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, MTHI YANE 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
2
STREICHER JA:
[1] This appeal is against a judgment in the High Court, Pretoria in terms
of which an action instituted by the a ppellants against the respondent, which
action proceeded by way of a stated ca se, was dismissed. The issue to be
decided is whether an action institut ed 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 Lt d 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 in surers and the respondent assumed the
rights and obligations of Aegis in terms of the 1993 policy.
[2] At the relevant time the appella nts practised in partnership as
consulting engineers. In terms of th e 1993 policy the insu rer undertook to
indemnify the partnership in respect of –
‘Liability incurred in respect of the Pract ice 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 th e heading ‘Limit of Liability’ that
the liability of the insure r ‘for damages and claimant ’s costs and expenses
arising out of any one claim’ would no t exceed R1 000 000. In addition the
insurer undertook to pay the costs and expenses incurred in the conduct of any
3
claim with the consent of the insure r. 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 to tal costs and expenses
incurred as the amount of the indemnity availa ble under this Certificat e bears to the total
amount to dispose of the claim.’
[4] During November 1993 Samancor instituted action against the
partnership in which action it clai med damages on the ground of the
partnership’s alleged breach of contract in failing to properly supervise the
construction of a water pipeline. The pa rtnership, with the consent of the
insurer, instructed attorneys to defe nd 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 insu rers, also issued a certificate of
insurance to the partnership in respect of the period 1 March 1991 to 29
February 1992 (‘the 1991 policy’). Th e 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.
4
[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 pa rties governing the partnership’s claim to
indemnity from the insurer was the 1991 Certificate; and that
(b) In terms of the 1991 Certificate, the li mit 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 ag reed 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 th e litigation between Samancor and the
partnership.
[7] Both policies contained a c ondition 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 fr om 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 ma y 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’.)
5
[8] During May 1991 the appellants became aware that Samancor
contended that the partnership ‘may ha ve 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 Glenv aal of a potential claim by Samancor.
Referring to the contract for the c onstruction 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 de klaag 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 kennisgewi ng van `n moontlike eis. Ons sal u op hoogte
hou van enige verdere verwikkelinge.’
[9] The appellants agree that they c ould have claimed indemnity from the
insurer in terms of the 1991 policy but c ontend that they were also entitled to
do so in terms of the 1993 policy. The a ppellants 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
6
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 th e insurer agreed to indemnify the
partnership in respect of liability whic h ‘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 wh en action was instituted,
which occurred during the period of insu rance of the 1993 policy, or whether
the claim was first made wh en 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 Insur ance 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 th e insured of a right to some relief
because of the breach by the insured of th e 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
1 See also Boshoff v South British Insurance Company Ltd 1951 (3) SA 481 (T) at 485B.
7
the English language the words “claims made” indicate that there has been a
communication by the client to the [ins ured] surveyor of some discontent
which will, or may, result in a reme dy expected from the surveyor. There
must, I say, be communication.’ It was suggested that this statement by
Staughton LJ is authority for the propos ition 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 wh en 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 no tified that there was a possibility of negligence on
the part of the appellants. In the last paragraph of the le tter it was expressly
stated that the letter only served as notif ication of a possible claim i.e. that the
letter was not a notification of a claim.
8
[15] Counsel for the respondent submitted that th e phrase ‘claims first
made’ in the 1993 policy should not be given its natural meaning but should
be interpreted so as to include the comm unication 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 policie s. 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 th e period of insurance and which may
possibly give rise to a claim. The partnership became aw are of such an
occurrence during the period of insuran ce of the 1991 certificate and gave the
required notice. Having given the notice the Samancor claim eventually made
against the partnership is regarded ‘fo r 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 appe llants was not given in respect of
an occurrence of which they became aw are 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 no t provide that a notification of an
occurrence which may possibly give ri se to a claim during a period of
9
insurance preceding the period of insu rance of the 1993 policy is to be
regarded, for purposes of the 1993 certif icate, as a clai m made during the
preceding period of insurance.
[18] Counsel for the respondent submitte d 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 4 th 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 a ny time to disclose to the Insurers facts
material to the assessment of the risk.
(b) that the Insured made an incorrect repr esentation 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
10
(b) where the Insured could have no tified 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 s ubmitted 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, th erefore, does not find application in
the present case. The condition does not provide that in the event of a
disclosure having been made the insure d 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 w hy the word 'claim' should not be given
its natural meaning. The appellants we re free to negotiate more extensive
cover in respect of periods subsequent to the insura nce period in which they
had given notice of the potential Samancor claim. They could have negotiated
11
such cover with the respondent or another insurer. In such negotiations they
were of course obliged to disclose th e 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 c over 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 ‘c laims 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 10 th 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 po licy. 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 th e 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 Samanco r-claim for damages and costs and its
liability to pay the appellants’ costs a nd expenses incurred in the conduct of
the Samancor-claim.
12
[24] As stated above the respondent agreed, whilst persisting in the
contention that the appellants were onl y 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 responde nt 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:
13
‘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 r eading 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 a ppellants are entitled to indemnity from
the respondent in terms of a professi onal indemnity policy issued on 6 March
1991 under a certificate of insuran ce 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 responden t 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 Febr uary 1994 (the
14
1993 policy) and can choose which; and
27.3 If the 1993 policy applies, the a ppellant’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 Civi l Engineer by Sa mancor 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. Sa mancor 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 th at date, the appellant gave notice to
15
Glenvaal, Griffiths and Armour (Pty) Li mited (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, Sa mancor claimed damages from the
appellants on the ground of their allege d 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
16
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 appella nts’ costs and expenses of the
appellants in the action, counsel and e xpert witnesses incurred in the conduct
of the defence of the action and the subs equent 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 conten ding 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 Sa mancor’ and the appellant s, ‘the funds for the
purposes of which were not available to the’ appellants.
30.1 Conditions 2(a) and 2(b) in bo th the 1991 and 1993 policies are in
identical terms. They provide as follows:
17
‘2. The Insured shall notif y the Insurers via Glenvaal, Griffiths & Armour
(Proprietary) Limited in writing as soon as practicable of
(a) any claim or of the receipt of notice fr om any person of an intention to make a
claim against the Insured.
(b) any occurrence or circumstance of whic h 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 sha ll 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 c hose to base their claim upon the 1993
policy as the extent of the indemnity prov ided in it is greater than in the 1991
policy. As I have already indicated, th e appellants contend that although they
are also entitled to indemnity in resp ect 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
18
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 in tended 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 conte nds 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 th e defence of the Samancor action and
subsequent appeal, and not the 1993 poli cy which covers such costs. I do not
agree.
32.3 The respondent’s counsel has referre d to a number of English cases and
leading English text books on Insuran ce Law where the m eaning of, and the
reasons for so called ‘claims first ma de’ 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
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
19
the case before this court where a ‘c laim 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 c ondition 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 Assn4
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 peri od 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 ar e 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 polic y. The 1991 and 1993 policies are
distinct and different policies conclude d at different times and for different
periods and differing in certain respects more particularly regarding the extent
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
20
of the cover afforded. There is no direct reference whatsoever, as there could
have been, in the 1993 policy to the 199 1 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. Th e 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 f act eventuated in the actual claim
notified during the period of the 1993 policy. There is no evidence that they
increased or changed the premium pa yable 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 prev ious insurer was to be regarded as a
notice of ‘first claim’ under the new policy.
21
33.4 No notification was given during th e 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 clai m 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-disclo sure would be irre levant. If the cover
was increased the non-disclosure would entitle the insurer to limit its liability
to the cover provided in the first period.
22
34.3 I accordingly do not believe that condition 8(b) is of assistance or
relevant in interpreting condition 2 a nd in deciding whether the 1991 or 1993
policy is of application.
35.1 In the alternative the respondent c ontends that in the event that it is
found that the 1993 policy applies to th e appellants’ claim the reference to
‘such costs and expenses’ in the 1993 po licy is a reference to the costs and
expenses of the appellant s referred to in paragra ph 3.11 above which totaled
R2 072 292,48.
35.2 The 1993 policy provides, under the he ading ‘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 occurren ce or circumstance that has
given rise to or may reasonabl y 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 su ch 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 a bove 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
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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 i ndemnity (R1 000 000, 00) to the total
amount payable to Samancor to di spose of its claim (R3 646 050,58)
according to the respondent was 1: 3,64605058.9
35.6 The respondent therefore contends th at 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 li ability 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
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
24
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 separa te and distinct indemnities to the
appellants. An indemnity against liability for dama ges 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 expe nses 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 agains t 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 cap ital amount of dama ges, interest and
costs which the appellants were ordered to pay to Samancor;
11 Stated case paras 8.6.7 and 8.6.8
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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 bu t who play no part in this appeal]
incurred in the conduct of the defe nce of the Samancor action and the
subsequent appeal to this court. Th e 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 th e 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.
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R H ZULMAN
JUDGE OF APPEAL
12 Para 5.20 of the stated case