition was complied with when the plaintiff's claim against
the defendant was made during the period 1 September 2008 to 1 August
-
2021.
51. The defendant seeks support for its argument in the wording of the policies,
as follows:
51.1 As indicated above, independently of the retrospective date of
indemnity cover stated in the 2021 policy schedule (which the
defendant says envisaged a period of insurance from 1 September
2008 to 31 August 2021), the period of insurance under the 2021
policy by definition included in the period of insurance of the 2020
policy (19 September 2019 to 31 August 2020). Thus, the 2021
policy itself referenced the 2020 policy.
51.2 In both policies, c lause 5 in section B of the introductory part of the
policy wording, u nder the heading "Limits of Indemnity", provides
that: "Regardless of the number of premiums paid for the renewal or
replacement of this insurance, where more than one period of
insurance applies to any claim the Limits of Indemnity shall not
aggregate from one period of insurance to the next”.
51.3 Clause 5 , so the argument goes, plainly envisages that “this
insurance” may be renewed or replaced from time to time, and
precludes the aggregation of prescribed limits of indemnity from one
period of insurance to the next. If, as the third party contends, it was
not possible for the 2020 policy to respond to a claim first made
during the period of insurance of the 2021 policy, but that the
policies were discrete , clause 5 would have been unnecessary and
purposeless in the 2021 policy.
51.4 There is a similar provision in clause 4 in section B of both policies,
under the heading "Limits of Indemnity", which provides that :
"Renewal of this policy from year to year will not have the effect of
increasing the limit of indemn ity applicable to each year or of
accumulating the limit of indemnity from year to year."
51.5 Clause 4 envisages that "this policy" may be renewed or replaced
from year to year, and precludes the accumulation of prescribed
limits of indemnity from one year to the next. If, as the third party
contends, it was not possible for the 2020 policy to respond to a
claim first made during the period of insurance of the 2021 policy,
but that the policies were wholly discrete, clause 4 would have been
unnecessary and purposeless in the 2021 policy.
52. Thus, the defendant submits, the court should find that the third party is
obliged to indemnity the defendant against its alleged liability to the plaintiffs
by reason of the insured event which occurred on 4 June 2019, during the
period of insurance both of the 2020 policy and of the 2021 policy.
53. The defendant argues further that the third party's contrary view, that the
defendant's claim for indemnification must be assessed with reference to the
2021 policy wording because the plaintiffs’ claims against the defendant were
first made during the pe riod of insurance of the 2021 policy, entails that the
defendant's right to indemnification which (on the defendant’s argument)
arose and vested under the 2020 policy wording, will be retrospectively
extinguished by the exclusion clause in the 2021 policy wording , which did
not exist when that right arose and vested.
54. The defendant says that that is not a commercially sensible or businesslike
outcome but is, in its assertion of the r etrospective operation of the exclusion
clause, legally repugnant. Although the 2020 policy and the 2021 policy were
discrete instruments they were, and were understood by both the defendant
and the third party to be, components of a continuing course of
indemnification insurance between them. There is no suggestion that when it
renewed the 2020 policy the defendant believed that any vested right to
indemnification thereunder was incapable of being enforced after the period
indemnification thereunder was incapable of being enforced after the period
of insurance thereunder had expired, and it is therefore impossible to suggest
that the defendant waived or abandoned the vested right to indemnification.
55. The defendant’s argument ignores, however, the contract made between it
and the third party . Its reliance on clauses in the policies acknowledging the
possibility and consequences of renewal does not assist it . Issues of waiver
or abandonment, or the “retrospective extinguishing" of claims, do not come
into the picture. The third party says that the policies are of the claims -made
kind. Thus, irrespective of when the plaintiffs’ claims against the defendant
arose (as long as it happened after the retroactive date), the date when the
defendant notified the third party of the claim against it determines which
policy applies.
56. It is nec essary to consider the policy wording , context, and purpose . The
applicable principles of interpretation are, in brief, that words must be given
their ordinary meaning, unless doing so would result in an absurdity.
Provisions must be interpreted contextual ly, purposively and as far as
reasonably possible in conformity with the Constitution, 13 and a sensible
interpretation should be preferred to an insensible one. Courts must guard
against inserting what they think a reasonable, sensible or businesslike
outcome would be, because that trespasses from interpretation into
legislation.14
57. In Centriq Insurance Company Limited v Oosthuizen and another 15 the SCA
explained that:
"Insurance contracts are contracts like any other and must be construed by having regard to
their language, context and purpose in what is a unitary exercise. A commercially sensible
meaning is to be adopted instead of one that is insensible or at odds with the purpose of the
contract. The analysis is ob jective and is aimed at establishing wha t the parties must be
taken to have intended, having regard to the words they used in the light of the document as
a whole and of the factual matrix within which they concluded the contract.
But because insurance contracts have a risk -transferring purpose containing particular
But because insurance contracts have a risk -transferring purpose containing particular
provisions, regard must be had to how the courts approach their interpretation specifically.
13 Minister of Water and Sanitation and others v Lotter NO and Two Similar Cases 2023 (4) SA
434 (CC) para 19.
14 See Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA)
para 18; Chisuse and others v Director -General, Department of Home Affairs and another
2020 (6) SA 14 (CC) para 48.
15 2019 (3) SA 387 (SCA) paras 17-18. Emphasis supplied.
Thus, any provision that places a limitation upon an obligation to indemnify is usually
restrictively interpreted, for it is the insurer's duty to spell out clearly the specific risks it
wishes to exclude . In the event of real ambiguity the doctrine of interpretation, contra
proferentem, applies and the policy is also generally construed against the insurer who
frames the policy and inserts the exclusion. But, like other aides to the interpretation of
contracts of this nature, the doctrine must not be applied mechanically, for exclusion clauses,
like other contractual clauses, must be construed in accordance with their language, context
and purpose with a view to achieving a commercially sensible result."
58. In the present matter, the policy wording (which are essentially identical for
both policies, except for the exclusion clause in the 2021 policy) defines a
claim as the “ demand by a Claimant (i ncluding their c osts) for
compensation or damages or the assertion of a right or rights against You”.
59. The “Claims Conditions” stipulate the following:
“The following Claims Conditions apply to this Policy:
…
2. You must give written notice to Us as soon as reasonably possible of:-
a) any Claim being made against You (or of any specific event or circumstance
which may give rise to a Claim being made against You
…
and which forms the subject of indemnity under this Policy and shall give all such
additional information as We require. Every claim, writ, summons or process and
all documents relating to the Claim, event or circumstance shall be forwarded to
Us immediately when they are received by You.
If You notify us during the Period of Insurance of any eve nt or circumstance which
We accept may give rise to a Claim being made against You, then such Claim
shall for the purpose of this Policy be treated as having been first made against
You during the Period of Insurance.
This Policy will allow You the opport unity to notify Us of Claims made against You
This Policy will allow You the opport unity to notify Us of Claims made against You
or events or circumstances that may give rise to Claims being made against You
for up to 30 days after expiry of this insurance provided that You first became
aware of the Claim or circumstances prior to expiry.16
16 Emphasis supplied.
3. It is condition precedent to Your right to indemnity under this Policy that you shall
notify Us immediately upon becoming aware of any Claims or circumstances that
may give rise to a Claim (not having been disclosed to Us) during the period/s
between:-
a) the date of the proposal; and
b) the inception and/or renewal hereof; or
c) the date We are placed on risk.”
60. Under “What is covered (Insuring Clauses)” the following is included:
“We will indemnify You:
1. Legal liability
Against all sums that You become lega lly liable to pay as compensatory damages
including Claimants costs for any claim first made against You during the Period
of Insurance17 as a result of any negligent act, negligent error, negligent omission
or negligent breach of contract committed by You or any consultant, sub -
contractor or agent for whose acts You are liable in connection with the
performance of any Professional Business Activity.”
61. Notably, u nder the heading “What is not covered” appears, amongst
others, “any loss or claim … arising out of any circumstance or event which
has been notified under any insurance which was in force prior to the
Period of Insurance or which was known or should have been know to You
prior to the Period of Insurance which might reasonably have been
expected to produce a Claim”.18
62. The “Period of Insurance” is stated in the respective policy schedules as
being from 1 September 2019 to 31 August 2020 (for the 2020 policy), and
from 1 September 2020 to 31 August 2021 (for the 2021 policy). There can
thus be no doubt in relation to the meaning of the phrase “Period of
Insurance” where it appears in the policy wording. The defendant’s
17 Emphasis supplied. The same applies to the loss of documents : the insured is
indemnified against “any Claim first made against You and notified in writing to Us during
the Period of Insurance”.
18 See the discussion in Merkin (ed) Colinvaux’s Law of Insurance (Sweet & Maxwell, 8ed,
18 See the discussion in Merkin (ed) Colinvaux’s Law of Insurance (Sweet & Maxwell, 8ed,
2006) at p686: “ A claims-made policy will exclude claims made against the assured during
some earlier policy, and in some cases the e xclusion will extend to claims arising out of
circumstances which could have been notified under an earlier policy ”. See also Leigh-Jones
(ed) MacGillivray on Insurance Law (Sweet & Maxwell, 11ed) at p929.
reliance on the definition of "period of insurance" under the 2021 policy,
namely "Period of insurance [means] The period shown in the S chedule
and any other period for which We have accepted Your premium” does not
assist it, because the reference to “any other period” must be considered
within the context of the existing 2021 policy. The definition does not serve
to extend the period of i nsurance under the 2021 policy to cover all
previous (lapsed) policies for which premiums had, over the preceding
years, been paid. That would be absurd.
63. It is not seriously disputed that the defendant’s renewal of its agreement
with the third party in July 2020 created a new contract in the form of the
2021 policy. 19 It was not merely an extension of the 2020 policy. Material
terms were altered, including the premium payable and the insertion of
additional exclusionary provisions. The legal effect of rene wal is well -
established: renewal gives rise to a new contract, even where the terms
are identical. There is nothing in the 2021 policy that supports the
defendant’s argument that any “vested” rights to indemnification (in the
sense of conduct that could be considered an insured event) under the
2020 policy would be carried over into the 2021 policy ’s period of
insurance. In any event, it is common cause that the defendant did not
notify the third party of any claim against it in 2020. On a claims -made
basis, then, no claim to indemnification vested even under the 2020 policy.
64. As a matter of interpretation, I agree with counsel for the third party that a
consideration of the policy wording in the present matter indicates that both
the 2020 and 2021 policies are claims -made policies. Accordingly, the
policy applicable to claims made during the period 1 September 2020 to 31
August 2021 was the 2021 policy, not the 2020 one.
65. The date of the insured event (the negligent act or omission by the insured)
65. The date of the insured event (the negligent act or omission by the insured)
is thus irrelevant for present purposes except insofar as it relates to the
retroactive date , which I shall deal with further below . The irrelevance of
19 See Southern Insurance Association Ltd v Cooper 1954 (2) SA 354 (A) at 360G-361A.
the negligent conduct was illustrated in Van lmmerzeel in that the S CA did
not address it at all in dealing with the question of whether the appellant's
claim for indemnity was covered by an earlier policy or the policy that was
active when the claim was made.
The period of insurance of the 2021 policy
66. I return to clause 7 of the 2021 policy – the exclusion clause . In Centriq, the
SCA articulated the principles for interpreting exclusion clauses as follows:
"[20] … [T]here may be occasions, where there is a genuine ambiguity in the meaning of
the provision, and the effect of one of those constructions is to exclu de all or most of the
insurance cover which was intended to be provided. In that event, the Court would be
entitled to opt for the narrower construction This result may be achieved not only by the
(application) of the contra proferentem approach but also t he approach that ... in the case
of ambiguity, the Court may opt for the more commercially sensible construction . .. .'
[21] The consequence of adopting a business -like or commercially sensible construction
of an insurance policy is that the literal meaning of words read in their context may have to
yield to a fair and sensible application where they are likely 'to produce an unrealistic and
generally unanticipated result', which is at odds with the purpose of the policy. But a word
of caution is warranted: courts are not entitled, simply because the policy appears to drive
a hard bargain, to lean to a construction more favourable to an insured than the lan guage
of the contract, properly construed, permits. For, if that is what the insured contracted for
that is what he is entitled to , and no more. It is not for the courts to construe exclusions in
favour of the insured simply because it considers them to be unfair or unreasonable."20
67. Centriq is distinguishable from the present case in that, amongst other
aspects, there is no ambiguity in the exclusion clause in the present matter.
aspects, there is no ambiguity in the exclusion clause in the present matter.
In Centriq, the SCA emphasised that the language of the policy was
obscure, failing to demonstrate an intention to contract out of the insured's
core business activities. The SCA held that " ... if Centriq sought to
achieve this type of exclusion, it should have done so with much clearer
language. Instead, it chose obscure language. It bears the onus to bring
itself within the exclusion, and cannot now complain if it is unable to d o
20 Centriq supra paras 20-21. Emphasis supplied.
so."21
68. By contrast, clause 7 of the 2021 policy (quoted earlier) is drafted in clear
language. The defendant did not challenge it. It is beyond dispute that all
claims made against the defendant emanating directly or indirectly from
COVID-19 losses are excluded from cover under the 2021 policy.
69. There is thus an elephant in the room for the defendant : the defendant
concedes that if the 2021 policy is applicable (assessed solely with
reference to the 2021 policy wording) then the Covid-19 exclusion clause is
applicable, and th e defendant is not entitled to indemnification. This is, on
the plain wording of the policy, correct. It is common cause that the
plaintiffs’ claims w ere first made against the defendant on 30 June 2021.
The defendant notified the third party of the claim s on 1 July 2021. The
claims were made during the 2021 policy's period of insurance, and the
defendant appreciates the difficulty that confronts it in this respect.
70. To overcome this hurdle the defendant contends that the 2021 poli cy's
period of insurance stretches from 1 September 2019 (instead of 1
September 2020) to 31 August 2021 , having regard to the definition of
“period of insurance” in the 2021 policy. I have referred to this earlier in
this judgment. This argument is thus not that the 2020 policy is applicable,
but rather that the 2021 policy is applicable because its period of insurance
includes the period of insurance of the 2020 policy.
71. I have already found that the policy is a claims-made one. On the common
cause fact that the claims were only made on 30 June 2021, extending the
insurance period to earlier than 1 September 2020 is of no assistance to
the defendant’s case.
72. There may have been an argument as advanced in Van lmmerzeel22 if the
defendant had notified the third party prior to 1 September 2020 ( and thus
21 Centriq supra para 32.
22 Van Immerzeel supra paras 15-17, and 22.
during the period of insurance of the 2020 policy) of circumstances likely to
give rise to a loss or claim. In such a case, by virtue of Claims Condition 2
of the 2020 policy, namely that where any circumstan ce is notified during
the period of insurance of the 2020 policy (1 September 2019 to 31 August
2020), and full particulars are supplied of the circumstances including the
dates and persons involved and the reasons for anticipating a claim, any
later claim arising out of the circumstances so notified will be deemed to
have been first made at the date of notification. If, therefore, the defendant
had notified the third party prior to 1 September 2020 that the plaintiffs
were unhappy about not being covered f or Covid-19, the defendant could
have relied on Claim Condition 2 to assert that the claim (made on 30 June
2021) was first made under the 2020 policy.
73. In Van lmmerzeel, the appellant (the insured) notified the respondent (the
insurer) of circumstances in 1991 that could give rise to a claim when it
received a notice from the client of a potential claim. The policy in place at
the time was the 1991 policy, which contained a similar clause to Claim
Condition 2 in the 2020 and 2021 policies in the present ma tter). The client
only made the claim in 1993 and at the time the 1993 policy was in place.
The 1993 policy had more beneficial cover than the 1991 policy and the
appellant sought to rely on the 1993 policy for its entitlement to
indemnification, whereas the respondent sought to enforce the 1991 policy
based on the notification of a potential claim in 1991.
74. The SCA held that the appellant was entitled to indemnification under both
the 1991 policy and the 1993 policy. The appellant was entitled to
indemnification under the 1991 policy by virtue of the deeming provision in
Claim Condition 2 (which deemed the notification of circumstances to
constitute claim first made under the 1991 policy even though the claim
constitute claim first made under the 1991 policy even though the claim
was only actually made later in 1993 when the 1 993 policy was
applicable). The appellant was further entitled to indemnification under the
1993 policy because that is when the claim was made by the client against
the appellant and when the appellant notified the respondent of the claim.
75. This argument is, however, not available to the defendant in the present
matter because it did not notify the third party of any circumstances which
could give rise to a claim during the 2020 policy's period of insurance.
The retroactive (or retrospective) date of cover
76. Once it is accepted that the policies are claims -made policies, that the
claims were made (by the plaintiffs against the defendant) on 30 June
2021, and that the defendant notified the third party of the claim s on 1 July
2021, it must be accepted that the 2021 policy is applicable. It cannot be
argued that on a claims-made basis the 2020 policy is applicable.
77. As indicated, the defendant nevertheless places reliance on the retroactive
date of cover for the proposition that it is entitled to indemnificat ion for the
plaintiffs’ claims because the alleged negligent conduct occurred during a
period covered by the retroactive dates of cover referred to in each of the
policies. The defendant effectively argues that “ the period of insurance in
respect of which the defendant enjoyed professional indemnity insurance
cover under the 2020 policy was from 1 September 2008 ” onwards. It
argues, likewise, that because the 2021 policy schedule provides that the
retroactive date of cover is 1 September 2008, the period of insurance in
respect of which the defendant enjoyed professional indemnity insurance
cover under the 2021 policy was from 1 September 2008 to 31 August
2021.
78. This argument is only part ially correct. P rofessional indemnity insurance
policies of the claims-made kind introduce two key temporal concepts: the
period of insurance , and the retroactive (or retrospective) date of cover.
The period of insurance (also called the policy period) is the span of time
during which the policy is active and can respond to claims. It typically runs
from the policy's start or inception date up to its termination or expiry date
as stated in the policy schedule. In a claims -made policy, the policy must
as stated in the policy schedule. In a claims -made policy, the policy must
be in force at the time a claim or incident is notified for covera ge to apply.
As discussed earlier, the insurer will only cover claims first made (and
notified) during the active policy period.
79. The retroactive date is simply the earliest date in the past from which the
insured's alleged unprofessional or ne gligent activities a re covered under
the policy.23 Any act, error or omission that occurred before this date is not
covered under the policy. Essentially, the retroactive date serves as a
historic cutoff: the policy will only cover claims arising from conduct on or
after that date. In the present matters, any negligent act committed by the
defendant from 1 September 2008 onwards will be covered, subject to the
policy terms, in particular in relation to the making of a claim.
80. In practical terms, since the allegedly negligent conduct occurred in June
2019, the defendant is entitled to submit a claim. However, the claim must
be made (notified) during the period of an active policy. The active policy in
the present case was the 2021 policy because on the defendant's own
version the claim was made on 30 June 2021 and notified to the third party
on 1 July 2021.
81. In the circumstances, the retroactive date of cover does not give the
defendant cover outside of the active policy period if it (the defendant) did not
submit a claim during the active policy period. The defendant accordingly
misstates the period of cover as "1 September 2008 to 31 August 2020" or “1
September 2008 to 31 August 2021”. On the face of both policies, the period
of insurance is explicitly and unambiguously state d. The retroactive date of 1
September 2008 does not extend the period of insurance. It merely permits
claims during the operative period of the relevant policy to be indemnified
even if they arise from conduct dating back to 2008 , and provided that the
provisions of the policy regarding the notification of claims are complied with.
23 See, for example, McCarthy Contractors (Pty) Ltd v Aegis Insurance Company Ltd [1993]
ZASCA 199 (1 December 1993) at p4: “In addition, provi sion was made for what was called
ZASCA 199 (1 December 1993) at p4: “In addition, provi sion was made for what was called
"the “retroactive date" and this was 1 November 1985. The importance of that date was that
in terms of an exclusionary clause in the policy the underwriters were not liable in resp ect of
the performance of any of the insured's professional activities prior to such date.
Consequently, even if the sort of negligence referred to in the policy occurred prior to the
insured period it could nonetheless lead to liability on the part of the underwriters if it
occurred on or after the retroactive date”.
The defendant’s duty of notification under the policies
82. The third party argues that the defendant had knowledge of the possibility of
a claim or claims against it at the latest upon receipt of email correspondence
from the plaintiffs during the period 19 to 22 January 2021 . T he plaintiffs ’
cancellation of their Renasa polic ies on 8 February 2021 was a further
indication of the plaintiffs’ intentions.24
83. The defendant's version is that the plaintiffs ’ claims were first made on their
behalf by Simpsons Attorneys, in a letter of demand sent to the defendant on
30 Jun e 2021, and which the defendant forwarded to the third party's
underwriter on 1 July 2021. It is incontrovertible on either party’s version that
the plaintiffs’ claim against the defendant was first made during the period of
insurance under the 2021 policy.
84. In light of the finding that the policies were claims-made policies, and that the
operative policy is the 2021 pol icy which excludes the defendant’s claim for
indemnification, it is not strictly necessary to consider whether the defendant
timeously complied with its obligation to notify the third part y of the plaintiffs ’
claims under either of the policies. I nevertheless do so briefly.
85. The questions for consideration are the following: If the 2020 policy is the
applicable one, is the defendant in breach of clauses 2(a) and 3 of the 2020
policy, entitling the third party to repudiate the defendant’s claim on that
basis? If, on the other hand, the 2021 policy is applicable, is the defendant in
breach of clauses 2(a) and 3 of the 2021 policy, entitling the third party to
repudiate the defendant’s claim on that basis?
86. Section 53(1) of the Short -Term Insurance Act 53 of 1998, titled
“Misrepresentation and failure to disclose material information”, provides:
24 See the discussion in Thompson v Federated Timbers and others [2010] ZAKZDHC 72 (8
December 2010) paras 17-18.
"(1)(a) Notwithstanding anything to the contrary contained in a short -term policy,
whether entered into before or after the commencement of this Act, but
subject to subsection (2) -
(i) the policy shall not be invalidated;
(ii) the obligation of the short -term insurer thereunder shall not be excluded or
limited; and
(iii) the obligations of the policyholder shall not be increased, on account of any
representation made to the insure r which is not true, or failure to disclose
information, whether or not the representation or disclosure has been
warranted to be true and correct, unless that representation or non -
disclosure is such as to be likely to have materially affected the assessm ent
of the risk under the policy concerned at the time of its issue or at the time of
any renewal or variation thereof
(b) The representation or non -disclosure shall be regarded as material if a
reasonable, prudent person would consider that the particular information
constituting the representation or which was not disclosed, as the case
may be, should have been correctly disclosed to the short term insurer so
that the insurer could form its own view as to the effect of such information
on the assessment of the relevant risk."25
87. In Regent Insurance Company Ltd v King's Property Development (Pty) Ltd 26
the S CA confirmed that section 53(1) , like the common law , adopts an
objective test for both misrepresentation and non -disclosure. The SCA
reaffirmed that "the test for inducement remains subjective - was the
particular insurer induced by the failure to disclose a material fact to issue the
policy?"27
88. In both of the policies in the present matter, t he policy schedule, in bold type,
provides that "(t)his certificate is issued according to all information supplied
on the proposal form ...". In the proposal form for the renewal of the 2020
policy, the defendant was asked, inter alia, "(a)re you currently aware of any
policy, the defendant was asked, inter alia, "(a)re you currently aware of any
circumstances that may give rise to a claim?". The defendant responded by
selecting "no", and accepted the proposal by signing it on 21 July 2020.
25 Emphasis supplied.
26 2015 (3) SA 85 (SCA) para 23.
27 Regent Insurance sup ra para 27 : “... once materiality has been established, the insured is
likely to face an uphill struggle in trying to demonstrate that his non -disclosure or
misrepresentation bearing this stamp had no effect…”
89. Before the declaration section, the proposal form drew the defendant's
attention to the following provision:
"It is essential that every Proposer or Insu red when seeking a quotation to take out or renew
any Insurance discloses to the prospective Underwriters all material facts and information
(including all material circumstances) which might influence the judgment of an Underwriter
in deciding whether to accept the risk and on what terms. The obligation to provide this
information continues up until the time that there Is a completed contract of insurance.
Failure to do so entitles the Underwriters, if they so wish, to avoid the contract of insurance
from inception and so enables them to repudiate liability thereunder. If you have any doubt as
to what constitutes a material fact or circumstance please do not hesitate to ask for advice."
90. The policy wording, under "A. General Conditions - Applicable to All
Sections", provides that " (t)his Policy shall be voidable in the event of
misrepresentation, misdescription or non -disclosure by or on behalf of the
Insured in any particular which is material to this insurance”.
91. Under "B. Limits of Indemnity", the policy wording provides that "(l)imits of
Indemnity are inclusive of all damages, claimants' costs, costs and expenses
(including defence costs) incurred by or on behalf of the Insured and all other
indemnity. The limits of indemnity are in excess of the Deductible”.
92. In the section of the policy wording dealing with “ Professional Indemnity”, the
insured is cautioned to "(p)lease take time to read all these documents to
make sure that the cover meets Your needs and that You understand the
terms, exclusions and co nditions. If there is anything You do not understand
or You need to change please contact Your insurance adviser immediately”.
93. The policy wording further cautions that "(t)his Policy will be voidable if You or
anyone acting for You fails to disclose, mis represents or misdescribes any
anyone acting for You fails to disclose, mis represents or misdescribes any
material fact”. Under “Reasonable Precautions”, the policy wording states that
"You must: ... use due diligence and ensure that all reasonable and
practicable steps are taken to avoid or diminish any liability”.
94. Under the sub-heading "Claims Conditions", the policy document states:
“2. You must give written notice to Us as soon as reasonably possible of:-
a) any Claim being made against You (or of any specific event or circumstance
which may give rise to a Claim being made against You…
3. It is condition precedent to Your right to indemnity under this Policy that you shall
notify Us immediately upon becoming aware of any Claims or circumstances that
may give rise to a Claim (not having been disclosed to Us) during the period/s
between:-
d) the date of the proposal; and
e) the inception and/or renewal hereof; or
f) the date We are placed on risk.”
95. The essence of these clauses is that, once the defendant becomes aware
of any events or circumstances that might give rise to a claim against it, it is
obliged to notify the third party immediately or as soon as reasonably
possible. Did it do so? The onus rests upon the third party to establish on
a balance of probabilities that the defendant breached its obligations as
alleged.28
96. It is common cause that on 9 June 2020 the defendant informed the
plaintiffs that their commercial insurer, Renasa, was not in a position to
indemnify the plaintiff for the loss it suffered as a result of business
interruption due to the C ovid-19 pandemic. On 19 and 20 January 2021
the plaintiffs transmitted emails to the defendant, in which the plaintiff s
informed the defendant that they had suffered losses as result of the
adverse impact of the pandemic on its business operations, and expressed
concern that their insurance coverage was insufficient to address those
losses. In these emails the plaintiff s made statements such as the
following:
"As you know the lockdowns (sic) have crushed my businesses and I can barely
remain open."
28 Resisto Fairy (Pty) Ltd v Auto Protection Insurance Co Ltd 1963(1) SA 632 (A) at 643G-
645C.
"Why is it that you never placed m y restaurant insurance with hospitality specific
policies? I have never said no to the most comprehensive cover and if you had I
would have been covered now for my losses."
"… please tell me why I wasn't pleased with the hospitality package? if you had
placed me there I would have been covered. Will Renasa settle my loss of income
claims? Can we submit to them?”
"Jaco I have always said to you that I want to be covered when I suffer any loss
hence me ensuring everything I own always . I have lost 18 milli on in GP so far. I
have had to put 4.5 million into my businesses to stay open. I find it hard to believe
that I am not correctly insured. My friends in the trade are being paid out."
97. I agree with the submission by counsel for the third party that t hese
communications leave no room for doubt as to the possibility of claims to
come. As early as 9 June 2020 (within the period of insurance of the 2020
policy, and before the renewal proposal in July 2020 ), circumstances had
arisen which could give rise to a cl aim being made against the defendant.
By 20 January 2021 (within the period of insurance of the 2021 policy) the
situation was quite clear. The plaintiff s indicated that they regarded
themselves as inadequately covered, while competitors in the same
industry were successfully receiving payouts. This must have served as a
forewarning to the defendant of an impending claim against it.
98. The obligations in clauses 2(a) and 3 of the policy wording, whether that of
the 2020 policy or the 2021 policy, were therefore triggered. It is common
cause that the defendant did not notify the third party of any of these
circumstances and communications prior to 1 July 2021, when it sent the
plaintiffs’ letters of demand to the third party’s underwriter.
99. Reinecke et al29 observe that "[l]iability policies as a rule require the
insured to notify the insurer of particular facts. What exactly requires
insured to notify the insurer of particular facts. What exactly requires
notification depends on the wording of the particular policy and, generality,
29 South African Insurance Law (LexisNexis, 2013) at para 25.46.
on the type of liability insurance. The purpose of the notification is to alert
the insurer to the possibility of an (action against the insured and a
consequent) action against itself, so that it ma y take steps to miti gate the
insured's loss (liability) and, with it its liability to pay him an indemnity for it”.
100. The defendant says that on 21 July 2020, when it renewed its policy with
the third party, the law in relation to the operation of an extended business
interruption clause was in a state of flux. Major insurers, including the third
party itself, asserted in ongoing litigation that an extended business
interruption clause did not yield business interruption cover in respect of
losses caused by the Covid -19 pandemic. It was thus impossible for the
defendant to suppose or predict that the SCA’s judg ment in Guardrisk
would ultimately lay down that an extended business interruption clause did
indeed yield such cover. Accordingly, the defendant could not on 21 July
2020 have been aware of any circumstances that might give rise to a claim
against it.
101. It seems to me, however, that precisely because of the ongoing litigation on
issues directly pertinent to the plaintiffs’ and the defendant’s situation, the
defendant must have been acutely aware that it was at risk of a claim. It
should have alerted the th ird party of this risk – by all accounts both the
defendant and the third party were awaiting the final word from the SCA.
The fact that the plaintiffs in their email correspondence did not directly
assert a claim against the defendant is neither here nor there, because the
accusatory tone of the email correspondence (admittedly also addressing
other aspects such as the cost of the cover obtained by the defendant)
speaks for itself . The defendant ought to have understood the
correspondence as conveying th at the plaintiffs might claim damages from
it.
102. The defendant must therefore have realised that a storm was brewing , at
it.
102. The defendant must therefore have realised that a storm was brewing , at
least by January 2021 when the plaintiffs expressed their incredulity at not
being covered . Its failure to notify the third party of wh at was going on
constituted a breach of the policy , and that the breach was material
--
because both clause 2(a) and clause 3 were material to allowing the third
party to mitigate any possible claims it m ight subsequently have had to
face. By withholding noti fication, the defendant deprived the third party an
opportunity to mitigate against its potential loss.
103. The third party points out that th is approach was followed in Thompson v
Federated Timbe rs and others 30 where a similar notification clause had
been br eached. The court held that "(t)he reason is that what had to be
reported was the event that might give rise to the claim against Zurich and
that event was Mr Thompson's alleged fall." The court explained31 why the
breach of these clauses , in the form o f non-notification, has severe
consequences on the third party:
"The purpose of a clause such as this is to enable the insurer to investi gate the event
under the most favourable circumstances and to take immediate ste ps to mitigate the loss.
It can intervie w witnesses, inspect the scene of the accident, assess the cause of the
accident and determine whether or not any liability is likely to attach in consequence of the
incident. That in turn may enable it to resolve the claim quickly and at minimal cost. Delay
may be seriously prejudicial. In particular , the insurer, with its broader experience , may
have a better understanding of what type of claim may arise from a particular accident.
Thus in the present case where Mr Judkins contemplated the possibility of a claim by
Federated Timbers the insurer would no doubt have contemplated the possibility of a
direct claim by Mr Thompson. That could have led them to contact Mr Thompson's
attorneys at an early stage and compromise the claim. It is clear that the failur e to notify
Zurich in 2008 of Mr Thompson's alleged accident had within it the seeds of prejudice to
Zurich's interests."
104. This reasoning is apposite in the present matter. The breach of either or
both clauses 2(a) and 3 is material and renders the policy void.
both clauses 2(a) and 3 is material and renders the policy void.
Compliance with these clauses w as in any event a condition precedent for
any claim for indemnity under either of the policies , or at least a material
obligatory term of the policies:32
30 Thompson supra para 22.
31 At para 24.
32 Napier NO v Van Schalkwyk 2004 (3) SA 425 (W) at 436G-437B.
“There has been judicial debate as to whether a condition suc h as condition 3 constitutes a
condition precedent or is merely a material obligatory term of the policy. More recent
authority clearly favours the latter approach. … Whichever approach is adopted, it seems to
me that condition 3 is clear and unequivocal i n its meaning and effect. It provides in terms
that a failure to furnish notification of the loss in writing within 24 hours is to hold the
consequence that the indemnification to which the insured might otherwise have been
entitled is to be treated as for feited. In short, a breach by the omission to furnish the
prescribed notification will result in the appellant being absolved from its obligation to
indemnify the insured… It is of course true, as was pointed out by the learned Judge a quo,
that the condit ion was imposed for the benefit of the appellant and that the failure by the
respondent to provide it with written notification of the loss within the prescribed time -frame
occasioned no prejudice to it whatsoever, whether in relation to its ability to inv estigate the
claim or to make a decision thereon. This consideration does not in my judgment impact on
the appellant's right to refuse the claim, for it is now settled law that it is entitled to invoke the
benefit conferred upon it by a condition such as c ondition 3, irrespective of whether it has
suffered any prejudice as a result of any non-adherence thereto.”
105. If, therefore, I had found that the defendant had a claim for indemnification
under either policy, I would have held that the third party would ha ve been
entitled to repudiate the claim on the basis of the defendant’s breach of the
notification clauses.
The limit of indemnity
106. In light of the findings set out above, it is not necessary to consider the third
question that the parties posed for dete rmination, which was the limit of the
indemnity to which the defendant would have been entitled if it had a right to
indemnity to which the defendant would have been entitled if it had a right to
indemnification under either policy . I have earlier referred to the monetary
limits imposed under the respective policies.
Costs
107. It would be fair for each party to bear its own costs incurred as a result of the
defendant’s interlocutory application. As I have indicated, the erroneous
inclusion in the separation order of a fact that was not common cause is to be
laid at both parties’ door. It is a pity that the error could not earlier have been
rectified by agreement , thus saving the costs incurred in launching and
opposing the application.
108. There is no reason for costs not to follow the event as far as the separated
issue is concerned. T his would include all costs incurred by the third party
after the delivery of the third party notices. The parties were agreed that
counsel’s fees should be taxed on Scale C. I agree that that is an
appropriate scale given the issues involved, including the interpretation of the
policies, and the importance of the matter to the parties.
Order
109. In the premises, I make the following orders:
Under case number 5421/2023:
1. The defendant’s interlocutory application for the variation of the separation
order dated 19 February 2025 is granted , and that order is varied by the
introduction in paragraph 3.1 thereof, immediately after the words
"paragraphs 22 to 24, inclusive ", of the bracketed words " (but excluding
paragraph 24.11)".
2. Each party shall pay its own costs incurred as a result of the interlocutory
application.
3. The separated issue is determined in the third party’s favour, and the
defendant’s claim against the third party for indemnification is dismissed.
4. The defendant shall pay the third party’s cost s in relation to the third party
proceedings, including counsel’s fees taxed on Scale C.
Under case number 5422/2023:
5. The defendant’s interlocutory application for the variation of the separation
order dated 19 February 2025 is granted , and that order is varied by the
introduction in paragraph 3.1 thereof, immediately after the words
"paragraphs 22 to 24, inclusive ", of the bracketed words " (but excluding
paragraph 24.11)".
6. Each party shall pay its own costs incurred as a result of the interlocutory
application.
7. The separated issue is determined in the third party’s favour, and the
defendant’s claim against the third party for indemnification is dismissed.
8. The defendant shall pay the third party’s costs in relation to the third party
proceedings, including counsel’s fees taxed on Scale C.
P. S. VAN ZYL
Acting Judge of the High Court
Appearances:
For the plaintiff: No appearance.
For the defendant: Mr T. M. Tyler
Instructed by: Visagie Vos Inc.
For the third party: Ms L. Segeels-Ngube
Instructed by: Eversheds Sutherland (South Africa) Inc.