THE LAW OF INSURANCE

CASE NOTES
INSURANCE
1.Introduction

Lake v Reinsurance Corporation Ltd 1967

Although a contract of insurance is validly made and complete even though the premium of
insurance is not paid, the insured cannot require the insurer to perform his obligations under
that policy without himself performing his own obligation to pay the premium. Moreover, if
the insured has not paid the premium, then as far as he is concerned the contract remains an
executory one.

Preliminary definition of an insurance contract: Lake v Reinsurance corp: A contract between

an insurer (or assurer) and an insured (or assured) whereby the insurer undertakes in return
for the payment of a price or premium to render to the insured a sum of money or its
equivalent on the happening of a specified uncertain event in which the insured has some
interest.
- def bridges gap between indemnity and non-indemnity insurance
- Demarcates insurance from wagers by requiring interest

2. Sources
Mutual and Federal insurance co v Oudtshoorn Municipality
The respondent municipality was the owner of the aerodrome at Oudtshoorn in October 1971
when a light aircraft crashed to the ground as a result of a collision with the top of a pole
carrying electric power lines. The pole had been erected by the respondent in 1964 in a street
immediately outside the boundary of the aerodrome. The owner of the aircraft, having
instituted action against the respondent, was awarded damages in the Cape Provincial
Division, having established causal negligence on the part of the respondent. The respondent
was the holder of a public liability policy issued in June 1970 by the appellant's predecessor
in title and accordingly claimed in the Witwatersrand Local Division the damages for which
it was liable to the owner of the aircraft as well as an order declaring that the said policy was
valid and in force at the time of the aircraft collision. The action in the Witwatersrand Local
Division was successful and the orders sought were granted. On appeal, it was contended on
behalf of appellant that the respondent's claim should have failed because of the fatal non-
disclosure of certain material facts, viz that the close proximity of the high tension overhead
line to the aerodrome constituted a hazard to aircraft and furthermore that there had been
allegations of danger and that the proposed thorough investigation of such allegations had not
yet been finally concluded. The respondent contended that, although in the past there had
been fears of danger relating to the existence of the pole, those fears had long since been
allayed. The Court, considering the requirement of disclosure.
Held (per JOUBERT JA, CILLIÉ JA, VILJOEN JA and GALGUT AJA concurring), that the
expression "uberrima fides " was an alien, vague and useless expression without any
particular meaning in law and the time had come to jettison it.
Held, furthermore, that the test of materiality of facts for the purposes of disclosure in
our law was judged neither from the point of view of the reasonable insurer nor that of
the reasonable insured.
Held, that it was in accordance with the general principles of our law that the Court applied
the reasonable man test by deciding, upon a consideration of the relevant facts of the
particular case, whether or not the undisclosed information or facts were reasonably
relative to the risk or the assessment of the premiums: if the answer was in the
affirmative, the undisclosed information or facts were material.
Held, accordingly, that, when the respondent negotiated the insurance policy with appellant
during June 1970, the undisclosed information was rea-
1985 (1) SA p420
sonably relative to the risk or assessment of the premiums and was therefore material.
Held (per MILLER JA, GALGUT AJA concurring), that the words "uberrimae fidei " as
applied to the contract of insurance must not be taken too literally and, after the very many
years in which it had been used in its context, was not potentially misleading.
Held, furthermore, that, in determining whether undisclosed facts were material or not, the
Court's function was objectively to decide in the light of all the relevant circumstances,
whether the "reasonable insured" (ie a reasonable man in the same situation and with the
knowledge of the same facts and circumstances) would have regarded the facts as material.
Held, further, that the information ought to have been disclosed to the appellant and that the
failure to do so afforded the appellant the right to avoid the respondent's claims. The appeal
succeeded.
4. Temporary Cover

Bushby v Guardian Assurance Co 1915 WLD 65

Plaintiff and his partner, desiring to insure certain wood and iron premises with
defendant company, filled up and signed a proposal form on the 4th January, 1913.
On the same day the premium for one year was paid, and an "interim cover note"
signed on behalf of plaintiff was handed to plaintiff as follows
"Messrs. Bushby & Bishop having this day effected an insurance against fire on
property as particularised in the proposal . . . . a policy according to the terms and
conditions of this office will be forthwith prepared and delivered. From 4th January,
1913, to 4th January, 1914." The question in the proposal "whether the books are
deposited in a fireproof box or safe at night or when the premises are closed" was
answered "No," and the question "if not so deposited, state precautions for safe
custody "was answered "kept at night in proprietor's room" (this was in the same
building). The question whether the insurance now proposed had been declined
by any other office was answered in the negative, the fact being that prior to
insuring with the defendant company, plaintiff approached C, who was a general
agent, but also agent of the L company, and C replied that the L company did not
insure wood and iron premises. This interview was not disclosed.
On the 8th February, 1913, the policy was delivered containing the following
warranty: "warranted that the books are locked in a fireproof safe or removed to
another building at night and when the premises are not actually open for business."
There was also a clause voiding the policy if the property insured passed from the
insured otherwise than by will or operation of law, without the consent of the
defendant company.
On the 28th August, 1913, the partnership was dissolved and the assets ceded to
plaintiff, the remaining partner. On the 16th September, 1913, the premises were
destroyed by fire. Defendant refused to pay on the ground that the warranty had not
been complied with. The policy was never read, and no objection prior to the fire
ever taken to the warranty clause. In an action for rectification, viz., to have the
warranty struck out on the ground of inconsistency with the prior contract. Held, that
to obtain rectification of a written instrument the onus was on plaintiff to prove a prior
contract with which the instrument to be rectified failed to agree, that such failure
was due to mutual mistake, and that such mistake was reasonable and not due to
carelessness or negligence on plaintiff's part; Held, further, assuming (but doubting)
that the interim note amounted to a definite agreement to insure for one year, that
the warranty was a usual condition clearly within the company's power to insert, and
not at variance with any antecedent contract, and that therefore there was no right to
rectification; Held, further, that in any event plaintiff was estopped by his conduct
from now questioning the validity of the warranty. Held, further, on the facts that
there was no declinature of the risk by the L Company, and that the non-disclosure
of the interview with C was not a non-disclosure material to the risk; Held, further
that a refusal to insure based solely on the fact that the proposed business is outside
the scope of a company's activities is not a declinature of the risk.
Held, lastly, that a transfer from a retiring to a continuing partner was not a "passing
of interest" which would avoid the policy.

3. INSURABLE INTEREST

Littlejohn v Norwich Union Insurance Society

In Littlejohn the husband was found to have an insurable interest in the goods of his wife to
whom he was married out of community of property in circumstances where the goods
constituted trading assets of the business which the husband de facto controlled and managed.
Wessels J found that the husband had an insurable interest, observing as follows (380-381):
‘The principle to be deduced from these cases appears to be this: If the insured can show that
he stands to lose something of an appreciable commercial value by the destruction of the
thing insured, then even though he has neither a jus in re nor a jus ad rem to the thing insured
his interest will be an insurable one. … Applying these principles, I ask myself the question
whether the husband was in a worse position after his wife’s property insured by him had
been burnt, and whether he has suffered loss thereby. He was the manager of the property, it
was almost entirely under his control, and from the profits he and his wife carried on the joint
household. It is to his interest that the property should be replaced exactly as it was before the
fire. In the words of Chambre J, he is interested in the preservation of the property because he
has a benefit from its existence and prejudice from its destruction. It is to his interest that the
business should be conducted in the future as it has been in the past, and therefore I think he
must be held to have had an insurable interest in the goods insured by him.

It appears that in Littlejohn the husband was held to be entitled to claim the market value of
the destroyed goods (up to the limit of the policy). He was not required to quantify and value
his separate interest in controlling the business and earning profits for the benefit of the joint
household. In other words, although in law his patrimony was not shown to have been
reduced by the amount payable to him in terms of the policy, Wessels J evidently considered
that the nature of his insurable interest entitled him to enforce a policy which provided cover
measured with reference to the market value of the insured assets.

Steyn v Malmesbury Board of Executors and Trust Assurance Co 1921

In Steyn v Malmesbury Board a landlord was found to have an insurable interest in the chaff
produced by his tenant’s crops. It was found that the insurable interest derived from the fact
that after the tenant had left the premises, the chaff would remain as fertilizer on the land.

Steyn v Malmesbury Board of Executors and Trust Assurance Co 1921 CPD 96

If an applicant for insurance is not the owner of the property to be insured, that fact
need not be disclosed if it in no way affects the risk. But if the nature of his interest is
such that the risk is affected thereby, the nature of his interest must be declared.
Where an applicant for insurance of property has such an interest in the property that
he will derive benefit from its preservation, but has not a proprietary interest in it, his
correct course, if he is insuring his own interest only, is to insure his interest and not
the corpus of the property.
Every fact which affects the risk must be disclosed by the assured, whether or not
information upon that fact is called for in the proposal form which he is requested to
sign.
Plaintiff to the knowledge of defendant company leased portion of his farm to a
lessee on condition that the lessee should not have the right to remove any chaff,
straw or manure from the farm. Plaintiff thereafter applied to the defendant company
for insurance of the stacks of chaff on the portion leased, and a proposal form was
filled in on his behalf in which plaintiff was described as the owner of the farm and
the lessee's name was given as occupier. The plaintiff did not disclose that he was
not the owner of the stacks of chaff and no question with regard to their ownership
appeared upon the proposal form or was asked orally. The proposal form contained
a condition that the assured should bear his proportion of the loss, and the chaff was
insured up to two-thirds of its value. No policy of insurance was issued but the
proposal form was treated as a policy of insurance.
It was shown in evidence that the existence of a stack of chaff on a farm would
increase the letting value of the farm. It was also shown that defendant, company,
through its secretary, knew that the portion was leased to the lessee, that the stacks
insured were upon the portion leased, and that the lease contained the condition
referred to above.
One of the stacks of chaff having been destroyed by fire and plaintiff having sued
defendant company for the sum insured, Held, (1) that the plaintiff had an insurable
interest in the stack of chaff, because if the stack was burnt the soil of his farm would
lose the fertilising elements in the chaff and he would lose the contingent benefit of
having the chaff upon his farm at the end of the lease; (2) that it was material for
defendant company to know the nature of plaintiff's interest in the stack destroyed,
that the stack was under the control of the lessee, and that the condition in the lease
applied to the stack in question; (3) that plaintiff should have disclosed these facts
although information on them was not called for in the proposal form, and that he not
having disclosed them and defendant company having no knowledge of them he
was not entitled to recover.
*A landlord was found that the insurable interest derived from the fact that after the
tenant had left the premises, the chaff would remain as fertilizer on the land.
The next case is STEYN V AA MUTUAL ASSURANCE ASSOCIATION LTD 1985 (4) SA
7 (T). In this case the insured was a Mr Steyn who had two insurance policies, one covering
the furniture in the house and the other covering the house itself. A fire destroyed the house
and all its contents. The plaintiff occupied the house in terms of a settlement agreement
arising out of litigation. He occupied the house and received water and electricity free of
charge for as long as the provincial administration which was the owner of the house did not
require it. The defendant contended that the plaintiff’s right to stay in the house free of charge
was not an insurable interest as the provincial administration could at any stage begin its road
building programme and demolish the house. The court held that it was often forgotten that
the concept of insurable interest was to distinguish between a contract which is one of betting
and wagering which would be an illegal and an unenforceable contract. The court found that
it was clear Mr Steyn had not entered into a wager and therefore the agreement was
enforceable. But because he was an unrehabilitated insolvent and had not disclosed this to the
insurer this was a material non-disclosure and he could not succeed.

In our view the insured had an interest in the property. He had the right to occupy the
property for free until it was required by the Provisional Administration. This right certainly
had a value to his patrimony and the early destruction of the property by fire diminished his
patrimony. As stated in the Littlejohn case, the insured had lost “something of an appreciable
commercial value by the destruction of the thing insurable.” A difficulty is the placing a
value on such loss.

The decision of the court also was to the effect that the Roman Dutch Law of Insurance
should be adopted and not the strict English Law approach.

Headnote

If an applicant for insurance is not the owner of the property to be insured, that fact need not
be disclosed if it in no way affects the risk. But if the nature of his interest is such that the risk
is affected thereby, the nature of his interest must be declared.
Where an applicant for insurance of property has such an interest in the property that he will
derive benefit from its preservation, but has not a proprietary interest in it, his correct course,
if he is insuring his own interest only, is to insure his interest and not the corpus of the
property.

Every fact which affects the risk must be disclosed by the assured, whether or not information
upon that fact is called for in the proposal form which he is requested to sign.

Plaintiff to the knowledge of defendant company leased portion of his farm to a lessee on
condition that the lessee should not have the right to remove any chaff, straw or manure from
the farm. Plaintiff thereafter applied to the defendant company for insurance of the stacks of
chaff on the portion leased, and a proposal form was filled in on his behalf in which plaintiff
was described as the owner of the farm and the lessee's name was given as occupier. The
plaintiff did not disclose that he was not the owner of the stacks of chaff and no question with
regard to their ownership appeared upon the proposal form or was asked orally. The proposal
form contained a condition that the assured should bear his proportion of the loss, and the
chaff was insured up to two-thirds of its value. No policy of insurance was issued but the
proposal form was treated as a policy of insurance.

It was shown in evidence that the existence of a stack of chaff on a farm would increase the
letting value of the farm. It was also shown that defendant, company, through its secretary,
knew that the portion was leased to the lessee, that the stacks insured were upon the portion
leased, and that the lease contained the condition referred to above.

One of the stacks of chaff having been destroyed by fire and plaintiff having sued defendant
company for the sum insured, Held, (1) that the plaintiff had an insurable interest in the stack
of chaff, because if the stack was burnt the soil of his farm would lose the fertilising elements
in the chaff and he would lose the contingent benefit of having the chaff upon his farm at the
end of the lease; (2) that it was material for defendant company to know the nature of
plaintiff's interest in the stack destroyed, that the stack was under the control of the lessee,
and that the condition in the lease applied to the stack in question; (3) that plaintiff should
have disclosed these facts although information on them was not called for in the proposal
form, and that he not having disclosed them and defendant company having no knowledge of
them he was not entitled to recover.

Case Information
Action for money due under an insurance policy.

Plaintiff alleged in his declaration that he was the owner of the farm Grootzoutfontein in the
Division of Malmesbury. On or about the 14th March, 1919, defendant entered into a contract
with plaintiff in terms of a certain proposal for fire insurance of farm crops whereunder the
defendant company undertook that if certain four stacks of chaff, situate on the farm
Zoutfontein,

1921 CPD at Page 98

should be damaged by fire at any time between 14th March, 1919, and 14th March, 1920, the
defendant would make good all loss not exceeding an amount of £373 6s. 5d, being two-
thirds of the total value of the said stacks. Plaintiff alleged that one of the said stacks was
destroyed by fire on 16th December, 1919, and claimed payment of £266 13s. 4d., being two-
thirds of its value.

Defendant, in his plea, alleged that at the time of the said contract plaintiff had leased the
farm to one de Jongh, and that in terms of the said lease the said de Jongh did not have the
right to cut or remove chaff from the said farm. Plaintiff had failed to disclose this fact to
defendant when entering into the said contract as it was his duty to do. Further, plaintiff had
no insurable interest in the said stacks. Defendant tendered repayment of the premium paid
but denied liability under the said policy.

Plaintiff, in his replication, denied that he had no insurable interest in the said stacks and
alleged that defendant was acquainted with the terms of the said lease.

Evidence was led.

The facts appear in the judgment.

G.G. Sutton (with him G.M. Swift), for plaintiff: The Court should presume in favour of an
insurable interest. Stock v Inglis (12 QBD 564); Porter, Law of Insurance (5th ed., p. 46);
Bunyon on Fire Insurance (p. 32); Littlejohn v Norwich Union Fire Insurance Co. 1905 TS
375. Here there was an insurable interest. If there was no chaff on the farm the soil
deteriorated and letting was less easy. The chaff might also become subject to landlord's lien.
It was not incumbent on plaintiff to disclose the exact nature of his interest unless specially
asked as to it. Porter, Law of Insurance (5th ed. p. 55). Here defendant knew the
circumstances or had means of knowing them. Means of knowledge is tantamount to
knowledge. Drysdale v Union Fire Insurance Co. (8 SC 63). The assured can recover the full
value insured, even if he has only a limited interest. Castellain v Preston (11 Q.B.D. p. 398).
The risk was not increased by the fact that plaintiff was not the owner.

R.B. Howes (with him M.C. Fourie), for defendant: Here no rental was due therefore there
was no landlord's lien. There was concealment of facts which affected the risk. The interest of
the plaintiff was contingent and could be defeated by the lessee. Malcher and Malcomess v
King William's Town Fire Assurance Co. (: E.D.C. 271);

1921 CPD at Page 99

Lucena v Crauford (2 Bos. and P.N.R. 269, at pp. 299, 315, 321, 323); Welford and Otter-
Barry, Fire Insurance (1911 ed., pp. 21, 22, 24); Moran, Galloway & Co. v Uzielli and
Others (1905, 2 KBD 555, p. 562); McGillivray, Insurance Law (1912 ed., pp. 118, 119);
Halsbury, Laws of England (vol. 17, secs. 725, 727). As plaintiff's interest was a peculiar one
and limited, he should have given full particulars of it even though not specially asked. Fine
v General Accident Fire and Life Insurance Corporation, Ltd. 1915 AD 213; Welford and
Otter-Barry (pp. 132, 299); McKenzie v Whitworth (1875, 1 Ex. Div. 36);
McGillivray, Insurance Law (1912 ed., pp. 123, 125, 307, 1); Palmer v Pratt (9 Moore 358).
Where there has been concealment the insurer may repudiate the contract. Welford and Otter-
Barry (1911 ed., p. 138). Plaintiff should have insured his interest only and not the corpus of
the property. Knowledge of the terms of the lease would not necessarily warn defendant that
plaintiff was not owner of the chaff. The onus of proving his interest was on the plaintiff and
he failed to prove his interest or the value thereof. The insured was to bear a proportion of the
loss; therefore the risk was greater if a person other than the owner insured the chaff than if
the owner insured it. The lessee was owner of the chaff, and could have lawfully burnt it
without the plaintiff having any recourse against him.

PHILLIPS V GENERAL ACCIDENT INSURANCE CO (SA) LTD 1983

A more recent case dealing with insurable interest in the South African manner and reflecting
a more flexible approach is that of Phillips v General Accident Insurance Co (SA) Ltd 1983
(4) SA 652 (W). In this case Mr Phillips insured the diamond ring that he had given his wife.
One Luigi who read palms managed to persuade Mrs Phillips to part with the ring on the
grounds that he was going to have it blessed by his church. He managed to ensure that the
Phillips parted with some cheques and other articles which, including the ring, were never
seen again. Mr Phillips claimed on his policy in which he had made it clear that he was
insuring his wife’s jewellery. The insurer raised two defences, namely that Mr Phillips had no
insurable interest and that he had breached the reasonable precautions clause. The learned
Judge quoted Littlejohn and a criticism of Littlejohn in Gordon and Getz, The South African
Law of Insurance (2nd ed: p75) where the authors say:

“Both these statements are, however, too wide: they do not emphasise the fundamental rule
that the interest must have a legal basis. If it does have such a basis an expected benefit,
however remote, confers an insurable interest.”

The learned Judge De Villiers, J thought that this was much too narrow an interpretation of
Littlejohn. He quoted the case of Price and Another v Incorporated General Insurances
Limited 1980 (3) SA 683 (W) and stated:

“It seems to me that a practice has grown up that a husband has an insurable interest in his
wife’s jewellery. For these reasons I am of the view that the plaintiff, on the principle laid
down in the Littlejohn case, had an insurable interest in the engagement ring which was
insured. If I am wrong in coming to this conclusion, then I am satisfied on all the facts that
this agreement cannot be said to be either a betting or wagering agreement.”

In Phillips v General Accident Insurance Company the court found that a husband had an
insurable interest in his wife’s engagement ring because he derived pleasure from seeing her
wearing it, he felt an obligation to replace it when it went missing and also because if they
ever became bankrupt, she would have to sell it to buy household necessities. The court made
the very important remark that too much weight was being placed on the need for an
insurable interest whereas it should have been placed on whether the contract was a valid
insurance contract or a wager agreement.

He said that because a betting and wagering agreement would have been illegal and therefore
unenforceable.

Refrigerated Trucking (Pty) Ltd v Zive No (Aegis insurance Co Ltd, Third Party)

More recently in Refrigerated Trucking (Pty) Ltd v Zive NO (Aegis Insurance Co Ltd, Third
Party) 1996 (2) SA 361 (TPD) the court had to consider whether an insured had a clear
economic interest in the contingent liability of a driver of a vehicle which it owned and had
insured. The court analysed the Littlejohn and Phillips case and said:

“The ratio seems to be that where the relationship between the person with the legal right in
the property and the insured is such that the insured will be worse off in that, for example, he
has to forfeit a benefit or be morally responsible, or through circumstances forced, to replace
the article the court will recognise that he has an insurable interest. It seems then that in our
law of indemnity insurance an insurable interest is an economic interest which relates to the
risk which a person runs in respect of a thing which, if damaged or destroyed, will cause him
to suffer an economic loss or, in respect of an event, which if it happens will likewise cause
him to suffer an economic loss. It does not matter whether he personally has a right in
respect of that article, or whether the event happens to him personally, or whether the rights
are those of someone to whom he stands in such a relationship that, despite the fact that he
has no personal right in respect of the article, or that the event does not affect him
personally, he will nevertheless be worse off if the object is damaged or destroyed, or the
event happens.

The owner of a motor vehicle stands to lose a lot if his spouse or a member of his household
negligently gets involved in a collision whilst driving the vehicle. Apart from the damage to
the vehicle itself, third parties may sue the driver for damage to other vehicles or even bodily
injury where, for instance, a third party was a passenger in the vehicle in question. It is of
great economic interest to the owner that the member of his family be insured against such
claims by third parties. If a servant drives the vehicle by order of the owner the owner will be
vicariously liable to third parties for damage negligently caused. It may pose a difficult
factual question whether the servant acted within the scope of his employment. To have that
question answered by a court may lead to extra costs in a court case. It is not only in a case
of a servant that the owners may be held to be vicariously responsible for damages to third
parties.”

The Judge then goes on to say:

“Again complex factual disputes may arise as to whether the driver drove the vehicle for the
benefit of the owner, or whether the owner had control over the manner in which he was
driving the vehicle. If the owner is held to be vicariously liable and the servant or
acquaintance turns out to be financially unable to pay the damage, the owner will be the one
who has to pay the bill. That, in my view, is a clear economic interest in the contingent
liability of the driver. It follows that, whilst I am bound by the conclusions in the Croce case
that the owner has an insurable interest in the contingent liability of the driver I am also in
full agreement with that conclusion.”

On page 38 Reinecke has the following to say:

“In Australia and New Zealand it was deemed necessary for the legislature to free insurable
interest from its so-called legal basis. Such a step is not necessary to facilitate the insurance
of expectancies in South African law. It is clear that, in principle, there is no objection to
treating frustration of an expectancy as loss or damage in South African law although no
legal right subsists in respect of the subject matter of the expectancy. In South Africa the
insurability of a positive expectancy should therefore not be regarded as an exception to a
general rule that expectancies cannot be insured. It is simply a consequence of the fact that
the law accepts certain expectancies as part of a person’s patrimony. That the insurability of
expectancies is not based on a legal right or liability is recognised the world over and it is
submitted that our courts need not be hampered by outdated considerations restricting the
growth of a dynamic principle of indemnity and its counterpart, insurable interest. To this
limited extent the wide description of insurable interest in local decisions is to be
welcomed.”

Richards v Guardian Assurance Co 1907

Headnote

On application to an insurance company for a new policy, an agent of the company filled in
the answers to questions on the proposal form, taking his information partly from the answers
made to the same questions on an old proposal form in respect of a previous policy issued by
the same company to the same applicant, and partly from personal observation of the
premises insured. At the foot of the proposal form he wrote the words "answers accepted as
correct." This form was sent to the insured, who then signed it. In an action on the
policy, Held, that the proposal was that of the insured, and the statements therein contained
were to be regarded as his.

The buildings insured were described in the proposal form as a dwelling-house, whereas, to
the knowledge of the insured, but not of the insurance company, they were used as a
brothel. Held, that the insurance of a place which the insured knows to be habitually used as
a brothel tends to assist immorality, and it is against the policy of the law to support contracts
which even indirectly effect such a purpose. Pearce v Brooks (1 Ex. 213, and 35 L.J. Ex.
134) discussed. The degree to which collateral contracts aid acts of immorality must be
determined according to the circumstances of each case. Lloyd v Johnson (1 B. & P. 340, and
4 RR 322) distinguished.

Held, further, that the description, for purposes of insurance, of a brothel as a dwelling-house
is not uberrimae fidei. Such a description is a misdescription, and avoids the contract of
insurance.

This was an action for £747 on a policy of fire insurance. The insurance policy was issued
subject to, inter alia, the following conditions: ---

(1) Every person desirous of effecting an insurance must state his name, place of abode and
occupation; he must describe the construction of the buildings to be insured, where situate,
and in whose occupation, of what materials the same are respectively composed, and whether
occupied as private dwelling-houses, or how otherwise; also

1907 TH at Page 25

the nature of the goods or other property on which such insurance is proposed, and the
construction of the buildings containing such property, and whether there be any apparatus in
or by which heat is produced, other than grates in common fireplaces in any of the said
buildings, or connected therewith. Any misstatement in the above particulars will vitiate this
policy.

(2) Every insurance attended with particular circumstances of risk, arising from the situation,
contiguity to other buildings, or construction of the premises, or the nature of the trade
carried on, or the goods therein, is to be specially mentioned in the order for the policy, so
that the risk may be fairly understood; if not so expressed, or if any misrepresentation be
given so that the insurance be effected upon a lower premium that would have been charged
had such risk been fairly stated; or if the buildings or goods be described in the policy
otherwise than they really are; or if after an insurance shall have been effected, there shall be
any erection or alteration of apparatus for producing heat as aforesaid; or if any hazardous
occupation or trade shall be carried on, or any hazardous goods be deposited, or any
hazardous communication made, and the same be not respectively made known to the
company or its agent in writing; or if the assured shall neglect or refuse to pay any further
premium which may be demanded in consequence of increase of risk from any of the afore-
mentioned circumstances, the assured will not be entitled to any benefit under the policy. The
company shall have the option, either on account of such increase of risk, or for any other
cause, of terminating the insurance upon giving notice thereof to the assured, or his
representative, in which case the company will return a rateable proportion of the premium
for the unexpired period of the policy.

D. DUTY TO DISCLOSE MATERIAL FACTS (THE DUTY OF GOOD FAITH)

1. General

Mutual and Federal co Ltd v Oudtshoorn Municipality 1985

. On appeal, it was contended on behalf of appellant that the respondent's claim should have
failed because of the fatal non-disclosure of certain material facts, viz that the close proximity
of the high tension overhead line to the aerodrome constituted a hazard to aircraft and
furthermore that there had been allegations of danger and that the proposed thorough
investigation of such allegations had not yet been finally concluded. The respondent
contended that, although in the past there had been fears of danger relating to the existence of
the pole, those fears had long since been allayed. The Court, considering the requirement of
disclosure.
Held (per JOUBERT JA, CILLIÉ JA, VILJOEN JA and GALGUT AJA concurring), that the
expression "uberrima fides " was an alien, vague and useless expression without any
particular meaning in law and the time had come to jettison it.
Held, furthermore, that the test of materiality of facts for the purposes of disclosure in our
law was judged neither from the point of view of the reasonable insurer nor that of the
reasonable insured.
Held, that it was in accordance with the general principles of our law that the Court applied
the reasonable man test by deciding, upon a consideration of the relevant facts of the
particular case, whether or not the undisclosed information or facts were reasonably relative
to the risk or the assessment of the premiums: if the answer was in the affirmative, the
undisclosed information or facts were material.
Held, accordingly, that, when the respondent negotiated the insurance policy with appellant
during June 1970, the undisclosed information was rea-sonably relative to the risk or
assessment of the premiums and was therefore material.
Held (per MILLER JA, GALGUT AJA concurring), that the words "uberrimae fidei " as
applied to the contract of insurance must not be taken too literally and, after the very many
years in which it had been used in its context, was not potentially misleading.
Held, furthermore, that, in determining whether undisclosed facts were material or not, the
Court's function was objectively to decide in the light of all the relevant circumstances,
whether the "reasonable insured" (ie a reasonable man in the same situation and with the
knowledge of the same facts and circumstances) would have regarded the facts as material.
Held, further, that the information ought to have been disclosed to the appellant and that the
failure to do so afforded the appellant the right to avoid the respondent's claims. The appeal
succeeded.

2. Content of the Duty to Disclose

FINE V GENERAL ACCIDENT, FIRE AND LIFE ASSURANCE CORPORATION LTD

1915 AD 213.

Headnote

A contract of insurance is uberrimae fidei and any omission to state any fact material to be
known for estimating the risk justifies a company in repudiating liability.

Where an applicant for a policy of fire insurance in answer to a question as to whether the
insurance now proposed had been declined by any other office, replied "No," when in fact a
policy of insurance had been cancelled on the same property by another office, before the
expiration of the term, on return of the rateable proportion of the premium paid for the
unexpired term.

Held, on appeal, that the answer was not untrue.

Held, further, (a) that the applicant's failure to inform the company of the previous
cancellation was an omission of a fact material to be known for estimating the risk, which
justified the company in repudiating liability, and (b) that expert evidence as to the
materiality of the non-disclosure was unnecessary as the fact spoke for itself, and (c) that the
reason of the previous cancellation did not affect the position.

The judgment of the Witwatersrand Local Division in Fine v The General Accident, Fire and
Life Assurance Corporation Ltd., affirmed.

Case Information

Appeal from the decision of the Witwatersrand Local Division (GREGOROWSKI, J.) in an
action in which the appellant was plaintiff, and the respondent defendant.

The plaintiff sued defendant company for £1,000 on a policy of fire insurance issued by it.
Two grounds for defence were relied on, the first being that plaintiff's answer to one of the
questions in the proposal form was false; and the second that she had omitted to disclose to
the defendant company a fact material to be known for estimating the proposed risk.

With regard to the first of these grounds of defence, the proposal form contained a question
No. 18 which read, "Has the insurance now proposed been declined in any other office?" To
this the plaintiff's answer was "No." The policy issued to plaintiff expressly provided that the
proposal form "is hereby made a part of the policy and the basis of this contract of insurance
and a warranty on the part of the applicant." It was common cause that a policy was
consequently vitiated by an untrue answer to any of the questions

1915 AD at Page 214

on the proposal form, irrespective of whether the fact enquired into was material or not.

It appeared that the Law Union and Rock Insurance Co., with which the plaintiff had on 14th
February, 1913, taken out a policy of insurance for £1,000 over the same property for one
year, had by letter on the 11th June, 1913, cancelled the said policy without assigning any
reason, and returned to plaintiff the rateable proportion of the premium paid for the unexpired
term. This cancellation was made under a provision contained in the policy, that the company
could cancel a policy at any time by giving notice, and by returning a proportionate amount
of the premium. No reason had to be given. The plaintiff contended that her answer was true.
With regard to the second ground of defence, the policy expressly provided that if there was
"any omission to state any fact material to be known for estimating the risk" the company
would not be liable.

P. Millin, for the appellant: The two defences set up in the court below were (1) a breach of
warranty owing to a wrong answer to the question on the proposal form, and (2) failure to
disclose, i.e., concealment of a material fact.

This involves four points. See Elkin v Jansen (14 L.J. Exch. 204). The point which the
respondent failed to prove was that the fact concealed was material. See Helford and Otter-
Barry's Fire Insurance (135); Joel v Law Union and Crown Insurance Co. (1908, 2 KB 897).

There is a distinction between withholding a material fact, and the means enabling the
ascertainment of a material fact.

The cancellation of the previous policy might have been for an innocent cause. The onus is
on the defendant to prove the materiality of the concealed fact. Materiality must be proved.
See Frenkel v Ohlsson's Breweries (1909 TS 957, 962). A mere probability, however strong,
that the information withheld was material, is insufficient. Proof of a probability does not
shift the onus. The question was, the motive the other company had for cancelling the
previous policy. If it was an innocent motive the concealment was immaterial, if not
the onus was on the defendants. Evidence as to materiality was adduced in Tate and Sons v
Hyslop (15 QBD 368).

See the Penn Mutual Life Assurance Co.'s case (38 Lawyers'

1915 AD at Page 215

Reports Annotated U.S.A, pp. 43 and 69). In America, in the State from which this case came
on appeal, there is statutory provision that a wrong answer to a question in a proposal form
must be fraudulent as well as material to avoid the policy, but materiality has to be proved as
clearly as fraud. See May on Insurance (vol. 1, p. 399, sec. 200); 55 Lawyers Reports
Annotated (123). Proof of materiality may be dispensed with if the materiality is obvious, but
if it depends on disputed facts those facts are to be found by the jury.

The fact of cancellation is immaterial. See Rivaz v Gerussi (6 QBD 228); The Bedouin (1894,
P.D., pp. 8, 12 and 14). May on Insurance (vol. 1, p. 426, sec. 215). Only facts require to be
communicated, not apprehensions and reasons. See Ionides v Pender (1874, 43 L.J. Q.B.
227, 229). Materiality may not be presumed without evidence. See Bridges and Others v
Hunter (105 E.R. 6); Grandy v Adelaide Marine Insurance Co. (40 L.J. Q.B. 239); Foley v
Moline (128 E.R. 756) and Penn Mutual Life Insurance Co's case (supra) at p. 62).

When an insurance company reduces to a written form a series of questions, the assured is
entitled to assume that the questions exhaust the field of enquiry, and he need not disclose
further information. See Helford and Otter-Barry on Marine Insurance (145). The questions
define the limits of materiality. See Joel's and Penn's cases (supra).

J. Stratford, K.C. (with him Honey), for the respondent: The answer to question 18 was a
false answer. A declinature to continue a policy is a declinature to insure. Any other
construction tends to absurdity. A declinature at any time constitutes a refusal to insure.
There is no distinction between a renewal of insurance policy and an initial insurance. The
applicant is a continuing applicant for the balance of the year. The Court has only to decide
the construction of the question.

Materiality is, I admit, not a question of fact, but it can be admitted ex re ipsa. The Court was
not precluded from holding that the non-disclosure was material. See London Assurance Co.
v Mansel (11 Ch.D. 363); and Joel's case (supra). The questions indicate the scope of the
materiality.

The English law is not the same as the American. The American cases differentiate between
life and marine insurance. Joel's case

1915 AD at Page 216

and Mansel's case (supra) decide that the English courts can go outside the policy.
Materiality means materiality per se. The opinion of the experts as to materiality of a
conceded fact has been held inadmissible. See Biddle on Insurance (vol. 1, p.
542); Campbell v Ricards and Others (110 E.R. 1103). After an exhaustive consideration of
cases in Arnould on Marine Insurance the conclusion arrived at is that the evidence of
experts is admissible. A fact is material if it is important that it should be known, whether its
disclosure would be likely to influence the insurer or not. As far as the assured is concerned,
if she thought the fact material and failed to disclose it, that constitutes fraud.

Millin, in reply: See Ionides v Pender (supra) (p. 231). The opinion of experts as to
materiality must be shown to be a reasonable opinion. It is sufficient for the appellant to show
ambiguity in the opinion. As the answer constitutes an estoppel for ever afterwards, if there is
ambiguity in the question, the underwriters cannot complain if the question is not answered in
the way in which it was intended. See May on Insurance (vol. 1, p. 343). The question might
have been framed clearly, so as to show that an answer as to discontinuance of a policy was
required. See the form of question given in Helford and Otter-Barry on Fire Insurance (p.
461). The rejection of a proposal is clearly different from the termination of a policy. The
motive of the question is immaterial. See the Penn Mutual's case (supra). The
doctrine contra preferentes should be adopted.

Cur. adv. vult.

Postea (on March 2).

The Judgment of the Court was delivered by SOLOMON, J.A., as follows:

Judgment

SOLOMON, J.A.: The action in the court below was brought to recover the sum of £1,000
under a fire insurance policy issued by the defendant company to the plaintiff in respect of
certain premises in Potchefstroom. The premises were consumed by fire while the policy was
in force, and the decision turned entirely upon the question whether the special plea set up in
answer to the claim had been established. Two grounds of defence were relied upon The first
is that the answer given by the plaintiff to one of the

1915 AD at Page 217

questions contained in the proposed form signed by her was false; and the second is that the
plaintiff had omitted to disclose to the defendant company a fact material to be known for
estimating the proposed risk.

Now as regards the first of these grounds, it appears that the proposal form signed by the
plaintiff contained a number of printed questions which every applicant for insurance is
required to answer and the policy issued to her expressly provides that the proposal "is hereby
made a part of the policy and the basis of this contract of insurance and a warranty on the part
of the applicant." It is common cause that the effect of this provision is that the policy is
vitiated by an untrue answer to any of the questions without regard to whether the fact
enquired into was material or not.
Now question 18 in the proposal reads as follows: "Has the insurance now proposed been
declined in any other office?" and the answer to that was "No." It was alleged on behalf of the
defendant company that this was an untrue answer, inasmuch as the Law Union & Rock
Insurance Co., with which the plaintiff had on the 14th February, 1913, taken out a policy of
insurance for £1,000 over the same property for a period of one year, had by letter of the 11th
June, 1913, cancelled the said policy and had returned to plaintiff the rateable proportion of
the premium paid for the unexpired term. The cancellation had taken place by virtue of a
provision contained in the policy that the company could cancel a policy at any time by
giving notice and by returning a proportionate amount of the premium. No reason need be
given and none was given in the letter of 11th June, 1913. Now it is important to bear in mind
on this part of the case that we are not concerned to enquire whether the plaintiff had been
guilty of any concealment but merely whether the answer given by her was untrue. The
question was very clear and explicit, "has the insurance now proposed been declined by any
other office." In fact the insurance had not been declined but had been accepted by the Law
Union & Rock Co., and the answer "No" was, therefore, a perfectly correct one. It is true that
after accepting the risk the said company had prematurely terminated it, and that this was a
significant fact which it was quite as desirable, for the defendant company to have known as
the fact that the insurance had been

1915 AD at Page 218

declined. But then this fact might have been ascertained by an explicit question directed to
that point. That insurance companies do sometimes cancel policies prematurely was well
known to the defendant company, for their own policies contain a clause identical with that
under which the Law Union & Rock Co. acted when it sent the plaintiff the letter of 11th
June, 1913. And if the defendant company wished to have information on this subject from
intending insurers it would be a simple matter to put to such persons a direct question asking
then not only whether the insurance now proposed had been declined in any other office but
also whether an insurance once issued, had been subsequently cancelled. But as the question
now stands in the proposal form I cannot agree with the contention that the answer given by
the plaintiff was untrue, though no doubt she must have realised that in answering the
question with a simple negative she was concealing a fact which the defendant company
would have desired to know.
And that brings us to the second ground of defence set up in this case, viz., that the plaintiff
had omitted to state a fact material to be known for estimating the risk. Now it is well-settled
law that insurance policies are contracts uberrimae fidei, and that consequently there is a
greater duty cast upon an insurer regarding disclosure of facts known to him than there is in
ordinary contracts. In the present case, moreover, it is an express condition of the contract
that the company should not be liable upon the policy if there is "any omission to state any
fact material to be known for estimating the risk," a condition which for all practical purposes
is merely a statement of the common law on this subject. Now the plaintiff did undoubtedly
omit to inform the defendant company that the Law Union & Rock Company had
prematurely cancelled the policy which they had issued to her, and the question, therefore, is
narrowed down to this, was this a fact material to be known by the defendant company in
estimating the risk. Or the same question can be put in this way: "Was this a fact which it was
material or important for the defendant company to know in deciding whether it should
accept the risk, and if so, what premium it should charge; and, so put, it appears to me that
there can be only one answer to it. As was said by the Master of the Rolls with regard to life
insurance in the case of London Assurance v Mansel

1915 AD at Page 219

(11 Ch.D. 370), "I should say that no human being acquainted with the practice of companies
or of insurance societies or underwriters could doubt for a moment that it is a fact of great
materiality, a fact upon which the offices place great reliance. They always want to know
what other offices have done with respect to the lives." It is true that in that case the question
of whether the fact omitted to be stated was material or not was unnecessary for the decision,
and that these observations were, therefore, obiter dicta. But nevertheless they represent the
views of a great Judge, and they are moreover entirely consistent with the law as laid down
by other cases. Thus in the case of Joel v Law Union and Crown Insurance Co. (1908, 2 K.B,
at p. 883), FLETCHER MOULTON, L.J., says: "The insurer is entitled to be put in
possession of all material information possessed by the insured. This is authoritatively laid
down in the clearest language by LORD BLACKBURN in Brownlie v Campbell: In policies
of insurance there is an understanding that the contract is uberrima fides, that if you know
any circumstance at all that may influence the underwriter's opinion as to the risk he is
incurring and consequently as to whether he will take it or what premium he will charge, if he
does take it, you will state what you know."
Now can it be open to question that the fact that another insurance company had prematurely
cancelled a policy issued to the plaintiff, was a circumstance that might have influenced the
defendant company in deciding whether it would take the risk or what premium it would
charge if it did?

It was contended on behalf of the appellant that there is a distinction between withholding
material facts and withholding information that may lead to the discovery of material facts;
that the fact of cancellation is not itself material, but that what may turn out to be material is
the reason which led to the cancellation. Consequently it is argued that, inasmuch as a policy
may be cancelled on grounds which in no way reflect upon the character of the insured, it was
incumbent on the defendant company to find out what was the reason for the Law Union and
Rock Co. sending the plaintiff the letter of the 11th June, 1913, and only in case the reason
was one adverse to the plaintiff, would it be proved that there had been a concealment of a
material fact. That, however, in my

1915 AD at Page 220

opinion, is a contention which cannot be accepted. The primary fact which the defendant
company was entitled to know was that the previous policy had been cancelled; if that fact
were capable of a satisfactory explanation, it was for the plaintiff to furnish such explanation;
but until she did it is common sense that the defendant company would be influenced by that
fact in making up its mind whether it should accept the risk or not. To adopt the appellant's
contention that the reason for the cancellation must be shown to be material would to a great
extent defeat the object which the defendant company had in view in inserting the condition
in its policies. For it might be impossible for it to have discovered the reason before the trial
of the action, the Law Union & Rock Co. might have refused to give it any information, and
it might very well have been unable to obtain the information from any other source. But in
its plea it would have been necessary to set forth the material fact which had been concealed,
and this would have been impossible if it could not discover that fact. Or to take another
example. Suppose that the defendant company had been told by the Law Union & Rock Co
that it had cancelled the policy in consequence of information given to it by one A; that I
presume would necessitate another enquiry from A, and a second series of difficulties might
arise. Moreover, it might very well be that the policy was cancelled for a reason unknown to
the plaintiff and how could she be charged with concealment of a fact of which she had no
knowledge? Other difficulties might be suggested in the application of the principle
contended for by the appellant, a principle which in my opinion it is quite impossible to
endorse.

But it was also contended on behalf of the appellant that expert evidence should have been
called to prove that the fact concealed was a material one and that there was no such evidence
in the present case. But the answer to that contention is that the fact speaks for itself. As Sir
George JESSEL said in Mansel's case "no human being acquainted with the practice of
insurance companies could doubt for a moment that such a fact is one of great materiality, a
fact upon which the offices place great reliance."

And in Joel's case FLETCHER, MOULTON, L.J., says: "If a reasonable man would have
recognised that it was material to disclose the knowledge in question, it is no excuse that you
did not recognise it

1915 AD at Page 221

to be so." And that after all appears to be the true test, would a reasonable man consider that
the fact was one material to be known by the insurer, or a fact that in the words of LORD
BLACKBURN "might influence the underwriter's opinion as to the risk he is incurring." And
if that be the test, can there be any doubt that a reasonable man would consider the fact, that
there had been a cancellation of a previous contract, material, unless at the same time a
satisfactory explanation had been given of that fact. Nor do I see that the matter would be
carried much further, if agents of other insurance companies had been called to say that in
their opinion such a fact is material. There is considerable conflict of opinion as to whether
such evidence is admissible, but assuming it to be, I am decidedly of opinion that in such a
case as this it is quite unnecessary.

I come to the conclusion, therefore, that the judgment in the Court below is right, and that the
appeal should be dismissed with costs.

3. Materiality

In Mutual and Federal Insurance Co Ltd v Oudtshoorn Municipality 1985 (1) SA 419 (A),
the Appellate Division formulated the test for materiality as being whether, having regard to
the circumstances, the undisclosed information is reasonably relevant to the risk or the
assessment of the premium.
Mutual and Federal Ins Co Ltd v Da Costa 2008 (3) SA 439 (SCA)

The Supreme Court of Appeal today dismissed an appeal brought by Mutual and Federal
Insurance Co Ltd against a judgment given in the Pretoria Magistrate’s Court (and affirmed
on appeal in the Pretoria High Court) upholding an insurance claim brought by a Gauteng
businessman, Mr JAF da Costa. Mr Da Costa’s claim related to a Mercedes Benz vehicle
which had been rebuilt using the body of a 1988 200 Mercedes Benz, the engine of a 1990
230 Mercedes Benz and an AMG kit comprising non-standard bumpers, grilles, interior trim
door panels, seats and a steering wheel. This kit was on the evidence worth at least R62 000.
The Supreme Court of Appeal held that in the circumstances the magistrate’s finding that the
vehicle which was damaged beyond economic repair, was worth at least R69 000 could not
be interfered with. The appellant’s contention that there had been a material
misrepresentation of fact because the vehicle had been described as a 1991 Mercedes Benz
230 E was rejected because no evidence had been led to show that the misrepresentation,
which was innocently made, was material.

The respondent had successfully sued the appellant in a magistrates' court for
indemnification in respect of damage caused to a motor vehicle which, the respondent
contended, was covered under a motor vehicle insurance policy issued by the appellant.
An appeal to a High Court was dismissed. In a further appeal, the appellant contended,
inter alia,
(1) that the respondent had not proved that the vehicle in respect of which he had
claimed was in fact a vehicle insured in terms of the insurance policy issued to him by
the appellant; and
(2) that the respondent had not proved that the damage to the vehicle had not been
caused by or in connection with political unrest, the insurer F not being liable for such
damage in terms of an exclusionary clause in the policy.
As to (1), it appeared from the evidence that the vehicle in question was a built-up
vehicle, from a 1988-model body and a 1990-model engine. At the time of its inclusion in
the list of the respondent's insured vehicles, the respondent was under the impression
that it was a 1991 model, and it G appeared on the list of insured vehicles as a 1991-
model vehicle. The appellant contended that the misdescription of the vehicle entitled it
to avoid the agreement between the parties on the basis of material misrepresentation,
alternatively non-disclosure by the respondent. The appellant had led no evidence at the
trial that the misdescription was material, but contended that evidence on the point was
unnecessary. H
As to (2), the appellant relied on clause 13.4 of the policy, which excluded liability on the
part of the insurer if the insured property was destroyed or damaged and such
destruction or damage was caused by or occurred in connection with various forms of
political unrest listed in the policy. The clause made provision for other exclusions of
liability. Clause 13.4 also provided that, if the insurer alleged on the basis of the
exclusions set out in I the clause that the destruction or damage or physical injury was
not covered by the policy, then the onus would rest on the policyholder to prove the
contrary. The appellant contended that the respondent had not proved that the damages
were not caused by political unrest.
Held, as to (1), that it was true that in some cases a conceded or misstated fact would be
held to be material without any evidence having been led on the J
2008 (3) SA p440
FARLAM JA
A point. But this was where 'the fact speaks for itself'. It could not, however, be said,
without any evidence having been led on the point, that the fact with which the court
was presently concerned 'speaks for itself'. Evidence of materiality was required in a
case such as the present. (Paragraphs [10] and [11] at 443C/D, 444A/B and 442I/J.)
Held, further, that, in the circumstances of the present case, in the absence
of B evidence indicating that a reasonable insurer in the position of the appellant, if it
had known the true facts, would have refused to extend the cover of the respondent's
policy to the vehicle presently under consideration or would have only accepted it at a
higher premium, it could not be held that the misrepresentation relied on was material.
Contention (1) could therefore not be upheld. (Paragraph [12] at 444B - C.)
C Held, further, as to (2), that on a proper construction of the relevant clause in the policy
the exclusion must first be raised as a defence by the insurer in its plea before it became
incumbent on the insured to prove that on the facts of the particular case it did not
apply. (Paragraph [17] at 445D.) Appeal dismissed. The decision of De Vos J and Legodi J
in the Transvaal Provincial Division confirmed.

REGENT INSURANCE CO LTD v KING'S PROPERTY DEVELOPMENT (PTY)

LTD t/a KING'S PROP 2015

In Regent Insurance Co Ltd v King’s Property (Pty) Ltd t/a King’s Prop, 117 Lewis JA
approved the statute in her judgment, in which it was held that: ‘since the introduction of s
53(1) of the Short-Term Insurance Act … the test in respect of both misrepresentations and
nondisclosures is an objective one, thus bringing the legislation in line with the common
law’.118

Section 53(1) of the Short-term Insurance Act 53 of 1998 * introduced an objective test for
determining the materiality of a non-disclosure — whether a reasonable person would have
considered that the risk should have been disclosed to the insurer. The onus of proving
materiality was on the insurer, as was proving that the non-disclosure or representation
induced it to conclude the insurance contract. The test for inducement, however, remained
subjective — whether the particular insurer was induced by the failure to disclose a material
fact to issue the policy (or to extend cover). (Paragraphs [22] – [23] and [27] at 91F/G – 92C
and 92H – J.)
The Supreme Court of Appeal (the SCA) so stated the applicable law in an appeal against a
High Court decision which had held that Regent, an insurer, was precluded by estoppel from
relying on a material non-disclosure to avoid
2015 (3) SA p86
liability under a short-term insurance policy because it had misled the insured (King's Prop)
into believing that the insurance cover was effective. The SCA held that no misrepresentation
by the insurer had been proved, and so no estoppel had been established (Paragraph [46] at
96G.)
The High Court had made no finding regarding the materiality of the alleged non-disclosure.
Regent had repudiated King's Prop's insurance claim for failing to disclose the nature of a
business carried on by a tenant on the premises of an insured building damaged by a fire, ie
manufacturing vehicle bodies out of highly flammable materials, including fibreglass and
resin. This non-disclosure, the SCA held —
• was material, in that the reasonable, prudent person would consider that it should have
been disclosed so that Regent could have formed its own view as to the effect of the
information on the assessment of the risk (s 53(1)(b) of Act); and
• had clearly induced Regent to enter into the contract. Had it known about the nature of
the manufacturing business, it would not have extended cover under the policy concerned or
would have declined cover altogether. (Paragraphs [43] and [47] at 95I – 96A and 96H.)
Thus, concluded the SCA (upholding the appeal), Regent was entitled to reject the claim and
to regard the policy as void. (Paragraphs [47] – [48] at 96I – J.)

VISSER v 1 LIFE DIRECT INSURANCE LTD 2015 (3) SA 69 (SCA)

Section 59(1) of the Long-term Insurance Act 52 of 1998 provides that an insurer may avoid
liability on the ground of misrepresentation, ie a representation that was not true or amounted
to non-disclosure of information, 'if [it were] . . . likely to have materially affected the
assessment of the risk under the policy concerned at the time of its issue'.
1 Life, an insurer, had repudiated a claim by the beneficiary (Visser) of a life- insurance
policy on the basis that the deceased had misrepresented and failed to disclose certain details
of her pre-existing medical condition, which materially affected risk assessment under the
policy. The high court dismissed Visser's action for payment, finding that 1 Life's basis for
repudiating her claim was justified. In Visser's appeal, the Supreme Court of Appeal —
Held: 1 Life failed to discharge the onus of proving the truth and accuracy of the contents of
the hospital records on which it relied to prove a pre-existing medical condition of the
insured. In the absence of proof of the deceased's pre-existing medical condition, the issue of
whether the deceased made a misrepresentation and the materiality of any alleged
misrepresentation or non-disclosure did not arise. (Paragraphs [12] and [20] at 72I and 74F –
H.)
In a separate concurring judgment Willis JA agreed that the issue of materiality did not arise
but considered that it nevertheless had to be dealt with, to give the unsuccessful litigant who
failed for lack of evidence an indication of what it might have been expected to prove.
(Paragraphs [31] – [36] at 77B – 79C.)

VAN ZYL AND MARITZ NNO AND OTHERS v SOUTH AFRICAN SPECIAL
RISKS INSURANCE ASSOCIATION AND OTHERS

Where property is sought to be insured, the party insuring the property has a duty to disclose
to the insurer all facts and circumstances material to the risk to be undertaken. A threat that
the property to be insured will be attacked would be material in the sense that it would
reasonably be relevant to the risk in question and would require to be disclosed to the insurer,
provided that such threat is regarded as serious and is sufficiently proximate in time to the
taking out or renewal of the policy. (At 355C-D.)
A house and its contents owned and occupied by members of the W family had been insured
against, inter alia, loss of and damage to the building and its contents caused by fire. On the
night of 19 and 20 October 1985 the property and its contents were destroyed by fire. It
appeared from the evidence that the liberal and
1995 (2) SA p332
KROON J
anti-apartheid political views of members of the family, which had received widespread
publicity, had earned them considerable unpopularity in certain quarters, as a result of which
they had received a number of personal threats over several years; several threats of damage
to the property and to their business premises had also been made. It appeared that only
during 1982/1983 were the threats against the property and business premises sufficiently
serious to warrant the guarding of the properties. None of the threats, either to property or
persons, had ever materialised.
The insurers relied on the non-disclosure of such threats and of the fact that all the insured
were in serious financial difficulties to resist claims under the policies. As to the threats
against the property, it was argued for the insured that because of the lapse of time between
the serious threats to the property and the effecting of the insurance, and because none of the
threats to the insured property or to the business premises or to the family members had ever
materialised, the insured parties had legitimately dismissed those threats as a hoax: the threats
against the property had not been material at the relevant time and the insured parties had
thus been under no obligation to disclose them to the insurers. It was argued, further, that,
although family members had continued to receive personal threats after the 1982/1983
period (and these had never materialised), such threats should be regarded as irrelevant
because the insurers had not relied upon such personal threats in their plea.
Held, that, although the insurers had placed reliance only on threats against the properties and
the other threats per se could therefore not be invoked, the materiality of the threats against
the property and the issue whether such threats should have been disclosed to the insurers had
to be decided in the light of all the relevant background and surrounding circumstances . (At
355H and I-J.)
Held, further, that even though the personal threats against family members had not
materialised, the fact that such threats had arisen from the same origin as the threats against
the property and had persisted and had been current at the relevant time was part of the
context in which the threats to the property fell to be assessed. (At 355H/I and 356B.)
Held, further, that, seen in the total context, the threat against the property had remained
material at the relevant time in the sense of being reasonably relevant to the risk undertaken
by the insurers and that the non-disclosure thereof accordingly entitled the insurers to avoid
the policies in question. (At 356B/C-C.)
The Court found, further, that the fact that certain of the insured had been in dire financial
difficulties at the relevant time should have been disclosed: such difficulties had clearly been
material to the assessment of the risk and their non-disclosure, too, had entitled the insurers to
avoid the policies. (At 361E/F-F and H/I-I/J, 362D/E.)

SANTAM BPK v VAN SCHAlKWYK 2002 (4) SA 193 (O)

Headnote : Kopnota
The appellant appealed against a decision of a magistrate's court in terms whereof it was
ordered to pay an amount of R34 400 to the respondent. Respondent's claim was based on the
provisions of an insurance policy, issued by the appellant in favour of the respondent, in
terms of which the appellant undertook to indemnify the respondent against the loss of or
damage to a particular motor vehicle. The vehicle had been purchased in terms of a written
instalment sale agreement with Stannic as the seller and the respondent's son as the purchaser.
According to the respondent, he assisted his son financially in the purchase of the vehicle as
he needed a car but could not afford to buy one. The motor vehicle was stolen and the
respondent instituted a claim. The respondent had applied telephonically for the insurance.
The grounds of appeal were that the court a quo had erred in finding that the respondent had
an insurable interest in the motor vehicle and, further, in not taking into account the evidence
proving that the respondent had failed, contrary to the provisions of the insurance policy, to
inform the appellant that the circumstances surrounding the use and address of the insured
vehicle had changed, which information would have influenced the risk of
insurance. According to the appellant, the undisclosed information was to the effect that the
respondent's son and not the respondent himself was in possession of the vehicle and that
such possession would be exercised in Florida and not in Kroonstad, where the respondent
lived. The appellant contended that Florida constituted a much higher 'risk area' than
Kroonstad and it would have levied a much higher premium.
The respondent contended that it would be unreasonable to expect him, in the position of the
reasonable man, to know which areas in the country involved increased levels of risk to the
appellant. It was further contended that the appellant had also not succeeded in showing that
Florida indeed presented an increased level of risk.
Held, that it was a general legal principle that an applicant for insurance was obliged to
disclose any fact exclusively within his or her knowledge and
2002 (4) SA p196
material to the insurance. Material information was that information which, in the opinion of
the insurer, would influence the opinion of the insurer with regard to the risk he was
accepting and at what premium. The test for materiality was that of the reasonable man. (At
199C/D - D/E.)
Held, further, that the evidence established that there were indeed areas that involved a
greater risk to the appellant for motor vehicle insurance. It was further proved that the
premiums differed in accordance with the risk situation and that Florida was considered
a higher risk area than Kroonstad. (At 200D/E - E/F.)
Held, further, that the non-disclosure of the fact of the place where the motor vehicle would
be used had to be considered together with the respondent's non-disclosure of information
regarding the purchase, possession and use of the motor vehicle. The undisclosed information
was clearly within the exclusive knowledge of the respondent and it would be unreasonable,
if not absurd, to expect the insurer, at his own instance, to enquire about those matters,
especially in the light of the respondent's statement at the time of his application for insurance
that it was he who had purchased a motor vehicle. It could even less in these circumstances
be said that there had been any waiver of the appellant's right to this information. (At 200E/F
- F and 201A - B/C.) D
Held, further, that the undisclosed information undoubtedly influenced, in the opinion of a
reasonable person, the calculation of the risk in that the appellant, had it been aware of all the
circumstances, would first have sought additional information, such as the purpose of the use
of the vehicle and the age of the son, before it decided to accept the risk. Respondent's
relevant non-disclosure to the appellant meant that he had concealed the fact that no rights or
remedies against third parties would vest in him. That in itself constituted a material
misrepresentation. (At 201B/C - C/D and G - H.)
Held, further, that the court a quo had in the circumstances erred in not finding that there had
indeed been a non-disclosure of material information by the respondent, on the basis of which
the appellant was entitled to repudiate the claim. (At 201H/I - I/J.) Appeal allowed.

Fransba Vervoer (Edms) Bpk v Incorporated General Insurance Ltd 1976 (4) SA 970
(W)

Consequently, despite the duty of disclosure on the plaintiff and the objective test to be
applied in determining the materiality of the misrepresentation, in my view this is a matter
where there is a ‘special circumstance’ as set out in Fransba Vervoer (Edms) Bpk v
Incorporated General Insurance Ltd 1976 (4) SA 970 (W) in the headnote at 970 E-F : ‘The
practice of allowing evidence of materiality is firmly established, though the Court may still
hold that the fact concerned is immaterial. The Court will examine such evidence, as it will
examine any other evidence, to see whether it is unduly coloured by bias or partiality. Once
the Court has found that certain facts were material to the assessment of the risk in any case,
it follows, in the absence of special circumstances, almost automatically, that a reasonable
man would have disclosed those facts’.
The effect of section 63 (3) of the Insurance Act, 27 of 1943, is that a claim can now only
fail if the incorrectness of statements or representations made by a proposer for
insurance is material in the special sense set out in the sub-section.
It is the duty of a proposer for insurance to disclose any fact, exclusively within his
knowledge which it is material for the insurer to know. What information is material for
the insurer to know is information that may influence his opinion as to the risk that he is
incurring and consequently as to whether he will take it, or what premium he will charge
if he E does take it. The insured's own opinion or realisation of the materiality of any
particular information is not relevant.
Where an insurance company disclaims liability under a policy that it has issued on the
ground of non-disclosure the onus is upon the company to establish (1) that the fact not
disclosed was material; (2) that it was within the knowledge of the assured; and (3) that
it was not communicated to the insurer. The practice of allowing evidence of materiality
is firmly established, though the Court may still hold that the fact concerned is
immaterial. The Court will examine such evidence, as it will examine any other evidence,
to see whether it is unduly coloured by bias or partiality. Once the Court has found that
certain facts were material to the assessment of the risk in any case, it follows, in the
absence of special circumstances, almost automatically, that a reasonable man would
have disclosed those facts.
Where the proposed insured is a company not only the 'character' of the company itself
is relevant, but the character of its directors, managers, executives and key personnel
may also be relevant to the 'moral hazard'. Facts that disclose possible carelessness or
inefficiency on the part of the proposed insured's principal servant namely its manager,
which may result in the company being accident-prone, are material facts. Where the
history of previous accidents is not that of the proposed insured himself, the materiality
of that history must depend to some extent upon the closeness of the link between the
facts concerned and the possible risk. If the connection is too remote, the facts will not
be held material.
The insured company carried on business as a transport contractor. The manager of the
company also carried on his own private business of the same nature. The insurer of the
insured company's vehicles, of which a mechanical horse and trailer had been involved in
an accident, had repudiated the claim for an order declaring that the insurer was liable to
indemnify the insured in respect of the
1976 (4) SA p971
McEWAN, J.
damage to the vehicles on the ground that it had come to its knowledge that certain
vehicles used in the manager's personal business had been involved in four separate
accidents prior to the insurance policy concerned having been taken out, and on the
ground that the insured company had failed to disclose this fact. The insured company,
however, pleaded (a) that it was under no duty in law to disclose any misfortunes which
had A befallen a separate and distinct business and (b), in the alternative, that disclosure
had been made by an insurance broker at the time when he was negotiating the policy
on the insured company's behalf. In the action the broker testified to having done so.
Held, as to (a) that it was the duty of the insured company to have disclosed such fact in
the circumstances.
Held, as to (b) that, on the facts, the insurer had failed to discharge the onus on it of
proving that this fact had not been disclosed.

PRESIDENT VERSEKERINGSMAATSKAPPY BPK v TRUST BANK VAN AFRIKA BPK

EN 'N ANDER 1989 (1) SA 208 (A)

During June 1984 the appellant and second respondent, P, concluded an agreement of
insurance, the provisions of which were contained in a multi-risk policy in terms of which
P was insured against damage to property on his business premises. On 21 September
1984, while the policy was in force, a fire broke out on P's premises and caused damage
to property. Appellant paid an advance of R50 000 to P and it was later agreed that the
damage resulting from the fire ran to R161 148. P ceded his claims to the first
respondent. Appellant adopted the attitude that it had incurred no liability as a result of
the fire and demanded repayment of the R50 000 advance. This resulted in first
respondent instituting action against appellant in which the balance of R111 148 was
claimed. Appellant defended the action and joined P as a third party to the proceedings,
a step designed to achieve the repayment of the advance payment. Appellant relied in
the main on a provision in the policy which entitled it to repudiate the agreement in the
event of non-disclosure of material information before the conclusion of the agreement.
Held, that the test of whether information should be disclosed was whether the
reasonable man (not the reasonable insurer or insured) would consider that it should be
conveyed to the prospective insurer so that it could reach a decision as to whether it
would accept the risk or charge a higher premium than normal.
Held, further, that P's failure to inform appellant that, due to a lack of funds shortly
before June 1984, it had not paid its previous insurer's premiums on time, seen in
combination with other J continuous liquidity problems that led to the bank
1989 (1) SA p210
A dishonouring cheques issued by P and the cancellation of the floorplan scheme by the
supplier, was material information that should have been disclosed to the prospective
insurer.
Held, further, with regard to the alleged waiver of its right to disclosure of information
related to claims submitted by P to its previous insurers, that waiver required at least an
act on the part of the waiving party from which an intention to waive the right was
evident and which was communicated to the other party: there was nothing in B the
evidence to indicate such an act and, in any event, such a waiver was never
communicated to the second respondent. Appeal allowed.

POTOCNIK v MUTUAL AND FEDERAL INSURANCE CO LTD 2003 (6) SA 559

(SE)

Headnote : Kopnota
The plaintiff instituted an action in a Local Division for payment of an amount in terms of an
insurance contract entered into between the plaintiff and the defendant in terms of which the
defendant had insured a vessel belonging
2003 (6) SA p560
to the plaintiff. In April 1999 the plaintiff had, with the assistance of his insurance broker,
completed a proposal form for insurance in respect of his vessel that contained the terms of
the contract upon which the action was based. The proposal form contained certain questions,
prefaced by a paragraph stating, inter alia, that 'failure to disclose all material information, ie
information which is likely to influence the acceptance of the risk and the terms applied,
could invalidate the insurance'. It stated further that, if the insured was in any doubt as to
whether any information was material, it should be disclosed. At the end of the form the
following question was posed: 'Any other information which is likely to influence the
insurers in regard to the proposal.' The plaintiff left the question unanswered. Immediately
above the plaintiff's signature was the following declaration: 'I hereby declare that, to the
best of my knowledge and belief, the particulars and answers are true and correct and that I
have not withheld any information which is likely to influence the decision of the insurers in
regard to this proposal. . . .' The proposal form was accepted by the defendant and formed the
basis of the contract of insurance between the parties. The plaintiff paid his annual premiums.
In August 1999 the vessel was damaged beyond repair and the plaintiff lodged a claim with
the defendant in respect of the loss sustained. The defendant repudiated liability and sought to
avoid the contract ab initio on the ground of an alleged non-disclosure by the plaintiff of
material facts relating to his financial position at the time the contract of insurance was
entered into. The premiums which had been paid by the plaintiff were tendered by the
defendant and later paid to the plaintiff. The plaintiff instituted the present action against the
defendant claiming the damages sustained. It appeared that the following facts relating to the
plaintiff's financial position between 1995 and 1999 had not been disclosed by him when
completing the proposal form for the insurance contract: The plaintiff had borrowed money
from two financial institutions during 1995 and 1998, inter alia for the construction of the
vessel. One of the institutions had obtained three default judgments against the plaintiff
during 1998 and 1999. In 1999 the other financial institution had obtained judgment against
the plaintiff and had attached the vessel. The attachment order was rescinded after the
plaintiff had settled the debt.
In its plea, the defendant had repudiated liability on account of non-disclosure by the plaintiff
of material information. Alternatively, the defendant had pleaded that the plaintiff had agreed
to a retrospective cancellation of the agreement or, alternatively, that the plaintiff had waived
his right to enforce the contract by depositing the refunded premiums. The plaintiff submitted
that the question relating to the disclosure of material information in the proposal form had
not been put to him by his broker. He submitted further that, even if the question had been put
to him, he would not have known what to disclose as the question did not specify what
information was sought. He stated that, in any event, he had nothing to disclose and he denied
that he had been in financial difficulties at the time.
Held, that the first question to be answered was whether such information as was not
disclosed by the plaintiff was material to the defendant's assessment of the risk. The test of
materiality for non-disclosure in insurance law was whether the reasonable man would
consider that the information in question, which was not disclosed, should have been
disclosed to the insurer so that he could form his own views as to its effect. What information
was material for the insurer to know was material that might influence his opinion as to the
risk that he was incurring and consequently as to whether he would take it, or what premium
he would charge if he did take it. The Court did not, in applying this test, judge the issue from
the point of view of a reasonable insurer, nor from the
2003 (6) SA p561
point of view of a reasonable insured. It was judged objectively from the point of view of
the average prudent person or reasonable man. The insurer's own opinion or realisation of the
materiality of any particular information was not relevant. (At 565C/D - D, 566F/G - H, 565I
- 566A and F/G - G.)
Held, further, that the plaintiff's submission that he had no reason to disclose his indebtedness
to the financial institution because he had passed a mortgage bond over his immovable
property in favour of the bank, and his submission that in the absence of a specific question
requiring him to disclose his financial position he could not reasonably have been expected to
have known that his financial position was important to the insurer, fell foul of the objective
test of materiality as set out above. The issue was not judged from the subjective point of
view of the plaintiff but from that of a reasonable man in the plaintiff's position. (At 566H/I -
567A/B.)
Held, further, that, even in the absence of the expert evidence of the insurance broker
tendered on behalf of the defendant that the plaintiff's adverse financial situation would have
presented him as a high moral risk in respect of which it would have been difficult to assess a
proper premium, it was clear that the information which the plaintiff had failed to disclose
was material. The defendant should have been apprised of it so that it could decide whether
to undertake the risk and, if so, at what premium. In all probability, had the defendant known
the plaintiff's financial position, it would not have entered into the contract with him. (At
567A/B - C.)
Held, accordingly, that the defendant had been justified in repudiating the contract. (At 567C
- C/D.) Claim dismissed.

PICKERING v STANDARD GENERAL INSURANCE CO LTD

[1980] 4 All SA 699 (ZA)

Judgment

LEWIS JP: This is an appeal against an order in the General Division of this Court declaring
that the respondent is not liable to indemnify the appellant, as his insurer, for the amount of
$18 876 claimed as damages against the appellant by one Kelly as a result of the appellant's
negligent driving of a motor car. The judgment in which the order is made is now reported in
the South African Law Reports sub nomine Kelly v Pickering and Another
(2) 1980 (2) SA 758 (R), and when referring to the judgment I shall do so by reference to that
report.

The proposal form for the insurance policy in question was completed by the appellant in
January 1976. Question 7 in that proposal form was as follows:
 "Do you, or any other person who to your knowledge will drive, suffer from defective
vision or hearing or from any physical or mental infirmity?"

To that question, the appellant's answer was a bare unqualified "No". He signed the
declaration at the foot of the proposal form in the following terms:

"I hereby declare that the above particulars and statements are true, correct and
complete and contain all information known to me affecting the risk to be insured, and
that this and any other written statement made by me or on my behalf for the purposes
of the proposed insurance shall be the basis of, and incorporated in, the contract
between me and the company, and shall be promissory. I further agree to accept
insurance on the terms and conditions set forth in the company's policy."

The policy which was issued on the basis of the proposal form set out that the proposal and
declaration should be the basis of the contract and should be deemed to be incorporated
therein. It also contained the usual condition (condition 9 in this policy) that:

"... the truth of the statements and answers in the said proposal shall be conditions
precedent to any liability of the company to make any payment under this policy."

The appellant renewed the policy the following year in January 1977. The accident giving
rise to the claim occurred in April 1977.

The facts of the case are fully and in my opinion accurately set out in the judgment of the
learned Judge in the Court a quo and it would be convenient simply to quote the following
passage of that judgment at 760A:

"The evidence has established that the defendant, in 1967 at the age of 13, became
prone to recurrent severe migraine attacks associated with visual disturbance, nausea
and paresthesia, notably of the left hand and arm.

Page 700 of [1980] 4 All SA 699 (ZA)

These attacks decreased in intensity and frequency as the defendant passed beyond
adolescence, but, in April or May 1974, during or shortly after strenuous exercise while
on military training, the defendant had a fit with accompanying total unconsciousness
and was taken to hospital, where he later had another episode in which he bit his lip. It
was suspected by a military doctor that he had suffered an epileptic 'Grand Mal' seizure
and the defendant was referred to a neurological surgeon for examination. Electro-
 encephalogram tests were conducted which gave borderline results, and in June 1974
the neurosurgeon expressed the view to the military

View Parallel Citation

doctor that the defendant should be categorised as a very mild epileptic and be
exempted from further active military duties. Although it is not clear exactly what was
then told to the defendant by the neurosurgeon concerning this diagnosis, it is apparent
that, before the proposal form was submitted, the defendant was made aware that it had
been said that he was a mild epileptic and had on that account been returned by the
military authorities to his civilian occupation. In June 1974 he was advised by the
neurosurgeon to return for a further EEG examination in six months' time, and in the
meantime to continue to take Epanutin tablets daily, a medication which the defendant
knew to be a prophylactic prescribed to ward off possible future seizures. Although the
defendant chose after a while to discontinue the use of Epanutin he did not experience
any further seizures, but he did continue to experience occasional migraine attacks from
which he found relief by using an analgesic at the time of such attacks. In April 1975,
after a protracted spell of dizziness, he underwent another EEG test. This was within
normal limits, but daily use of Epanutin was again prescribed for him. In October 1975
he was again seen by the neurosurgeon who found him very much more settled and
having no further seizures, but who nevertheless advised the defendant that 'certainly
for the next year he should continue with his medication (viz daily Epanutin) and return
at that time for an EEG and review'. During the next 12 months period the defendant
only infrequently experienced ill-health and he did not, in the result, return for the
suggested EEG and review of his condition, which he says he assumed was a
suggestion that had been made at the behest of the military authorities who wanted, so
he thought, a periodic check on his condition. However, on 25 January 1977, only days
before the policy fell due for renewal, the defendant, having again been called up by the
military authorities, certified the complete correctness of the undermentioned answers
to the following questions on the military medical examination form:

'Have you suffered from any of the following? Give dates:

1.
Fits or convulsions? Answer: Yes, May 1974. Severe or "sick" headaches,
migraine? Answer: Yes, continuous. At infrequent intervals (last on 3 November
 1976).'" (I would here interpose the fact that on the reverse of the medical
examination form appears the following, apparently written by one of the Army
medical officers: "Mild epileptic on Epanutin. See letter from Mr Auchterlonie.")

Page 701 of [1980] 4 All SA 699 (ZA)

"The defendant was forthwith categorised as unfit for any military duty (category 'E'),
was not called up, and it was again explained to him that he had been categorised as a
mild epileptic by his neurosurgeon.

The neurosurgeon has very recently examined the defendant again, and has found him
to be quite fit, although the neurosurgeon was not told that in 1978 the defendant had
again suffered three severe migraine attacks with associated visual disturbance and
nausea that had necessitated medical treatment for relief. The neurosurgeon is of the
view that the defendant has never really been a victim of epilepsy, but merely of severe
migrainous headaches that have lessened with the passage of time. It is his opinion that
the defendant's susceptibility to such headaches did not amount to a physical infirmity,
nor, in his opinion, did it impair the defendant's ability to drive a motor vehicle,
because the onset of such headaches is preceded by warning symptoms such as would
cause the defendant to refrain from driving before finding himself in the throes of an
attack when he would be quite incapable of controlling a motor car. It is the
neurosurgeon's opinion therefore that the negative answer that was given in January
1976 to the question in the proposal form that I have previously set out was, objectively
speaking, true."

The learned Judge, following the decision of KUPER J in Yorkshire Insurance Co Ltd v
Ismail 1957 (1) SA 353 (T), found that the declaration quoted above contained two
warranties. Firstly, that the particulars and statements in the proposal form were true, correct
and complete, and, secondly, that they contained all the information known to the appellant
affecting the risk to be insured. The correctness of that finding is not challenged in this
appeal.

View Parallel Citation

As the learned Judge pointed out none of the information relating to the appellant's state of
health was revealed to or known by the insurer either in 1976 when the policy was issued or
in January 1977 when the appellant renewed it. The appellant said in evidence that at the time
the proposal form was completed he asked his agent, a Mrs Van den Berg, who was the
broker through whom he negotiated the insurance, to confirm with his medical practitioner
that he was fit to drive and that the condition from which he suffered, or thought he suffered,
"would not affect my insurance policy to that extent". What Mrs Van den Berg did about this,
if she did anything at all, one does not know, but nothing was communicated to the
respondent. Later on in his evidence under crossexamination, the following passage occurs in
relation to his conversation with a Mr Powell after the accident:

"Q In other words, at the time you spoke to Mr Powell you were unaware, specifically,
of what your condition was, but you thought you might have been suffering from a mild
form of epilepsy? A Yes.

Q That was your state of mind when you spoke to Mr Powell? A Yes.

Page 702 of [1980] 4 All SA 699 (ZA)

Q Presumably that was your state of mind in January 1976 when you had completed the
proposal form? A That is correct, which is why I asked Mrs Van den Berg to refer to
my medical practitioners for this confirmation."

It is clear, therefore, that this was also his state of mind when he renewed the policy in
January 1977.

The learned Judge found that a breach of both warranties had been established, in that the
answer to question 7 of the proposal form, though not untrue, was not a complete answer
relating to the appellant's physical state at that time, and the particulars and statements in the
proposal form did not contain all the information known to the appellant affecting the risk to
be insured.

In attacking the judgment, Mr De Bourbon for the appellant submitted that the learned Judge
"misunderstood the evidence in believing that the appellant suffered from mild epilepsy". In
my view, it is not correct to say that the learned Judge entertained any such belief. It seems to
me to be clear from his judgment that the basis of his finding was this: Notwithstanding that
the appellant was not, in fact, suffering from mild epilepsy but only from periodical severe
migraine attacks, there was at all material times a suspicion that this might have been his
condition, and, as appears from the passages from his evidence quoted above, the appellant
himself believed, on what the army doctor had told him, that he was classified as a mild
epileptic.
The appellant's own expert witness, one Beckett from the Eagle Insurance Company, agreed
that information indicating even a mere possibility that a proposer might have a mild epileptic
condition would certainly put any reasonable insurer on his guard and on his inquiry before
deciding whether to accept the risk and, if so, on what terms. It was therefore a matter which
was clearly material. The fact that the specialist neurosurgeon was satisfied after the event
that the appellant had never suffered from epilepsy but only migraine attacks is neither here
nor there, and Mr De Bourbon's further submission that regard may be had only to the actual
condition of the appellant and not to what he

View Parallel Citation

believed it might be is incorrect. MacGillivray and Parkinson in their work on Insurance

Law 6th ed para 759 have this to say:

"'Rumours and Opinions.' An applicant for insurance is required to disclose not only
those facts of which he has actual knowledge himself, but also any rumours, opinions
or information as to facts which are themselves material which he may have heard. The
principle was established in a line of old cases on marine insurance which show that,
even if the applicant may himself regard the rumour as false or the opinion as ill-
founded, it is nonetheless his duty to disclose it, for what it is worth, so that the insurers
may exercise their own judgment on it.

Page 703 of [1980] 4 All SA 699 (ZA)

If the rumour subsequently turns out to be false, or the opinion to be wrong, the
insurance may still be avoided for non-disclosure. In British Equitable Insurance Co v
Great Western Railway (1869) 20 LT 422 the assured, prior to the issue of a policy on
his life, consulted a specialist concerning the swelling of his feet, and was told that he
was in a dangerous state of health. His own doctor said that the specialist was wrong,
and the assured did not disclose the matter to the insurance office. He died of a heart
disease shortly after the policy was issued. The policy was voided. The specialist's
opinion, even if wrong, should have been disclosed to the insurers."

There is a similar passage in Halsbury Laws of England 4th ed vol 25 para 226 at 133. This is
a follows:
 "The materiality of any particular circumstance is in no way determined or affected by
events subsequent to the conclusion of the contract, and the insurance is therefore
voidable although the information not disclosed turns out to be altogether untrue, or the
loss to have arisen from a cause wholly different from and wholly unconnected with
that referred to in the information or with any of the matters comprised in it. The only
question is whether the circumstances or information not disclosed, whether by design
or mistake, were such as would have influenced the judgment of a prudent underwriter.
Thus, if in proposing an insurance on goods on board a certain ship, the assured, having
received information that the ship has met with an accident, fails to communicate the
information to the underwriter, the underwriter will be discharged from responsibility,
even if the omission is due to mere mistake or carelessness, and the information turns
out in fact to have been wholly untrue, and even though the goods are lost by capture
wholly unconnected with the perils of the sea."

It is true that this passage appears in the chapter dealing with marine and aviation insurance,
but it would seem that it is equally applicable to all forms of insurance and the similar
passage from MacGillivray and Parkinson, referred to above, is not in any way limited to
marine insurance.

Mr De Bourbon placed great reliance on the case of James v British General Insurance Co
Ltd (1927) 27 Ll Rep 328 for the proposition that it is only the facts as they exist which are
relevant and not what the appellant believed them to be. That case is no authority for
suggesting that the passages from MacGillivray and Parkinson and Halsbury to which I have
referred are wrong. In James' case, the assured had had a past history of disability for which
he had received a disability pension, but, by the time he took out the insurance policy in
question, to his knowledge he was completely cleared of that disability. There was no
question, therefore, of his suspecting at the time he took out the insurance policy that he was
suffering from some physical disability which should have been disclosed.

Page 703(1) of [1980] 4 All SA 699 (ZA)

The fact that he had no such belief or suspicion is emphasised by what was said at 331 in the
judgment of ROCHE J, where the learned Judge pointed out that all pension payments had
ceased and the insured himself had never claimed any more payments because there was
nothing to claim. In other words, he realised that he was completely cured and free from any
physical disability. That case is clearly distinguishable, therefore, on the facts. It merely
emphasised the fact that the state of health of the insured at the

View Parallel Citation

time of insurance must be looked to, and a part disability, which to the insured's knowledge
has completely disappeared, need not be disclosed. In the instant case the current situation
which should have been disclosed was a suspected condition of mild epilepsy, even though
the suspicion later turned out to be ill-founded.

A hypothetical example may serve to illustrate the point. A person experiences a severe
attack of indigestion the symptoms of which he describes to his doctor in such terms as to
lead the doctor to believe that he is suffering from a serious heart condition. Arrangements
are made for the necessary specialist examination. In the interval the patient completes a
proposal form for insurance, stating he suffers from no physical disability but not mentioning
the forthcoming examination. Should the examination not disclose any heart defect he would
have truthfully said that he suffered no physical disability but it could not be doubted that he
should have disclosed the forthcoming examination.

Finally, Mr De Bourbon argued that this was a case where the specific questions put in the
proposal form relieved the insured from the obligation to reveal anything more than had been
demanded in the proposal form. He relied upon various authorities for the proposition that in
certain circumstances, when questions are asked on particular subjects and the answers to
them are warranted, it may be inferred that the insurer has waived his right to information
either on the same matters but outside the scope of the questions or on kindred matters to the
subject-matters of the questions. The subject is dealt with generally in MacGillivray and
Parkinson in paras 734, 735 and 736. Whether or not the form of the questions asked
enlarges or limits the insured's duty of disclosure depends upon the particular circumstances
and on the particular type of proposal form.

In the instant case, it is clear from the nature of the declaration which the insured was
required to sign at the end of the proposal form that the questions asked did not limit the duty
of disclosure as suggested by Mr De Bourbon. He was required, when answering the
questions, to answer them completely and to disclose all information known to him affecting
the risk to be insured. As I have already pointed out, the appellant's own expert witness, Mr
Beckett, was in no doubt that the information was material to the risk in the instant case, and
of course the appellant himself, by requesting Mrs Van den Berg to check up with his
medical practitioner as to his fitness to drive because of his suspected condition, realised that
this was something which should be disclosed to the insurer.

Page 703(2) of [1980] 4 All SA 699 (ZA)

I am therefore of the opinion that the learned Judge correctly found that there was a duty on
the appellant to disclose that he was suspected of being a mild epileptic both at the time he
completed the proposal form and at the time he renewed the policy, and that the respondent
was accordingly entitled to avoid liability under the policy by reason of the nondisclosure of
this suspected condition.

4. Actual or Constructive Knowledge

ANDERSON SHIPPING (PTY) LTD v GUARDIAN NATIONAL INSURANCE CO LTD

1987 (3) SA 506 (A)

The appellant carried on the business of a general and heavy haulage contractor and was
insured by the respondent against a large number of perils, inter alia, comprehensive motor
vehicle cover, including accidents caused by or in connection with an insured vehicle
including a claimant's costs and expenses which it was legally liable to pay in respect of the
death of or bodily injury to persons and damage to property. A vehicle owned by the
appellant and insured by the respondent was involved in a collision with another vehicle,
the owners whereof claimed R24 000 as damages from the appellant in a Provincial
Division. The appellant served a third party notice on the respondent who in turn pleaded
that it was entitled to repudiate liability as the appellant had either breached a condition
of the policy or had wrongly concealed that the driver of its vehicle, one M, had
previously been found guilty of driving under the influence of liquor and that it employed
drivers without satisfying itself as to the criminal record of the drivers, alternatively the
various endorsements on the drivers' licences. It appeared that M had been found guilty
of contravening s 140(1)(a) of the Road Traffic Ordinance 21 of 1966 (N) and sentenced
to four months' imprisonment and his driver's licence had been suspended for six
months. Evidence was led at the
1987 (3) SA p507
trial regarding the procedure adopted when employing new drivers: the applicant would
be asked for his driver's licence and for his public driving permit and particulars of his
previous experience. If an applicant said that his identity document containing his
driver's licence was lost or damaged, the appellant's operations manager, one R, would
rely solely on the public driving permit which could not legally be obtained unless the
applicant was in possession of a valid driver's licence. R said in evidence that, if he had
been shown M's driver's licence, he would have seen the endorsement and would B not
have employed him and must therefore have relied exclusively on the public driving
permit on which there was no endorsement: he did not know then that one could hold a
public driving permit when one had a previous conviction. The trial Court found against
the appellant. On appeal, counsel for the respondent relied solely on the defence of non-
disclosure.
Held, that it was clear that the undisclosed facts were material and the only question for
decision was whether the appellant had knowledge, actual or constructive, of the facts.
Held, further, that the respondent had not attempted to identify the persons who
represented the directing mind and will of the appellant: it had not established that R
was such a person and there was therefore no evidence that the appellant had actual
knowledge of the facts relied on and the question was then whether it was proved that it
had constructive knowledge.
Held, further, that no attempt had been made by the respondent D to show that the
appellant ought to have had actual knowledge that M's licence bore the endorsement or
that the system which was in operation for employing drivers was defective: the
company had given to R the duty and function of employing drivers and the evidence did
not suggest that it had any reason to suspect that the system in operation was not
working satisfactorily or that an investigation was called for.
Held, further, that R's knowledge could not be imputed to the company: R did not know
of M's conviction; he did know that his E practice when employing drivers was not to
require in every case that the driver's licence be produced but he had no duty to
communicate this knowledge to his employer: he was an agent to employ drivers and
there was nothing in the evidence to suggest that it was his duty to receive information
or to communicate it to the company. Appeal allowed.
The decision in the Transvaal Provincial Division in McCarthy Rental Ltd v Anderson
Shipping (Pty) Ltd and Another reversed. F

5. Facts Not Necessary to be Disclosed

JERRIER v OUTSURANCE INSURANCE CO LTD 2015 (5) SA 433 (KZP

The court a quo rejected Mr Jerrier's insurance claim for damage to his insured motor vehicle
on the basis that his failure to inform the insurer of two previous accidents, for which he
never claimed, amounted to a material non-disclosure or breach of the terms of the policy,
thus absolving the insurer from liability. The previous accidents happened during the
currency D of the policy but Mr Jerrier elected not to claim because he believed that the cost
of the repairs would be less than his excess payment, and because he did not want to lose his
no-claim bonus. The present case concerned his appeal against the decision of the court a
quo.
The obligations Mr Jerrier allegedly breached were (1) to inform the insurer 'immediately' of
'any changes to your circumstances that may influence E whether we give you cover'; and (2)
to inform the insurer, 'within 30 days' of its occurrence, of 'any incident that may lead to a
claim . . . . [including] incidents for which you do not want to claim but which may result in a
claim in the future . . . so that we may take steps to limit the effects of any claim which may
be made by the other person'.
Held F
The 'changes to your circumstances' the insurer regarded as being material to risk were
changes in the insured's personal circumstances rather than a change to the condition of the
vehicle. If the insurer considered 'changes to your circumstances' to include the occurrence of
every 'incident' it should have said so.
An accident for which the insured does not wish to submit a claim cannot be G construed on
any interpretation to mean a 'change in circumstances' as contemplated in the insurer's policy.
(Paragraphs [21] and [29] at 422G – I and 446B.)
The obligation to report a claim or an incident only arose if the insured wished to enforce the
indemnification for loss which the insurer was obliged to honour. A third party who had
suffered damages had no contractual relationship with the insurer. As such, the only party
against whom it could claim damages was the appellant. Where the insured elected not to
report the matter to the insurer within 30 days, that marked the end of the insurer's liability. In
this instance the appellant made a conscious decision to absorb the damages and to repair his
own vehicle and that of the other party, so as to preserve his no-claim bonus. As long as the
appellant understood that he would have no claim against the insurer for those incidents at the
time or at any time in the future, there was no obligation on him to bring the matter to the
attention of the insurer. (Paragraphs [25], [27] and [28] at 443I, 445F – G and 445H – I.)
The policy was not one which was subject to an annual renewal assessment of risk, and
therefore the failure to disclose the two incidents had no bearing
2015 (5) SA p434
on the conditions of cover or the premiums charged. The policy simply did not provide for
this ongoing duty to report after commencement of the policy. The court a quo's conclusion
conflated the duty to disclose true and correct information at the commencement of the
contract with the duty to disclose during the duration of the contract, and therefore could not
be sustained. To this end the appeal must be upheld. (Paragraph [34] at 447I – J.) B
The test for whether non-disclosure was material to the assessment of risk was objective, ie
whether the reasonable person would have considered that the risk should have been
disclosed to the insurer. The failure of the appellant to disclose the two previous incidents did
not constitute material non-disclosure. The attraction of the no-claim bonus must not
be underestimated; it was a key feature differentiating the respondent insurer's policy from
those of its competitors. It was therefore not surprising that an insured would opt not to claim
for damages but elect to self-absorb in order to 'get something out'.

A A MUTUAL LIFE ASSURANCE ASSOCIATION LTD v SINGH 1991 (3) SA 514 (A)

On 3 February 1986 the appellant issued a 10-year endowment policy with life cover (called
the 'Vitasave Life Policy') to the respondent's wife. The sum assured was R30 000 and the
premium was an amount of R312 per month. The respondent was named as the beneficiary in
terms of the policy. The respondent's wife died on 23 March 1986 and when the appellant
repudiated liability under the policy the respondent instituted action in a Provincial Division
which upheld the claim. The appellant appealed against this judgment, contending that the
insured had failed to disclose that when she signed the proposal form she knew that she was
in fact suffering from cervical cancer. In a section Q of the proposal form the proposer was
required to warrant that she was at the date of the application actively employed in her usual
occupation and that all statements and answers given in connection with the policy were true
and complete and it was stated that 'any misstatement or non-disclosure which materially
affects the assessment of the risk under G the policy... may render such policy void'. In
answer to the question requiring full details of work performed the insured stated:
'Housewife/dressmaker; also in family business. Husband is a transport operator.' The
Court a quo found that the insured was probably aware that she was suffering from cancer at
the time of the application but that she was able to lead a normal life and that there was no
merit in the appellant's contention that she had been untruthful in describing her usual
occupation. The Court a quo held that the appellant was H estopped from relying on the
insured's non-disclosure because of the nature of the Vitasave policy. The appellant had
introduced the policy on to the market the previous year in order to overcome the difficulty
created by the amendment to the Sixth Schedule to the Income Tax Act 58 of 1962, whereby
pure endowment policies were made taxable in the hands of an insured. The Vitasave policy
aimed at overcoming this problem by providing for premiums of more than R1 500 per
annum with life cover at I least eight times the annual premium. In terms of 'Marketing
Notes' issued by the appellant the policy automatically incorporated life cover required in
terms of the legislation. It provided for 'Free Cover... up to R30 000 sum assured... free of
medical evidence.... (T)his means that you simply complete the application as if it were a
normal non-life Vitasave, no medical questions whatsoever.' The evidence at the trial was
that the appellant's broker consultant, who had explained the advantages of the Vitasave
policy to the broker (one S) who sold the policy to the insured, explained to S that the policy
was an investment J policy which included the required amount of life cover
1991 (3) SA p515
FRIEDMAN JA
A free of medical evidence to get around the Income Tax Act and that although the appellant
was not looking for people with serious health problems, applicants fit enough to lead normal
lives, who were actively employed in their usual occupations would qualify as potential
clients. S approached the insured as he had been told that she was not in the best of health and
filled in the proposal form without asking her any medical questions. The insured began to
explain that she had not been well recently but S told her that she did not have to disclose
anything about her health. The form that S completed was not one specifically for B the
Vitasave policy but one designed for other policies which was adapted for the purposes of the
Vitasave policy. S did not complete the medical sections of the form. The appellant
contended that, despite the fact that medical questions need not have been answered, the form
in which section Q was drafted required a proposer to disclose any facts which were material
to the risk that the appellant was being asked to undertake. C
Held, that section Q could not be regarded in isolation and had to be read in the light of the
questions which preceded it: as far as a proposer's medical history was concerned there were
no questions which were required to be answered and S had in fact told the insured that the
appellant did not wish to know anything about her health.
Held, accordingly, that the appellant must be taken to have waived whatever right it might
have had to require the proposer to disclose her health details.
Held, further, that section Q, commencing as it did with a declaration and warranty that the
proposer was 'actively employed in my usual occupation' and containing questions relating to
the proposer's occupation and work performance would have alerted a proposer to the fact
that the appellant attached importance to his or her occupation and work performance but not
to his or her state of health.
Held, accordingly, that the appeal had to be dismissed.
The decision in the Durban and Coast Local Division in Singh v AA Mutual E Life
Assurance Association Ltd confirmed.

BODEMER, NO v AMERICAN INSURANCE CO 1961 (2) SA 662 (A)

When respondent had been sued under a personal accident insurance policy it had
repudiated liability on the ground that the deceased had failed to disclose that he had an
artificial leg. It appeared that one R, an employee in a firm of bookkeepers some 27 miles
away, had kept the books E of the deceased, that the firm had also acted as canvassing
agents for various insurance companies including the respondent, and that the deceased
had instructed R to have his life insured for the maximum. R had then asked his
employer N to make out a cover note as agent for the respondent in favour of the
deceased. which was signed by N but never sent to the deceased, though a copy thereof
was sent to the respondent. Some time afterwards one M, the manager of respondent's
local branch, F had visited this firm at Bethal, and was asked by it to proceed to the
deceased at Hendrina to get him to sign the application form. M, however, maintained
that it was unnecessary for him to do so and that N could sign the form. N had then
signed the form containing the usual proposal and declaration, and thereafter
respondent had issued the policy. Neither R nor N had been aware that the deceased had
an artificial leg, and N had signed the declaration that the deceased suffered from no
physical disability. N had not had the deceased's G authority to sign the proposal form
and the deceased had not known, before he actually received the policy, that a proposal
form had been signed on his behalf. The action having been dismissed with costs in a
Provincial Division, in an appeal it was contended on appellant's behalf that the deceased
had had no real opportunity of disclosure before the policy was delivered to him, and that
his duty to disclose fell away when the policy was delivered to him.
Held, that the failure to disclose was fatal to the policy.
H Held, further, that an application now made for the first time on appellant's behalf to
amend the declaration by introducing a claim for rectification could not be granted as the
issue involved in the new claim had not been properly canvassed at the trial.
The decision in the Transvaal Provincial Division in Bodemer, N.O v American Insurance
Company, 1960 (4) SA 428, confirmed.

Warranties
Affirmative warranty
Beyers’ Estate v Southern Life Association 1938 CPD 8

The preamble of a policy of life insurance, upon which the executor of the deceased
assured had instituted action, set out that the contract between the assured and
defendant Association was based upon the proposal and declaration and any
statements made by the assured to the medical examiner of the Association. In the
course of these statements the assured denied that he had consulted any doctor
during the previous five years except in connection with dyspepsia suffered in 1935.
The proposal form, signed on 28th March, 1936, contained a declaration by the
assured that he was in good health and ordinarily enjoyed good health and that he
was not aware of any circumstance tending to shorten his life or render an
assurance thereon more than usually hazardous. The assured further agreed that
the proposal and declaration and statements made in writing in reply to any
additional questions should be the basis of the contract between himself and the
Association, warranted the truth of the statements made in the above and agreed
that if any material information was withheld or any matter not truly or fairly stated,
the assurance should be null and void. The proposal was accepted and a policy duly
issued on 12th May, 1936. The assured died on 2nd August, 1936, and his executor
claimed payment of the amount of the policy from the insurers. This was resisted on
the grounds, inter alia, that at the time of making the declaration above the assured
was not in good health but suffered from the disease of angina pectoris that he was
suffering from this disease in August, 1933, and was attended by a medical
practitioner on thirteen occasions during that month for this disease.
At the commencement of the trial, application was made on behalf of defendant for
leave to insert a new paragraph in the plea to the effect that on the 2nd April, 1936,
in a health statement deceased made in writing a declaration containing a warranty
that the answers in the health statement were true, and agreeing that the said
answers should be incorporated in and form part of the contract between deceased
and defendant Association, that the conditions of the original declaration were to be
taken as embodied in this later declaration and that if the contents of this later
declaration be untrue in any particular the assurance to be effected or reinstated
should be null and void.
Held, refusing the application ---
(1) that the health statement could not be regarded as incorporated in the term
"declaration" contained in the policy, as the only declaration there referred to must
be the declaration made on the same piece of paper as the proposal;
(2) that defendant Association having elected to rely only on the proposal and
declaration referred to in the policy, could not now rely on the subsequent health
statement to which no reference was made in the policy and concerning which there
was no proof of acceptance by defendant;
(3) that the said health statement could not be admitted as a collateral agreement,
(a) in that insofar as it went further than or amplified or varied the terms of the
original declaration it was inconsistent with it and (b) in that oral evidence would
have to be led to prove which was the original declaration which in terms of the later
declaration was to be embodied therein.
From the evidence it appeared that the doctor who attended the assured in 1933 and
again in 1935 had deliberately concealed from the assured the nature of the disease
from which he was suffering and from which he eventually died in August, 1936, and
told him he was suffering from indigestion merely. It was admitted that the assured
thought he was in good health when he made the statement to that effect in the
original declaration.
Held, that this statement was a warranty, not only of its truthfulness but also of its
accuracy, and upon breach of this warranty the policy was voided.
Held, further, that even if the assured had forgotten that he had consulted his doctor
in 1933, such forgetfulness would not excuse him, and the fact that the statements,
on his own undertaking, were said to be true "to the best of his knowledge and
belief" placed upon him a duty to use his utmost endeavours to recollect anything to
the contrary.
Zeeman v Royal exchange Ins Co 1919 CPD 63

A policy of fire insurance, in respect of a stack of wheat and chaff, provided that this
insurance is only granted on the understanding that the whole sum (insured) is not
more than 2/3rds of the whole market value of any stack on the day the insurance is
effected." In the proposal form the insured proposed an insurance on a stack of
wheat, "consisting of 154 loads, each load estimated to yield 7½ muids . . . . Total
value, £174 0s. 10d.: on stack of chaff consisting of 154 loads, each load estimated
to yield five bales . . . . Total value, £134 15s." The proposal form also contained the
words: "The foregoing particulars are to be held to be warranties furnished by or on
behalf of the proposer." Held, that the insurer warranted that he had put 154 loads
into the stack, and that a fair and reasonable estimate of the yield per load would be
7½ bags of wheat and five bales of chaff, but that he did not warrant that at least that
yield would in fact be realized.
Where an insured has made a statement in a proposal form, which he believed to be
true, the presumption is that it is true, and the onus is on the insurer to prove that it
is not true.

Promissory Warranty
Cole v Bloom 1961 (3) SA 422 (A)
In terms of an insurance policy against theft of travellers' samples, the policy was
subject to the warranty that 'all road vehicles conveying the samples hereby covered
(would) be saloon cars and/or panel vans and that all doors, windows and roof
(would) be closed and locked when such vehicles are left unattended'. A traveller
had picked up two hitch-hikers to Johannesburg on the previous day. On the day
concerned he had arrived at his uncle's house in Johannesburg and proceeded to
unload the goods contained in the boot of the car, with the assistance of these two
companions. Whilst the traveller was in the house, the two men had taken advantage
of his absence and had driven off in his car, from which two cases containing
samples had not yet been removed. To a claim by the insured to be compensated
under the policy in respect of the theft of these samples, the insurer had relied on a
breach of the warranty against leaving the car unattended, whilst unlocked and with
the keys in it. A Local Division having found that the car had not been left unattended
and having awarded compensation, in an appeal the Court found that on the
evidence all three of the persons concerned had been inside the house at one and
the same time, however brief the period might have been, and that the car had been
left unattended during that time.
Held, therefore, that the appeal should be upheld.
Quaere: Whether in any case the warranty did not call for something more
responsible than the act of leaving two out-of-work and out-of-pocket hitchhikers to
'keep an eye' on a car in which the key had been left.
The decision in the Witwatersrand Local Division in Bloom v Cole, 1961 (2) SA 92,
reversed.

Advantage of Warranties
Jordan v New Zealand Insurance Co 1968 (2) SA 238 (E)
In the proposal form for the insurance of a motor car the plaintiff had stated his age
next birthday as 22. The proposal form contained a declaration that 'the above
particulars are true, correct . . . and that (I) accept the insurance and the terms and
conditions set out in the policy'. The policy in its preamble recited that the proposal
and the declaration 'shall be the basis of this contract and it is deemed to
be incorporated herein', and 'that the truths of the statements and answers in the
proposal will be conditions precedent to any liability of the company to make any
payment under this policy'. In an action claiming amounts for which the defendant
was alleged to be liable, the defendant had pleaded that the plaintiff's statement
about his age was untrue because his age next birthday was 23 years.
Held, that in regard to the answers to the proposal from the plaintiff had given a
warranty and the parties had intended the answers to the plaintiff's age to be subject
to the warranty.
Held, further, that there was no room for the contention that the incorrectness of the
answer was not material.
Held, further, that there was no room for the application of the doctrine of substantial
performance in considering the truthfulness or otherwise of the answers to the
insurance proposal form.

Norman Welthagen Investments (Pty) Ltd v South African Eagle Insurance Company
Ltd 1994 (2) SA 122 (A)
In this more recent case, the insurer repudiated a claim for the breach of a term in a
multi-peril policy in terms of which the insured warranted to keep all vehicles stored
in the open, locked and to keep the keys of the vehicles in a locked safe. A vehicle
was stolen and a claim submitted. It then was discovered that the keys were kept in
a locked office in a cupboard and not in a locked safe as required and warranted by
a term in the policy. The keys played no part in the theft of the vehicle and were
found safely stored in the locked office in the cupboard after the theft. The vehicle
would have been stolen even if the keys were kept in a locked safe. No causal
connection existed between the failure to lock the keys in the safe and the theft;
nevertheless, the insurer repudiated the claim on the basis that the insured had
breached the term in the policy. To breach the term, it was not necessary to show a
causal link. The trial court found in favour of the insured and the matter was taken
on appeal to the Appellate Division where an attempt was made to bring the matter
within the purview of s63(3). The attempt failed and trial court’s decision overturned
in favour of the insurer.

So, once again, it was shown that insurers were repudiating valid claims for factually
immaterial reasons. Academics expressed the opinion that s63(3) (now re-
promulgated as s53(1) in the Short-term Act and s59(1) in the Long-term Act) did not
go far enough and further legislation was called for.

Statutory Reform
Viking Inshore Fishing (Pty) Ltd v Mutual & Federal Insurance Co Ltd 2016 (6) SA
335 (SCA)
In May 2015, a collision between two ships led to one of the vessels capsizing and
sinking and 14 crew members drowning. The appellant was the owner of the ill-fated
vessel, which had been insured by the respondent. The appellant claimed an
indemnity under the policy for the agreed value of the vessel, but its claim was
rejected and an action in that regard in the High Court failed. That led to the present
appeal.
Held –The clauses relied on by the appellant in support of its claim were of the type
commonly described as “Inchmaree clauses”, extending the indemnity under the
policy to situations beyond perils of the sea. The respondent’s principal line of
defence lay in the terms of the warranty provided for in the Merchant Shipping Act 57
of 1951. The relevant provisions stated that the Act and the regulations appertaining
thereto would be complied with at all times during the currency of the policy,
provided that the warranty would be effective only to the extent of the regulations
promulgated for the safety and/or seaworthiness of the vessel. The warranty was not
to be construed so as to nullify the Inchmaree clause. The parties were at odds over
the meaning and effect of the said proviso to the warranty. The appellant said that its
effect was to render the warranty irrelevant to the assessment of its claim as that
claim arose under the two Inchmaree clauses, while the respondent said that the
operation of the warranty could be reconciled with the Inchmaree clauses and
therefore breaches of the warranty could properly be raised as a defence to the
appellant’s claim. That was the primary issue in the appeal.
Addressing the respondent’s contention that it was not liable under the Inchmaree
clause due to the appellant’s failure to comply with the MSA warranty, the Court held
that there was no doubt that the collision would not have occurred and the vessel
would not have sunk were it not for negligence on the part of either or both of the
crews of the two vessels. Therefore, the risk that materialised was a risk covered by
the policy in terms of the Inchmaree clauses. The contention that the loss of the
vessel was due to a want of due diligence on the part of the appellant had to fail.
That meant that the appeal had to succeed and the appellant was entitled to an
indemnity under the policy.
[22] That renders it unnecessary to explore Mutual & Federal's grounds C for contending
that the warranty was breached. Had that been necessary it would also have been
necessary to analyse the scope of the warranty in far greater detail. Mutual & Federal
adopted the approach that at every moment of every day during the period of cover
Viking was obliged to comply with every regulation promulgated under the MSA for the
safety D and seaworthiness of the vessel. It contended that any departure from this
rigorous degree of compliance entitled it to avoid liability under the policy, citing the
classic statement by Innes CJ on the nature of a warranty in Lewis Ltd v Norwich Union
Fire Insurance Co Ltd. 12
[23] Those contentions adopted an extreme view of what was required from the insured
in order to comply with the warranty. I am by no means E satisfied that it was a correct
view. Such warranties are to be construed favourably towards the insured because of
their impact upon the liability of the insurer. 13 In other words they are to be given a
practical and businesslike construction in the light of the purpose of the clause and the
insurance policy. 14 They are therefore not lightly to be construed as F invalidating cover
on grounds unrelated to the loss.
[24] Looking at the MSA warranty in this light, it is plainly intended to require the insured
to comply with those regulations promulgated under the MSA that have to do with safety
and seaworthiness. But it is less plain that Mutual & Federal's liability under the policy is
always contingent G upon such compliance. Where that liability arises from an insured
peril having nothing to do with the safety or seaworthiness of the vessel, such as for
example, violent theft by persons from outside the vessel, piracy, breakdown of or
accidents to nuclear installations or reactors, contact with aircraft or similar objects, or
earthquake, volcanic eruption or lightning, 15 it can hardly be thought that the identity
and qualifications H of the crew on board or the absence of firefighting equipment or life
jackets should affect Mutual & Federal's liability to make good a loss
2016 (6) SA p345
Wallis JA (Maya AP, Saldulker JA, Swain JA and Victor AJA concurring)
under the policy. That points towards a construction of the warranty that A it applies
when the breach of regulations is materially connected to the loss that has occurred.

LONDON AND LANCASHIRE INSURANCE CO LTD v PUZYNA 1955 (3) SA 240

Headnote : Kopnota
The words 'lost or not lost' in a policy of insurance of goods in transit from one country to
another cannot and do not serve to extend the area or the
1955 (3) SA p241
DIEMONT AJ
duration of the risk but to cover the insured firstly in respect of any loss which may have
occurred (unknown to the parties) within the express terms of the policy and secondly in
respect of goods in which he obtained an insurable interest only after the loss had
already occurred. The effect of the words is to make the insurer's liability retrospective to
the commencement of the voyage where the risk has already commenced. But any loss
in respect of which it is claimed that liability has attached must be shown to have
occurred within the limits of the policy.
Under a marine policy of insurance taken out by the respondent with the A applicant
company it was agreed and declared 'that the said insurance shall be and is an insurance
(lost or not lost) upon etchings, etc., as per schedule attached'. The policy contained a
clause 'that the insurance attached from the time the goods leave the warehouse and/or
store at the place named in the policy for the commencement of the risk'. The schedule
contained eight pictures and a Persian rug: one of the pictures was an etching by
Albrecht Durer and it was together with B the other articles in the possession of one B, in
England, who had handed them to one D for the purpose of examination and valuation.
As respondent was determined to have these articles sent to South Africa he requested B
to make the necessary arrangements. When the parcel purporting to contain the
scheduled articles was opened in Cape Town the Durer etching was missing. B was
definite that it had been included in the parcel sent out. As the result of enquiries made,
both applicant and respondent were under the impression that the etching had been
shipped C but lost in transit. Accordingly, applicant paid the respondent the amount for
which the etching had been insured and respondent in turn signed a letter of
subrogation. Subsequently D wrote to the applicant's agents informing them that the
etching had been found in his house. The etching was handed to the applicant who
offered to deliver it to the respondent against payment of the amount paid under the
policy. The respondent declined to do so stating that he had renounced all claim to the
etching. Applicant moved on notice of motion for orders (a) cancelling the subrogation
agreement; (b) obliging the respondent to D repay the amount paid him; and (c) costs of
the proceedings.
Held, that subject to any extension which might flow from the words 'lost or not lost', the
policy only attached to such of the goods as had actually left the 'warehouse and/or
store' for the commencement of the transit.
Held, further, that before any claim could be effectively made under the policy there had
to be a loss within the limits of the policy.
Held, accordingly, that the risk under the policy at no time attached to E the etching and
therefore there was no obligation upon the applicant to indemnify the respondent, even
if it be assumed (as it was) that there had been a loss of the etching.
Held, further, as the applicant had paid the respondent under a common mistake of fact
that it was entitled to succeed on a condictio indebiti.
Held, further, as there was no real dispute of fact that the applicant was entitled to the
orders as prayed.
CREDIT AGREEMENT

STANDARD BANK OF SOUTH AFRICA LTD v DLAMINI 2013 (1) SA 219 (KZD)

Headnote : Kopnota
Mr Dlamini, a functionally illiterate Zulu speaker, bought a car from a second-hand car
dealer. The dealer acted as the bank's agent to facilitate the bank's financing of the
purchase of the vehicle. Four days later Mr Dlamini returned the seriously defective
vehicle and demanded a refund D of his deposit. The dealer did not refund Mr Dlamini,
and the bank's attorneys ended up issuing summons against Mr Dlamini.
The bank contended that, because Mr Dlamini did not notify the bank of the termination
in the manner prescribed by a certain clause in the agreement, the termination was a
voluntary surrender, in which case the bank could sell E the vehicle and claim any
shortfall due by him under the agreement. This clause provided that Mr Dlamini could,
within five business days, terminate the agreement on notice to the bank at a certain fax
number, and return or tender the return of the vehicle. What the agreement had not
recorded was that he was entitled to a refund in terms s 121(3)(a) of the National Credit
Act 34 of 2005 (NCA).
Held, that Mr Dlamini terminated the agreement by returning the vehicle F because it was
so defective that it could not be driven. The bank failed to establish a factual basis for
any finding that the termination was a voluntary surrender, which is usually triggered by
a consumer's inability to comply with the credit agreement. Mr Dlamini's mere non-
compliance with the procedural formality of faxing notice of termination did not lead to
the inference that he terminated the agreement by voluntarily surrendering G the vehicle.
(Paragraph [25] at 225E – F.)
Held, that the bank and its agents caused Mr Dlamini to enter into a credit agreement
without reading, interpreting and explaining the material terms to him, which he did not
know or understand. (Paragraph [26] at 225G.)
Held, that, when a credit agreement was terminated in terms of s 121, the H consumer
had the right of a refund from the credit provider, which the clause in the bank's
agreement studiously excluded. Rescission of the agreement under s 121 aims to restore
the parties to the status quo ante. The remedy to which Mr Dlamini was entitled when he
discovered that the bank's agent sold him a vehicle that could not be driven at all, was a
refund in terms of s 121(3)(a). (Paragraphs [37] – [39] at 228C – H.) I
Held, further, that non-disclosure of s 121(3)(a) violated the right of consumers to
education and information in terms of s 3 of the NCA. The bank's selection of what parts
of s 121 of the NCA it recorded in the agreement, and what it excluded, was deliberate
and deceptive. Such deception conflicted with the letter and spirit of the NCA.
(Paragraphs [41] – [42] at 229A – D.) J
2013 (1) SA p220
AHeld, further, that the bank could not have misunderstood Mr Dlamini's reasons for
returning the defective vehicle. The bank had given the dealer no mandate to report
vehicles that were returned within five days in terms of the termination clause. Such a
business practice made credit transactions unduly onerous and a trap for poor, illiterate
and disadvantaged people who intuitively would return defective goods to a supplier and
ask for a refund. B The bank could not absolve the dealer of its duty to act in good faith to
notify the bank in the ordinary course of commercial practice that the vehicle was towed
back and that it could not be driven. (Paragraphs [43] – [45] at 229D – H.)
Held, further, that for lawyers and lay persons alike, the form of the bank's standard
agreement was an unappetising, formidable read. For a labourer C like Mr Dlamini who
did not read, write or understand English there might just as well have been no written
agreement at all. Mr Dlamini was in a worse position than the purchaser who signed one
page of an agreement, but who was sued in terms of a clause appearing on the reverse
of that page which had not been sent to him. His failure to comply with a purely
procedural obligation had not been due to an unwillingness to comply, but D rather an
unawareness of such an obligation. (Paragraphs [53] and [57] at 231G – H and 232H –
233A.)
Held, further, that the bank could not hold Mr Dlamini bound to the agreement by
applying the common-law principles of caveat subscriptor and mutual consent. Due to his
illiteracy, the unpalatable form and get-up of the agreement would have been immaterial
to Mr Dlamini, and this was all E the more reason why the bank should have ensured that
its agents explained the material terms to him. Since Mr Dlamini was ignorant of the
prescribed notice requirements of the agreement, there was no mutual consent as
regards this term. (Paragraph [64] at 234F – H.)
Held, further, that the agreement had been skewed in favour of the bank by:
the F selective disclosure; the failure to inform Mr Dlamini of the contents of the
agreement; and the breach of his rights to information in an official language that he
understood and to information in plain and understandable language (ss 63 and 64 of the
NCA). Distorting the balance created in the NCA in this way was unlawful, defeated the
purpose of the NCA, and rendered the entire agreement unlawful. The entire agreement
had to be set aside. (Paragraphs [66] – [67] at 235B – E.)

SIKWEYIYA v AEGIS INSURANCE CO LTD 1995 (4) SA 143 (E)

Headnote : Kopnota
In terms of two accident insurance policies concluded between one M ('the deceased')
and the defendant in 1987, the defendant undertook that, in the event of the deceased
sustaining bodily injury resulting in his death, the defendant would pay to the deceased's
estate the compensation stated in each policy. 'Bodily injury' was defined in each
contract as meaning, inter alia, 'injury . . . caused by accidental violent external and
visible means . . .'.
On the evening of 6 November 1991 the deceased entered a shop, of which he was a
regular customer, in order to purchase cigarettes. While the deceased was in the shop a
shop assistant, one M, who was outside, observed and overheard two persons, who were
carrying stones in their hands, say to each other that they would 'get' the deceased. M
thereupon instructed his companion, V, to warn the deceased. V informed the deceased
that there were people outside who wanted to attack him and warned him not to leave
the premises. The deceased, however, stated that he had never harmed anyone and that
he would go out. On completing his purchase the deceased emerged from the shop,
whereupon a person approached him from the rear and struck him in the back of the
head with a garden fork. The deceased fell flat on his face and the attacker then stabbed
him in the back of the head with the garden fork before making off. The deceased was
removed to hospital where he died several days later from his injuries.
The defendant refused to pay out in terms of the policies, whereupon the H plaintiff, as
the representative of the intestate estate of the deceased, instituted proceedings in a
Provincial Division for the recovery of the compensation which he alleged was due to the
estate. The defendant denied liability, contending that the deceased's injuries were not
caused by 'accidental means' as envisaged by the policy, that his death was therefore
not due to 'bodily injury' as defined and that his demise was accordingly not an event
against which he was insured. The defendant conceded, however, that the deceased's
injuries had been caused by 'violent external and visible means' as required by the
definition of I 'bodily injury', and the sole point for decision was therefore whether his
injuries had also been caused by 'accidental means'.
The Court examined the meaning of the phrase 'accidental means' and of the word
'accident', as interpreted in foreign jurisdictions and in South Africa, and pointed out that
both the phrase and the word were imprecise. (At 147D/E.) It then referred to the so-
called 'strict approach' adopted in one line of cases, in terms whereof the phrase
'accidental means' is strictly interpreted and so is contrasted with phrases such as
'accidental J injury' or 'injury caused by accident', since it looks to the means
1995 (4) SA p144
A by which the result is achieved and not to the result itself and, although numerous
injuries are accidental in the sense that the insured did not expect or intend them to
occur, many such injuries would not be caused by 'accidental means'. In other words, this
approach distinguishes between accidental means and accidental results. (At 147E/F-F
and 148G.) With the 'strict' approach the Court contrasted the 'liberal' approach adopted
in another line of cases, which had regard to whether the insured intended to injure
himself or whether his injuries (that is the result of his actions) could be regarded as
having been accidentally suffered. (At 150C/D.) The Court concluded that, in the light of
the decisions to which it had referred and what it viewed to be justified criticisms of the
strict approach, it was of the opinion that the liberal approach was to be preferred and
that, as at the end of the day the Court had to decide whether or not the loss or damage,
that is the result, was accidental, it was illogical to attempt to distinguish between the
accidental character C of such result and the means which produced it. (At 150H-I.)
The Court went on to hold that, applying the liberal approach to the facts of the case
before it, the plaintiff had to succeed: although the deceased had been warned that there
were people outside who wanted to attack him and that he should not leave the shop,
there was no indication that he, by disregarding that warning and leaving the premises,
was prepared to forfeit his life; it would be illogical to hold that, although the deceased
had not anticipated or foreseen himself being attacked and killed D with a garden fork,
his death by such means was not 'accidental'. Accordingly the unexpected and
unintended attack with a garden fork causing fatal injuries constituted 'accidental means'
as envisaged in the policies. (At 150I-151B.)
With regard to the argument advanced by the defendant that, even if the infliction of
fatal injuries upon the deceased was unexpected, it could not be regarded as having
been an accidental occurrence as it had followed E in consequence of him having placed
himself in a hazardous situation, the Court held that, even if one accepted the principle
that an occurrence was not accidental where an insured deliberately caused the risk of
injury by embarking on a course of action which was hazardous and where the
occurrence of injury or loss, objectively stated, was a natural or probable consequence of
his action, it followed that, if a deliberate act on his part caused an injury which was an
unexpected and unforeseeable result of his action, that injury was caused accidentally.
(At 151B/C-C F and 151G-H.) The result of the deceased's action in leaving the shop,
notwithstanding the warning he had received, was not foreseeable: one could not lose
sight of the fact that the deceased, on being warned of persons waiting for him, had
stated that he had not harmed anyone; moreover, he had not armed himself or sought
any assistance to ward off any attack, nor was there any suggestion that he had in fact
done anything to anyone likely to provoke a savage assault upon him, nor was there
evidence that he had earlier been the victim of death threats or had reason to believe
that he was likely to be murdered. At best for the G defendant, all the deceased
anticipated was probably some minor form of confrontation. There was therefore nothing
to indicate that he had deliberately placed himself in a situation of risk by embarking on
an obviously hazardous course of conduct likely to result in him being either fatally or
seriously injured. Even if a confrontation was reasonably foreseeable, it would not have
been of such a nature that the fatal attack upon the deceased was a natural or probable
consequence of his action in H leaving the shop to face the persons who had allegedly
threatened him. There was therefore no reason to hold that the attack upon the
deceased was, from this point of view, anything else but accidental. (At 151H-152A/B.)
The Court accordingly held that the plaintiff had established that the death of the
deceased was due to injuries caused by 'accidental means' as envisaged in the definition
of 'bodily injury' contained in the policies, and the plaintiff was therefore entitled to
payment of the two amounts due I under the policies.

N & B CLOTHING MANUFACTURERS (PTY) LTD v BRITISH TRADERS' INSURANCE

CO LTD 1966 (2) SA 522 (W)

Plaintiff, who carried on business as clothing manufacturers on the 5th floor of the C.
House, had taken out a policy of insurance with the defendant for loss by theft following
upon forcible and violent entry of C the premises. The premises had subsequently been
forcibly and violently entered and insured goods had been stolen. The plaintiff claimed
indemnification. The defendant repudiated liability and relied, inter alia, upon condition
4 (a) of the policy which read as follows: 'Under any of the following circumstances the
insurance ceases to attach as regards the property affected unless the insured, before
the occurrence of any loss or damage, obtains the sanction of the company signified
by D endorsement upon the policy, by or on behalf of the company: (a) if the trade be
altered, or if the nature of the occupation of or other circumstances affecting the building
containing the insured property be changed in such a way as to increase the risk of loss
or damage by theft.' Access to the factory premises on the 5th floor was by means of a
goods lift. On this level of the building there was a door, leading from the goods lift into
the factory premises, with a glass panel and across this panel two metal bars were
welded. At the time when the E insurance was effected the ground floor landing of the
goods lift was enclosed by double metal-lined doors in proper working order and capable
of being locked by mortice locks and padlocks. The doors, when locked, sealed off the
goods lift from the rear yard of C. House, which bordered on G. Street, where there was a
side-entrance to the building. This entrance from G. Street was protected by a large
steel-roller door which fell down from above. In this door there was a small door or
hatchway which was capable of being locked by means of a Yale lock. The
forcible F entry had been effected from the goods lift by means of breaking the glass
panel and one of the two metal bars across it. Immediately before the entry was effected
only one of the metal-lined doors at the entrance to the goods lift on the ground floor
was in position on its hinges, the other metal-lined door was completely off its hinges and
had for some time been resting up against the outside wall of the lift shaft and was
incapable of being used and locked.
Held, that 'building' in the condition referred to C. House in its entirety and not merely to
the 5th floor thereof.
G Held, further, that there had been circumstances affecting the building and a change of
a kind which had increased the risk of loss or damage by theft. Claim accordingly
dismissed.

MUTUAL & FEDERAL INSURANCE CO LTD v SMD TELECOMMUNICATIONS CC 2011

(1) SA 94 (SCA)

In an accident insurance policy in which the insurer undertakes to compensate the

insured in the event of disability or death of a particular person caused solely by violent,
accidental, external and visible means, which injury shall independently of any other
cause be the sole cause of any of the results, if the parties intend to exclude pre-existing
infirmities as compensatable causes of such disability or death, this should be
unequivocally stated in the insurance contract by means of an appropriate exception
clause. (Paragraphs [1] and [21] at 95D - E and 102D - E.)
Where in such an insurance policy it was provided in an exception clause that cover was
excluded for 'any occurrence consequent upon any pre-existing physical defect or
infirmity', the insurer cannot, in an action for payment in terms of the policy, rely on the
exception clause if it has not pleaded it. Where the insurer has failed to place reliance on
the exception clause before or during the trial, it is not able to do so on appeal, nor can it
seek an G amendment on appeal. This is so because, if the clause had been pleaded, the
onus would have been on the insurer, during the trial, to prove that the insured's
occurrence fell within the terms of the exception, and the insured would not be
prejudiced because it would have had an opportunity of rebutting this evidence.
[11] At the outset it is necessary to consider the use of the words 'bodily G injury' in the
occurrence clause. There is a long line of cases in which it has been recognised that,
even if the loss is not felt as the immediate result of the peril insured against, but occurs
after a succession of other causes, the peril remains the proximate cause of the loss, as
long as there is no break in the chain of causation.

YOUNG v LIBERTY LIFE ASSOCIATION 1991 (2) SA 246 (W)

The insured had taken out a policy of life insurance with the respondent. An exemption
clause in the contract provided that the contract would be void if within two years of the
date of issue of the policy the insured died 'by his own act'. The insured died within two
years of the issue date of the policy by putting a pistol to his head and pulling the trigger
in jest and in the mistaken belief that the pistol did not contain a bullet. In an application
in a Local Division by the beneficiary under the policy for payment of the sum insured,
the respondent attempted to avoid liability under the policy by contending E that, on the
ordinary grammatical construction of the clause, liability was excluded and to hold
otherwise was to read into the clause a qualification such 'as accidental, intentional or
negligent'. In an application for a determination on a point of law,
Held, that the policy had clearly been intended to provide cover for the insured against
the risk of accidental death and on the facts placed before the Court that that was how
he had come to meet his death: the exemption clause was not wide enough to cover an
accidental death even F though such accidental death was caused as a result of the
conduct of the insured. Application decided in favour of applicant.

Van Zyl NO v Kiln Non-Marine Syndicate No 510 of Lloyds of London

[2002] JOL 10258 (SCA)

On appeal, the issue was whether in terms of an accidental death and disability policy, the
deceased had died in an accident and whether, if so, the insurer was nevertheless exempted from
liability because the deceased was guilty of ‘wilful exposure to danger’. The appellant brought an
application for payment in terms of the policy as the executrix in the estate of her deceased
husband.

Held, that the policy provided cover in cases of ‘accidental bodily injury resulting in death or
disablement’. The deceased had died while driving home from a party where he had consumed
more alcohol than was permissible for someone about to drive a vehicle. One of the exceptions to
liability under the policy was wilful exposure to danger.

In cases such as this, the ordinary rule is that the insured must prove himself to fall within the
primary risk insured against, whilst the onus is on the insurer to prove the application of an
exception. The court examined the meaning to be attributed to the terms "wilful" in the context of
the insurance policy and concluded that the deceased's conduct did qualify as wilful. The majority
of the court therefore dismissed the appeal.

Beresford v Royal Insurance Co Ltd

[1938] 2 All ER 602

By a condition in an insurance policy issued in 1925, it was provided that: “If the life assured shall
die by his own hand, whether sane or insane, within one year from the commencement of
the insurance, the policy shall be void as against any person claiming the amount hereby assured
or any part thereof.” The premiums were regularly paid upon the policy until 1934, when the
assured committed suicide. It was found as a fact by a jury that the assured was sane at the time
of his death:—

Held – although the condition in the policy necessarily implied a positive undertaking by the
company to pay if the assured died by his own hand, sane or insane, after the expiry of a year from
the commencement of the insurance, it was contrary to public policy that either a person who had
committed a crime or his personal representative should be allowed to benefit by that crime. In the
circumstances, therefore, the contract was unenforceable.

NICOLAISEN v PERMANENTE LEWENSVERSEKERINGSMAATSKAPPY BPK 1976 (3)

SA 705

Headnote : Kopnota
Where an insurance company opposes a claim on the ground that a condition in an
insurance policy which reads as follows 'If the insured life commits suicide, whether
fully compos mentis or when insane, within two years from the date of issue, this policy
shall be null and void...' the onus is on the insurance company to prove on a balance of
probabilities that the circumstances of the insured's death fall within the scope of the
condition. It must show that the insured intended to end his life. The intention can
be directus or indirectus,
1976 (3) SA p706
VAN WINSEN R
which would also include dolus eventualis, and recklessness is an element of the
concept dolus eventualis. Thus, where the insured died as a result of a shot which he
himself fired through his head, and it appeared that he had fired it intentionally or
recklessly in the sense intended, the Court held that the company had discharged
the onus

Ackerman v Loubser
1918 OPD 31

A person insured against accidents has the right to recover damages from a wrongdoer for any
wrong done to him although he has already been compensated in respect of such wrong by the
insurers, but, as the principle of of5 subrogation is applicable in our law, the insured, if fully
compensated by the insurer, becomes a trustee for any compensation paid him by the wrongdoer
and is bound to hand over to the insurer whatever money he receives from the wrongdoer over
and above the actual loss he has sustained after taking into account the amount he has received
under the contract of insurance.

Semble: An insured who has been fully compensated by the insurer may cede his right of action
against the wrongdoer to the insurer and the insurer may then sue in the name of the insured.

WALKER v SANTAM LTD AND OTHERS 2009 (6) SA 224 (SCA)

After the appellant's motor car had been hijacked and damaged beyond repair, the
appellant lodged a claim for compensation with the third respondent which administered
his insurance policy underwritten by three insurance I companies, the first, second and
third respondents. The claim was repudiated. The appellant thereupon sold the wreck of
his motor car to a scrap metal dealer and informed the third respondent thereof. In order
to enforce
2009 (6) SA p225
his claim in terms of the policy, the appellant then instituted action in a A magistrates'
court for compensation, claiming the difference between the insured value of the car in
its undamaged condition and the value of the wreck, less the compulsory excess, being
five percent of the difference. The respondents defended the action, but the magistrate
granted judgment in favour of the appellant with interest at the prescribed rate and
costs. The respondents appealed to a High Court against the magistrate's B judgment.
The High Court upheld the appeal, holding that the evidence that had been placed before
the court was insufficient to enable the court to determine the value of the motor vehicle
in its damaged condition, with the result that the appellant had failed to prove the
quantum of his damages. It appeared from the evidence before the magistrates' court
that the respondents never disclosed the reasons for their repudiation of the claim,
despite having been C requested to do so. The only defence persisted in during the trial
in the magistrates' court was that the appellant had not proved his damages and based
its contention in this regard on the decision in Erasmus v Davis 1969 (2) SA 1 (A). In a
further appeal,
Held, that our law recognised a clear distinction between claims based on D contract and
those based on delict. Erasmus v Davis dealt with an ordinary delictual claim for
damages arising out of a motor collision. The present case, on the other hand, was based
squarely on a contract of indemnity insurance. This fact had important consequences -
not only with regard to the onus of proof, but also to the facta probanda required in order
to succeed. (Paragraph [15] at 229H - I.) E
Held, further, that in terms of basic principles of indemnity insurance the insured was
entitled to recover the actual commercial value of what he has lost through the
happening of the event insured against. The ordinary rule was that an insured had to
prove that his claim fell within the primary risk insured against, while the onus was on
the insurer seeking to avoid liability to prove the application of an exception. (Paragraph
[16] at 230A - C.) F
Held, further, applying these principles to the present case, that the respondents were
liable in terms of the policy in question to compensate the appellant 'if the vehicle or any
part of it (including accessories) is lost or damaged'. The 'maximum amount payable'
would be the lower of 'the sum stated in the Policy Schedule, or the retail value (adjusted
for mileage and condition)'. The sum stated in the Policy Schedule in this case was G R98
100 and the appellant's unchallenged evidence established that this sum equalled the
retail value of the vehicle. (Paragraph [17] at 230C - D.)
Held, further, that the appellant had accordingly succeeded in bringing himself within the
primary risk insured against, with the result that the respondents were contractually
bound to indemnify him in an amount of R98 100, less the 'first amount payable'
amounting to five percent of the agreed loss, H unless the respondents could establish
some valid excuse for refusing to pay. (Paragraph [17] at 230E.)
Held, further, that the respondents had repudiated liability for reasons that were still
unknown and the conclusion was irresistible that the respondents had no valid excuse for
repudiating liability. Faced with such repudiation, it was incumbent upon the appellant to
take reasonable steps to minimise his loss. I His own evidence that he did everything
reasonable in order to get the best price available went unchallenged. (Paragraph [19] at
230H - 231B.)
Held, further, that on the evidence the appellant had proved - at least prima facie - that
he had taken reasonable steps to minimise his loss and the respondents had failed to
rebut such prima facie case.

Renasa Insurance Company Limited v Watson (32/2014) [2014] ZASCA 13 (11

March 2016)
This appeal has its origin in a fire that erupted during the morning of 10 January 2011 in industrial
premises in Elsies River, Cape Town. Pursuant thereto the respondents sought indemnification from
their insurer, the appellant, for the loss they suffered as a consequence of the fire. The insurer
repudiated the claims and the Western Cape High Court found in favour of the respondents
awarding them their respective claims. This finding was upheld by the Supreme Court of Appeal on
the basis that the appellant had failed to discharge the onus of proving its defence, namely that the
first respondent was the arsonist who had set fire to the premises, alternatively that the
respondents are precluded from claiming loss due to a failure to take reasonable steps and
precautions to prevent the loss.