The Legal Approach Towards Time Barring Clauses in Insurance Contracts

The Constitutional Court, in the case of Barkhuizen v Napier 2007 (5) SA 323 (CC), dealt with the issue of “time-barring clauses” in contracts entered into between private persons.

The salient facts of the case are as follows:

The Applicant had entered into a short-term insurance contract with the Respondent for insurance of his motor vehicle. On 24 November 1999 the motor vehicle was involved in an accident which caused the vehicle damages beyond economic repair. The Applicant thus claimed the insured sum, i.e. R181 000 from the Respondent. The respondent repudiated the claim on the grounds that the Applicant had used the vehicle for business purposes despite the insurance agreement providing that the vehicle must be used for private purposes only.

On 8 January 2002, two years later, the Applicant instituted legal proceedings against the Respondent claiming payment of the insured sum together with interest thereon. The Respondent responded to the action with a special plea, claiming that they were released from liability due to the Applicant’s failure to adhere to the time-limitation clause which formed part of the contract. The relevant clause read as follows: “if we reject liability for any claim made under this policy we will be released from liability unless summons is served… within 90 days of repudiation”. In essence the Applicant was time barred from instituting proceedings to pursue his claim.

The Applicant argued that the time-limitation clause was unconstitutional as it was contrary to public policy and thus invalid. The basis of the Applicant’s contentions in this regard was that the clause sought to prescribe an unreasonably short period of time within which to institute legal proceedings and as a result it infringed on the right to seek redress from the Court and the right to access the Court.

The Court, inter alia, considered whether public policy tolerates time-limitation clauses. The Court held that it did, subject to the considerations of reasonableness and fairness. Furthermore, the Court reiterated that the Constitution recognises that the right to seek legal redress may be limited in certain instances.

Relying on the Mohlomi decision the Court held further that the general test for enforceability is whether the provision affords the Applicant an “adequate and fair opportunity to seek judicial redress. Notions of fairness, justice and equity, and reasonableness cannot be separated from public policy”. The Court also formulated a test for fairness viz, firstly, whether the clause itself is unreasonable and secondly, if the clause is reasonable whether it should be enforced in the circumstances.

The Court found that in respect of the first leg of the test two considerations would need to be weighed up against one another. One being the maxim, pacta sunt servanda and the other being the right to seek legal redress. The Court found that clauses of this type are reasonable and thus operational within our law. The Court thereafter moved on to examine the circumstances in which the clause would operate, in order to assess whether same should be enforced.

The Court ultimately found that the clause should be enforced in this matter because the Appellant failed to show why he had failed to act in accordance with the provisions of the time-bar clause. The Court explained that had the Applicant been unaware of the time limitation clause or the consequences thereof, or failed to act in accordance with same due to factors outside of his control then the clause would operate unfairly and the Court would not enforce same. However, the appellant seemed to be fully aware of the clause and the effect of same. Thus, in the circumstances, the Court found that the clause operated reasonably.

This decision opened the door for the Courts to refuse enforcement of certain, unfair clauses in contracts between private persons and laid the foundation of the grounds on which to do so.


The Policyholder Protection Rules

On 01 January 2018 the amended policyholder protection rules came into force. Various Rules have been in place regarding time barring since 2011, which the new Rules amplify. The rules build on the position laid down by the Court in Barkhuizen v Napier.

The Rules firstly provide that insurers must accept, repudiate or dispute a claim or the quantum thereof within a reasonable period of time. Thereafter, insurers must give written notice of their decision to the claimant within 10 days of making same.

In the event that an insurance claim is rejected or disputed by the insurer, the Rules provide for a rather stringent set of disclosure obligations which the insurer must fulfil. This ensures that claimants are equipped with the necessary information to properly pursue claims which they feel have been wrongly rejected. Insurers are required to inform the insured of the following:


  • The reasons for the decision “in sufficient detail to enable the claimant to dispute such reasons if the claimant so chooses”;
  • That the insured party may within 90 days make further representations in respect of its claim;
  • Details of the internal claim escalation and review process required by Rule 17.5. Rule 17.5 provides that an insurer must establish and maintain an appropriate internal process for claim decision escalation and/or review and for resolution of claim related disputes;
  • That the insured party has a right to lodge a complaint against the insurer with the relevant Ombudsman, together with the relevant contact details of same, any applicable time limitations, and other relevant legislative provisions relating to the lodging of such a complaint; and
  • Of any time limitation provision for the institution of legal actions contained in the policy, as well as the implications thereof or, in the absence of same, of the operation of the Prescription Act, the prescription period applicable and the implications of the Act.


It is also clear that mere notification of the clauses and processes is insufficient. Insurers must also ensure that claimants are made aware of the relevant details and implications thereof in order for them to be well equipped to deal with such clauses and/or to pursue such processes successfully. It is thus the obligation of the insurer to provide information regarding the protection provided by the rules available and accessible to their clients – which provides some redress to the unequal positions private persons find themselves in when dealing with insurance companies.


   The Rules further state:

“ 17.6.8      Any time limitation provision for the institution of legal action that may be provided for in a policy entered into on or after 1 January 2011-

(a)   may not include the period referred to in rule 17.6.3(b) in the calculation of the time limitation period; and

(b)   must provide for a period of not less than 6 months after the expiry of the period referred to in rule 17.6.3(b) for the institution of legal action.

 17.6.9   Despite the expiry of the period allowed for the institution of legal action in a time limitation clause provided for in a policy entered into before or after 1 January 2011, a claimant may request the court to condone non-compliance with the clause if the court is satisfied, among other things, that good cause exists for the failure to institute legal proceedings and that the clause is unfair to the claimant.

 17.6.10 For the purposes of section 12(1) of the Prescription Act, 1969 (Act 68 of 1969) a debt is due after the expiry of the period referred to in rule 17.6.3(b).”


The Rules confirm the Court’s power to condone non-compliance with time-limitations should they operate unfairly, as well as in circumstances where the policyholder can show their failure to institute legal proceedings timeously was due to a good cause. It is submitted that the test for fair operation of such a clause remains as decided by the Court in Barkhuizen. It must also be noted that the above requirements must be fulfilled in conjunction with one another. However, what exactly “among other things” refers to in this provision is currently unclear.

Insurers are also precluded from imposing unreasonably short time-limitations, as the Rules state that any time-limitation imposed in a policy entered into after 2011 may not be shorter than six months.

The Rules now require insurers to ensure that the policyholder is well aware of the existence of the time-limitation clause, as well as the implications thereof. This protects policyholders from being prejudiced by clauses which they previously would not have been made aware of, or fully understood. It also provides the policyholder with ample opportunity to dispute repudiated claims and follow the correct processes in order to have their claims reconsidered.

Should an Insurer fail to act in accordance with the Rules, a policyholder may lay a formal complaint against the insurer. As a result, the Rules have created a more onerous position for the Insurer and this should ensure that they act in accordance therewith.

The Rules provide some welcome redress to the unequal power that insurance companies hold over policyholders. Furthermore, the new amendments to the Rules obligate Insurers to inform policyholders of the protection in place which makes it more accessible to the policyholder and easier to follow.


Claire Wolmarans

Insurance Law – The consequences of non-fulfilment of a condition precedent contained in an insurance policy: a recent decision

In Screening and Earthworks (Pty) Ltd v Hollard Insurance Company Limited the South Gauteng High Court recently considered whether a ‘condition precedent’ in an insurance policy placed a positive contractual obligation on an insured. The judgement is noteworthy to players in the machinery-breakdown-insurance field, but also to liability and indemnity Insurers.

The Plaintiff claimed the cost of repairing its cone crusher which became damaged as a result of the failure of the crusher’s main bearing from Insurers. The failure occurred during late October of 2007. Insurers refused indemnity under the Machinery Breakdown and Loss of Profit policy, raising a number of defences (certain of which fell away during the course of the trial). The most important remaining defence put up by Insurers was that the Plaintiff failed to preserve the damaged parts of the crusher and failed to make the parts available to it for inspection.

Kathree-Setiloane J considered first the following general condition of the policy:

“The due observance and fulfilment of the terms of this Policy … shall insofar as they relate to anything to be done or complied with by the insured be a condition precedent to any liability of the company [Insurers] to make any payment under this Policy.”

The particular term on which Insurers relied stipulated that:

“… on the happening of any event which may result in a claim under this Policy the insured shall as soon as possible and at its own expense … iii) preserve any damaged parts and make them available for inspection by a representative or surveyor of the company.” (hereinafter referred to as “the preservation condition”).

The Judge pointed out that the defence on which Insurers sought to rely was a ‘special defence’ founded on exceptions contained in the policy, and thus stood to be proved by Insurers. He considered the dictionary definitions of “preservation” (“preserving, being preserved, from injury or destruction”), “preserve” (“to keep safe”, “to keep safe from change or extinction” and “to protect from decay and damage”).

Insurers’ arguments

Insurers argued that the preservation condition was a condition precedent to a successful claim and that the Plaintiff had to comply with it, failing which Insurers were at liberty to deny liability under the policy.

Insurers also argued that the inclusion of a preservation clause in a policy of this nature was essential, as in its absence, Insurers would “be left to the mercy of the insured’s unilateral decision-making, leaving the insurers with no checks or balances” and that ‘strict observance’ was a condition precedent to liability on its part.

Plaintiff’s evidence

The Plaintiff led evidence by its own representatives as well as a number of experts.

Evidence made it clear that the Plaintiff started stripping the failed crusher shortly after the failure: parts were separated; some components were left in situ while others were freighted away to the Plaintiff’s workshop where certain parts were undressed further; some critical parts were even torch cut.

Expert evidence confirmed that the torch cutting may have caused the “killing of” evidence (not only of the parts which were cut, but also possibly the surrounding parts).

Under cross-examination, the Plaintiff’s representative conceded that these actions “killed evidence” but he attempted to soften this by offering that he had not intended to obscure or destroy evidence. He contended that he was simply driven by practical considerations and expediency when he instructed and oversaw the dismantling, hauling and cutting of the parts.

Insurers’ appointed loss adjuster apparently visited the site during November 2007 and his letter to the Plaintiff was accepted into record as an aid memoire or memorandum of sorts. The loss adjuster took some photographs of certain parts which were made available to him for inspection. It was contended by the Plaintiff that the loss adjuster failed to make a demand or request to see further evidence.

In response to these arguments, Kathree-Setiloane J observed that it was apparent from the evidence that the Plaintiff had become aware at a very early stage (mere days after the failure) of the “event which may result in a claim” and that the Plaintiff would have appreciated the ‘serious nature of the event’ almost immediately. It would thus have been apparent to the Plaintiff at such an early stage that an insurable event had occurred. The Plaintiff should have then complied with the obligation placed on it by the policy to preserve the failed component parts in order to make it available to Insurers.

The learned Judge observed further that the contractual obligation to preserve evidence is ‘absolute’ and that the test was thus not whether the Plaintiff’s failure to comply was intentional or negligent. The test was simply this: “was it preserved or not?” He agreed with Insurers’ contention that the Plaintiff’s failure to preserve the damaged parts was patent and fatal to the plaintiff’s claim and commented:

“What is absolutely certain at this time, is a complete and utter failure to preserve inter alia the damaged parts in the form of the component bearing. The bearing had for all intents and purposes been completely “destructed” by this stage in complete disregard of the plaintiff’s contractual and absolute obligations to preserve.”

The Judge commented on the mind-set of the Plaintiff as being apparent from its conduct and referred to the Plaintiff’s reliance of its broker’s advice to: “… carry on, do what you must as if you were uninsured …. The Plaintiff acknowledged to have interpreted the broker’s advice as “… do not waste time, do not wait, carry on because your income is standing, we will do whatever to get you going.”

The Court also commented pointedly that it was not for Insurers to demand to see the preserved damaged parts but for the Plaintiff to preserve same and “make them available” to Insurers for inspection.

Further expert evidence

By the time the Plaintiff’s experts became involved in the study of the occurrence, the failure to preserve and the consequences of such failure had become manifest and its consequences had been apparent.

One expert reported the he was only able to consider “the possible cause of failure having only inspected the inner ring, cage and two rollers” and he expressed grave misgivings on the fact that the cage had been cut at the point where the damage occurred, stating that the fact of the cutting made it “impossible to determine if there was a fracture, crack or distortion.” His report and his verbal evidence was littered with qualification and similar observations, concluding unsatisfactorily that on the sparse evidence available to him, he could merely conclude that the fracture of a cage pocket would usually be the sudden result of severe shock. His report made it clear that other possibilities could not be excluded.

One other expert reported plainly that the Plaintiff had killed evidence.

All the experts agreed that the only reliable mechanism for determining the cause of the failure with absolute certainty would be to examine the bearing as a full component.

The Court’s observations

Given the experts’ common view that there was a dire need to inspect a whole component, the learned Judge considered the practicality of preservation clauses as conditions precedent that place an ‘absolute obligation’ on the Plaintiff. He went on to say that preservation clauses were not merely inserted into policies so that Insurers would be allowed to avoid liability on vague and unreasonable technicalities. Preservation clauses, he stated, were essential for the proper assessment of the facts of a matter since such terms (that oblige a party to take on a positive duty) were designed to minimise the incidence of risk and to determine the extent of a loss.

The Judge referred, with approval, to similar clauses that have found application in our law –

First, the ‘timeous notice clauses’ which were found to be conditions precedent in Norris v Legal and General Assurance Society Limited : Watermeyer J in casu found (after considering various precedents) that a condition which imposes an obligation on an insured which was clearly intended to have some legal effect, in terms of which

“[t]he insured shall on the happening of any loss or damage to the property insured give immediate notice thereof in writing to the Company and shall at his own expense within 30 days after the happening of such loss or damage deliver to the Company a claim in writing with such detailed particulars and proofs as may be reasonably required …”

was indeed a condition precedent and the Plaintiff, having failed to comply with either of the conditions, was consequently not entitled to indemnity.

The Judge stated that Insurers would “obviously want to know immediately of the happening of a fire so that it could investigate the cause and effect thereof under the most favourable circumstances … Delay in notifying the Company … might well result in serious prejudice to the Company.”

Second, in Russel, N.O. and Loveday, N.O. v Collins Submarine Pipelines Africa (Pty) Ltd the Court found that a positive obligation in the form of assistance and co-operation was deemed to be a suspensive condition for the positive election by Insurers “to exercise their right to associate.”


Kathree-Setiloane J concluded that the uncontroverted evidence led on behalf of the Plaintiff (through its experts and representatives) equated to an admission that there had been a breach of its obligation to preserve. In law such a breach of an express term of the contract allowed Insurers to avoid liability and to reject the claim. It was found that Insurers had discharged its onus to prove on a balance of probabilities that the Plaintiff had failed to comply with its obligation and that Insurers were entitled to reject the Plaintiff’s claim.

The judgement is sound for many reasons. Where circumstances present an Insured with the opportunity to tamper with or destroy evidence, whether intentionally or not, it is crucial that Insurers are allowed reliance on a condition precedent to allow it a fair opportunity to investigate a claim.

Such conditions should be regarded as designed to ensure the preservation of evidence in order that Insurers may perform their own assessment but also to assist the Insured in the technical and commercial management of its plant and business.

Insurance Law – Time-Barring Clauses – What is Reasonable and Fair?

In the construction and engineering industry time-barring provisions are often included as part of the standard terms in construction agreements. These provisions often require “strict” compliance with time periods and hold significant sanction which may impact adversely on claims or other entitlements under such agreements.  Contracting parties often query the fairness and reasonableness of such provisions once they face the consequences of being time-barred.

Our Courts have clarified the legal position in respect of clauses of this nature in the case of Barkhuizen v Napier. The brief facts of the case are:

1. Two years after Napier rejected Barkhuizen’s insurance claim, Barkhuizen issued a summons for payment in respect of what he regarded as “an insured event”;

2. Napier stated in its defence that it was not liable as Barkhuizen had failed to issue the summons timeously. Napier argued that the contract contained a specific provision that required Barkhuizen to issue a summons within 90 days from the date on which Napier rejected Barkhuizen’s insurance claim and that his failure to do so effectively time-barred him from enforcing any perceived entitlements;

3. Barkhuizen’s counter argument was that the time-barring clause was unconstitutional and unenforceable because it violated his right under the Constitution of the Republic of South Africa to have the matter determined by a Court.

Initial Ruling

The High Court initially upheld Barkhuizen’s contention and declared the time-limitation clause to be inconsistent with the Constitution and dismissed the Napier’s defence.

Court of Appeal

However, the Supreme Court of Appeal ruled that Section 34 of the Constitution did not prevent time-limitation provisions in contracts that were entered into freely. Although it found that, on the evidence, it could not determine whether the clause under consideration had been entered into freely and voluntarily, the Court nevertheless upheld Napier’s argument and excused the insurer from all liability.

Constitutional Court

Barkhuizen then approached the Constitutional Court for leave to appeal against the decision of the Supreme Court of Appeal. In response, Napier’s arguments included that the provisions of Section 34 of the Constitution could not be applied to constitutional challenges launched against agreed contractual terms.

The Constitutional Court held that public policy considerations should be evaluated to decide whether or not a contractual term which violates the Constitution and, as such, is contrary to public policy and thus unenforceable.  The Court held that the correct approach to constitutional challenges of this nature was to determine whether the term itself was contrary to public policy and South Africa’s constitutional values, in particular, those found in the Bill of Rights.  The Court held that Section 34 not only reflected the basic values that underlie the constitutional order, but that it also constituted a manifestation of public policy. The proper approach to the present matter was therefore to determine whether the time-limitation clause violated Section 34 of the Constitution and was thus contrary to public policy.

The Court held that, as a matter of public policy (subject to considerations of reasonableness and fairness) time-limitation clauses in contracts are indeed constitutionally allowable. The Court held further that the right to seek judicial redress (as guaranteed by Section 34) may be limited in circumstances where:

1. It is allowable by a law of general application; and

2. Such a limitation would be reasonable and justifiable.


The test for reasonableness, the Court found, was whether or not the clause afforded the claimant an adequate and fair opportunity to seek judicial redress. If a contractual term provides, for instance, for an impossibly short time for a dispute to be referred to forum where it may be resolved, it may be contrary to public policy and unenforceable.


The Court set out a two-pronged test to be applied in order to evaluate such provisions in respect of fairness.  The first was whether the clause itself was unreasonable. This entails a weighing-up of the principle of pacta sunt servanda and the right of all persons to seek judicial redress. If the clause was found not to be unreasonable, then the further requirement is evaluated.

The second requirement was whether or not the circumstances that prevented compliance provided the defaulting party with a justified excuse for its non-compliance with the time-barring provision. Satisfaction of this requirement requires proof by the defaulting party that it has good reason for its failure to observe the requirements of the time-limitation clause. In that regard, the relative equality or inequality of the bargaining positions of the parties is a relevant consideration.

In Barkhuizen’s case, the Court found that the ninety-day time limitation was not manifestly unreasonable. It was also held not to be manifestly unfair. There was no evidence that the contract had not been concluded freely between parties in equal bargaining positions. There was also no evidence that the clause had not been drawn to the applicant’s attention. In the circumstances, enforcement of the clause would not be contrary to public policy.

One of the specific requirements that Barkhuizen failed to address (which the Court regarded as inexcusable) was his failure to explain and motivate his non-compliance with the requirements of the time-limitation clause. His failure to do so placed the Court in a position where it could not evaluate whether or not the application of the clause would be unfair and, consequently contrary to public policy.

While the Constitutional Court, in this specific instance, found that the time-limiting clause was not in conflict with public policy considerations and that it was necessary to recognise the doctrine of pacta sunt servanda, the Court acknowledged that it may decline the enforcement of a time-limitation clause if its implementation would result in unfairness or would be unreasonable for being contrary to public policy.

 Download article as a PDF >>

Insurance Law – Rejection of Construction Claims

Construction claims, the formulation of Insurance claims and the rejection thereof by Insurers have become one of the oldest battles in the Engineering and Construction industry.  This conflict has, to some extent, been the result of the difference between the risks being insured against in terms of Insurance contracts on the one hand, and the actual risks in Construction on the other.  What may be expected by Engineers and Contractors from Insurers when a claim is made and to what extent should the duties under the Construction contract be taken into consideration by their Insurers?

These issues were recently addressed by the Supreme Court of Appeal in the case of Mutual & Federal Limited vs. Rumdel Construction (Pty) Ltd.  The Court delivered a unanimous full bench decision in matter.


The background facts of the case are briefly as follows:

  • During the week of 21 to 28 February 1997 tropical cyclone Lizette struck in the Nampula Province in Mozambique.  The cyclone severely damaged various roads that Rumdel Construction had constructed and was about to hand over to its employer, the Mozambique Directorate of National Roads and Bridges.
  • Damage caused by the storm led to an insurance claim by the contractor which Mutual & Federal rejected.
  • The Insurer was unsuccessful in the High Court and was ordered to pay R2,500,000 in addition to what ever value added tax might have been paid by the contractor.
  • The Insurer then turned to the Supreme Court of Appeal and filed an appealed against this judgment.


The Contractor claimed under the Insurance policy for the repair cost of 101,88 kilometres of road that had sustained storm damage.  It argued that Insurers were obliged to indemnify both the contractor and the employer in respect of fortuitous physical destruction of or damage to the works that had to be undertaken by the contractor.  The Policy wording stated, inter alia, that:

“The company hereby agrees … that if … any part of the property Insured shall be lost destroyed or damaged as referred to in Part 1 hereof … the company will indemnify the Insured as provided herein after.”

Part 1 describes the indemnity:

“The company will … indemnify the Insured in respect of fortuitous physical loss or destruction of the property insured … whilst at the situation of the contract.”

The property insured was described in the schedule to the Insurance contract as:

“… opening of rural gravel roads and rehabilitation and construction of bridges in Nampula Province”.


The Insurer based its defence on two arguments, the first of which relates to a contractual interpretation.  The second argument was that the word “design” was used in the policy to indicate that the roads had to be fit for their intended purpose.

To further this rationale, the Insurer’s expert on road construction testified that various aspects of the design and construction of the road were “not fit for purpose”.  It was explained that various engineering principles were not incorporated into the design.  Flood returns had for instance to be calculated and incorporated into the design.  It was argued that, only if the design had incorporated the fundamental engineering principles, would the design not have been defective.

The evidence was presented on the basis that the Insurer’s obligation to indemnify the contractor was subject to the special exceptions contained in the insurance policy:

“The indemnity expressed in this part shall not apply or include:

4.  Loss destruction or damage to:-

…acts of the Insured or his competent or authorized agent or representative which are contrary to the recognized rules of engineering or to any legislation or regulations issued by an authority…

5. …defective design.”


As the Insurer’s argument focussed on the suitability of the roads for their intended purpose, the court assessed the intended purpose of the roads as defined in the Construction contract.

It was clear that the employer required completion of the project for the emergency opening of roads in the particular Province.  It was intended that, what remained of the road links in the Province after the Civil War, should be rehabilitated.

The court also found that it was agreed between the parties that the essential characteristics of the roads were low cost, high risk, high maintenance, low volume and all weather roads.  The main purpose of the roads was “to get the people out of the mud”.  The roads were accordingly built to a design philosophy of “as low as you can go for a public road”.  The roads were also meant to be degraded by the weather and repaired and maintained on a regular basis.

Having established the purpose of the roads, the court re-visited the Insurer’s argument in relation to the design of the roads.  It was found that, in effect, the Insurer’s argument before the court was that, if the contractor hoped to be entitled to an indemnity under the policy, it was not good enough for it to construct, the works to the requirements and satisfaction of the employer.  It had to construct the works to the satisfaction of the Insurer.  There was no acceptable evidence before the court that the roads were in fact poorly designed.

There was also no suggestion that the Insurer did not know the nature of the unsophisticated contract works it was insuring.

The court would not allow the Insurer to, ex post facto and as a prerequisite to accepting liability, demand that the roads should have been of ‘n higher quality than the employer was prepared to pay for.  The contention by the Insurer that the design of the contract works was defective accordingly failed.  The Insurer was ordered to pay the Contractor’s claim.


Engineers and Contractors must ensure that their Insurers are made aware of the nature of the Construction contract (including the standard of design required in terms thereof) for which insurance is required.  Insurers must be placed in a position where it can assess the nature of the works and risks it is insuring.

Insurers should similarly have due regard to the standard of design required in terms of the particular Construction contract.  Insurers should also take these aspects into consideration when assessing claims under the Insurance contract.

Download article as a PDF >>

Insurance Law – Removal or Weakening of Support, Collapse or Cracking of Structures – Insurance Perspective

In the case of Hypercheck (Pty) Ltd v Mutual And Federal Insurance Company Ltd the Court assessed the liability of an insurer under a property protection policy to indemnify against accidental, physical loss resulting from “any cause” but not for loss resulting from settlement, bedding down, or cracking.

It was specifically provided that the policy covered:

“the buildings (constructed of brick, stone, concrete or metal on metal framework …) including landlords’ fixtures and fittings therein and thereon, plant equipment, structures and other improvements of a permanent nature, walls (except dam walls) … all the property of the insured, and if so stated in the schedule, tenants’ fixtures and fittings.”

The insured property expressly included “structures and other improvements of a permanent nature“.

The policy further that specified perils covered by the policy extended to:

“Accidental physical loss or damage to the property insured by any cause not excluded by exceptions 1 to 9 appearing below…”

The accidental damage extension in terms of the policy therefore excluded indemnification for damages arising from contingencies specified in 9 clauses. One such clause (clause 6), excluded protection in terms of the policy for loss or damage to property arising from:

“Settlement or bedding down, ground heave, collapse or cracking of structures or the removal or weakening of support to any property insured”

The experts agreed that cutting away metal fins or hangers by tenants to attach signage to the property resulted in the removal and weakening of the support structure of the awning. In these circumstances, the experts also agreed that cutting away the steel plates increased the risk of the awning collapsing, which in turn caused the collapse of the awning.

M&F repudiated liability for Hypercheck’s claim in this respect on the basis of the provisions of exception 6 of the policy.


The Court was required to assess and determine whether, in these particular circumstances the loss fell under exclusion and therefore not covered. The Court interpreted exclusion clause as follows:


The general principles and rules relating to the interpretation of contracts can be summarised as follows:

  1. 1.  If the language is clear, the court must give effect to the language which the parties    have themselves used in the insurance contract. The words must be given their plain,     ordinary, popular and grammatical meaning, unless this would result in absurdity, or it is   evident from the context that the parties intended the words in question to bear a    different meaning. There is no room for a more reasonable interpretation than the plain     meaning of the words themselves convey, particularly so if there is no ambiguity.
  2. 2.  In order to establish the intention of the parties, the court must look at the insurance    contract as a whole rather than at isolated expressions, bearing in mind the language of    the policy.
  3. 3.  If the meaning of a word or clause in an insurance contract is not clear, or the word or   clause is ambiguous, the contra proferentem rule is applicable. This rule requires a written document to be construed against the person who drafted it. This approach was also    followed in the case of Allianz Insurance Ltd v RHI Refractories Africa (Pty) Ltd where the    court stated that “…an exception clause is restrictively interpreted against the insurer,    because it purports to limit what would otherwise be a clear obligation to indemnify”.
  4. 4.  In addition to the contra proferentem rule, Schreiner JA pointed out in the case of Kliptown Clothing that there is also the further related rule that if a warranty is ambiguous in an insurance contract, a court should incline towards upholding a policy against forfeiture on the part of the insured.
  5. 5.  Insurance policies should also be construed in such a way as to allow for business efficacy, and in accordance with sound commercial principles.
  6. 6.  Another rule of restrictive interpretation is premised upon the principle of eiusdem generis, which holds that where it appears that the language indicates a species, words or phrases should be restrictively interpreted to mean the same species as the associated words or phrases.


The policy provided that M&F was not obliged to indemnify Hypercheck against any accidental loss or damage caused by settlement or bedding down, ground heave, the collapse or cracking of structures or the removal or weakening of support to any property insured.

On the basis of a literal interpretation of the stated contingencies in exception 6, the Court was of the view that the plain and ordinary meaning of unambiguous words and phrases such as “collapse“, or “cracking of structures“, or the “removal of support“, or the “weakening of support” in relation to the awning leaves no room for a more reasonable interpretation than the words themselves convey.

The Court found that, in the absence of a distinct species or class of causes or an identifiable link of general application between the stated causes, the eiusdem generis principle cannot apply. Even though the eiusdem generis principle is a useful instrument in certain cases where a clear class or species is identified, this principle must not be utilised as a means to substitute an artificial intention for the real intention of the parties, as evidenced by the plain language used.


In these circumstances, the accidental loss and damages sustained by Hypercheck fall within the provisions of exception 6 and was therefore not indemnified.