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INSURANCE LAW NOTES

Zimbabwean Case Authority
A perusal of the Zimbabwean law reports reveals a paucity of case authority pertaining to the duty to disclose in insurance law.
This fact may be explained by the admission by a Claims Manager interviewed by the writer, that, in order to avoid adverse
publicity, insurance companies have on diverse occasions entered into compromises with insureds whose policies have been
avoided, paying a nominal percentage of the claim, whilst at the same time appeasing the insured and avoiding the eventuality of
judicial litigation. In addition, as happened in the local case of K N Nel v Heritage Insurance Company Ltd (discussed in
Chapter One), often insureds are advised not to persist with their claim since, as a result of the unsatisfactory state of the law,
the claim is doomed to failure, however sound it may be.

In the case of Kelly v Pickering and Another, (1980 Zimbabwe Law Reports page 61) the defendant, after he had had an
epileptic fit whilst undergoing military training, was diagnosed as a very mild epileptic. When he took out a motor insurance
policy with the insurance company, his insurance broker answered “no” on his behalf to a question in the proposal form asking if
he suffered from any physical or mental disability; despite his having advised the broker to consult his doctor before answering
the question. Subsequent medical tests indicated that the defendant was probably not an epileptic. Nevertheless, the insurance
company successfully repudiated the policy on the ground that the defendant had breached his common law duty of disclosure in
addition to a warranty in the proposal form.

The learned Justice Beck accepted the insurer’s evidence that the mere possibility that a proposer for motor insurance might be
an epileptic sufferer, however mild, would put a prudent insurer on guard before determining whether to accept the risk and on
what terms, and accordingly upheld the insurer’s prayer for the avoidance of the policy on the basis of non-disclosure, holding
that :
“… the fact that the risk of epilepsy might subsequently have turned out to be non-existent did not relieve him (the
insured) of the duty to disclose”.

In words reminiscent of those of MacKenna J in the Lambert case, the learned judge lamented at the injustice to the insured of
the decision reached:
“I have a measure of sympathy for the defendant … I did not detect in his evidence any indication that he ever
intended to deceive his insurer in any way. Unfortunately for the defendant, the duty to disclose material facts
within his knowledge is absolute and cannot be avoided by delegation, so that his conduct cannot be taken
into consideration, as in any way defeating the insurer’s right to avoid liability.”

This case highlights the fact that the law deems the agent who fills in the proposer’s proposal form, although employed by the
insurance company, to be the agent of the insured so that any failure to disclose on the part of the agent will be imputed to the
proposer. Such state of affairs is self-evidently unjust : The agent was employed by the insurance company and such company
should consequently bear the consequences (i.e. liability to avoid the policy) of the inefficiency of such agent; especially in a
case sc as this were the proper had specifically requested the agent to consult his medical practitioner and the agent neglected
to do so.

These cases cumulatively demonstrated the urgent need for the reform of the Zimbabwean duty to disclose since the practical
application of the same has been so haphazard, unreasonable and arbitrary that no distinct principles relating to materiality can
be distilled; has served no real purposes and the duty has instead been abused by unscrupulous insurers as a means to the
avoidance of often indisputably genuine claims on basis that lack substantive merit.

A lessee has insurable interest in property leased by him because

- his liability to an owner for damage to property would be basis of insurable interest.
- So a lodger should have insurable interest . Eansaam syndicate v Moore 1920 AD 457 Van Achterber v Walters 1950
3 SA 734T Green v Heyman 1963 3 SA 390.
- Where lessee’s possessory rights are at stake, lessee has right because he would be prevented from enjoying rights
where the contract. So lessee can insure a house in which he is renting. If there is a fire, lessee should be in a
position to indemnity to the extent of that so lessee can enjoy some h….
- Where property is leased for but then profits affected so interest must be specified i.e. – Nandos – business related to
premise loss of premises due to a fire impacts on Nando’s profits. This interest must be insured economic.

Benson v SA Mutual Life Assurance 1986 1 SA 776

- A mortgage has interest in property
- A bolder of a bond has interest

An owner of a car has insurable interest in the liability of an authorized ………..property. A partner has insurable interest in
partnership property.
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Terms usually consensual but sometimes the terms may be natural implied by law .i.e. parties specially agree on the applicability
of a term so law does not exactly determine meaning of terms but warranties sometimes implicit e.g. sea worthiness of a slip as
well as subrogation. Legislation also implies terms.

Consensual terms
- expressly and tacitly stated
- There are obligatory and non obligatory

Obligatory
- impose positive duty on the insured to fulfill a term

Non obligatory
- a positive duty is not imposed these are either suppositions or conditions. A supposition makes the obligations arising
from the contract dependent on some event e.g. it is assumed that insurance contract is concluded before the
event insured again has not occurred.
- Good faith is implicit in the contract – Truckers Land & Development Corporation v Hovis 1980 (1) SA 645
- Interpretation is a question of law and is aimed at determining the common intention of the parties as expressed.
- This the general/golden rule in terms of contract of interpretation
- Consensus pressured as basis of contract.
- While there are a lot of rules on interpretation of contracts, there are some priority rules. Judicial decisions offer
insufficient guide on relationship between rules of interpretation. Some rules always applied.

Primary rules
- Words should receive ordinary grammatical ….
- Words should be read in context of center as a war
- E… word should re……effect.

Secondary rules
- el… generis rule
Word used in contract ascertain meaning of contract not blanket term ….attaché to it.

Grammatical …
- plain, everyday meaning through constant usage in community courts usually use dictionaries and previous judicial
interpretation but one must

Exceptions
- Words with a technical meaning different from the ordinary meaning .
- If application will lead to an absurdity results in the unintended meaning
- Ordinary meaning not static

Context
- have regard to rest of contract all terms of contract must be read in conjunction
- marginal nots part of the contract
- re… or preamble not really part of center, only subordinate to operate part of contract but not divorced for contract.

Intermediaries/Brokers
The public face of insurance is mainly the intermediaries – insurance brokers – the Paul Mukondo’s.

It is through these people that insurance business is usually conducted.

Why
- Insurance Company usually corporates and it is through these people that business is conducted.
- Brokers are a convenient way of dealing with insurance company to negotiate for favourable deals.
- Through agency is a term found in many branches of law, in insurance it has acquired its own meaning i.e. an
intermediary who has authority to negotiate insurance business on behalf of an authority.
- There is the second aspect i.e. agent contracted by an insurer but does not have authority to do certain acts e.g.
employees, canvassing assessors, doctors.
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The consequences of actions of brokers are determined by the person on whose behalf the broker has acted – a broker
may be contracted by a proposer to obtain insurance cover but at the same time be contracted to receive premium on
behalf of the insurance company or grant interim cover.

MISREPRESENTATION
Brokers/agents are renowned for misrepresentation leading to conclusion of a contract.

In the process of determining liability for the misrepresentation, question that are asked are – to what extent is the principal
liable?
- liability of broker depends on the satisfaction of delictual grounds of liability
- a critical essential element is proof that the other party was in fact misled – in order to prove causation.
- A principal can also be liable for a…….

BROKER
- an intermediary between insured and insurer
- brokers are different from canvasses they are not tied to a particular insurer : Insurance broking is a profession.

Duties of a broker
- Duty to act with reasonable care and skill. This is the most important duty which is implied by law in every profession.
Care and Skill are natural of the agreement – Rabnowitz v Ned Equity Insurance Company 1980 1 SA 403.
Of importance are two considerations :
- what level of skill
- is standard …..that can be attained by an ordinary average broker.
Level of skill required is that of the profession to which the broker belongs. Statute provides for certain levels of
performance to a limited extent through requirement that a broker be regd.
- Duty to obtain insurance cover – primary duty – in a reasonable time
- To advise insured promptly of the terms of the cover.
- Authority to conclude cover on behalf of insured – all acts ordinary incidental to the conclusion of the insurance
contract.
- Broker liable for facility to obtain cover in time.
- Duty to investigate insured’s needs so that insurance obtain actually covers the needs.
- Duty not to insure with an insolvent insurer – so must know business environment after conclusion of contract must
also warn insured of any likeliness that chosen insurer will not be able to pay claim.
- Must discuss and ensure that insured discloses all material information insured is bound by omissions of broker – Kelly
v Pickers (2) 1980 (2) SA 758 as well as Std General ins. 1980 4 SA 326.
- Broker may however be liable to insured if the fails to disclose
- Duty to deliver policy – must ensure that insured gets policy or must keep it safe until so that insured can verify co….of
information.
- Duty to advise as to nearing of policy.
- To advise when cover has lapsed
- Not to cancel contract without authority
- To assist with claim – not general but must be written into the contract when done duty.
1 establishment of loss
2 completion of claim
3 receive payment
4 transmit it to the insured
- insurer not discharged from liability if pay to broker unless broker authorized to receive payment.
- Duty to account and render account
- Act in good faith
- Act in the interest of …
- Not to enter into contract of competing mandates
- Not to make a secret profit

Must comply with

Rights
- to retain policy as a lien against any expenses incurred
- right to be remunerates – fee
- right to commission – insurer
- right to be reimbursed and indemnified for any losses
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- a broker who introduces new business to the insurer

- contract must be concluded

Insurance Agents
- statutory de…
- An insurer will only bear consequence of a juristic act concluded by a person with authority

Insurers complete proposal forms on behalf of insurance company or something with approval of only the knowledge of a agent
with authority to bind insurance company be imputed on the insurer or when he has been instructed to obtain information e.g.
doctors, assessors.

Bawden v London Endiburg & Glasgow Association Company 1892 2 QB 534.

Proposer almost illiterate with one eye. Proposer dictated answers. Agent then warranted that no inf… insurer liable.

Drysdale v Union Fire Insurance Company.

Agent who filled in proposal after satisfying himself of the condition of the premises held liably.

Simon v Equitable Marine & Fire

Agent had been correctly informed of use of premises but said that premises used for other business note was made without
knowledge and authority of insured.

Lenwarts v TSN Motors

2002 ALL SA 337 2001 4 SA 1100
Stander v Raubbheiner
1996 2 SA 670

Premium
Premium is the other bargain in insurance, the insured’s part of the contract. No insurance is possible without
- premium
- liability of insurer usually does not attach where premium has not been paid.
- If premium is not paid within a certain time, contract comes to an end

Depending on wording of the contract payment of premium is c…

Duty
There may be an agreement that payment of premium will take place failure of which the insured is considered to be in breach –
insurer can then resile from contract.

Formality
Prepayment may be a formality to validity of contract. No payment no insurance. There is no obligation to pay, no breach no
liability.

Payment suspensive
-Cover comes into being when premium is paid. Contract can become operative retrospectively upon payment
Resolutive – c….payment – validity

Time of Payment
Critical for validity of contract and liability of insurer.

If no date is put – payment due when insurance expires. Cover commence at conclusion of insurance. No harm in late payment.

Time specified
- insurer has election to cancel contract or accept late payment
- insurance may lapse by operation of time so no need for formal rescission.
- Payment may be a way to renew contract
- Critical in co….contract are the days of ….-contract expires after days of ….expire.

How pay
By legal tender – cheque, cash
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If pay by cheque it must reach and be cleared before the expiry.

Who pays premium

Anyone can pay no need for insurable interest

To whom – insurer on his agent at appointed place

Return of premium
- usually only possible if there is proof that cover was induced by fraud.
- Sometimes insurer runs no risk – object destroyed before effect contract so return premium
- But sometimes, risk is run then no return
- If contract is void for lack of consensus
- If no insurable interest
- Conditions apply and they are not met
- Where there is breach of warranty and insurer cancels contract

Interim contact
- taken before the full cover is given while …….preliminary

Duration is limited. Granting cover does not oblige insurer to grant full cover.

Usually granted during a reminder, renewal

Given usually by agents
- Premium payable
- Warranties apply, disclose, some duties
- Automatically pa….when cover note the expires.

Claim
- a valid contract
- suspensive conditions must have been fulfilled
- peril must have occurred during currency of contract
- loss must have occur
- loss must be proximately cancel

Critical to this is the notification of loss

Amount that can be claimed sometimes limited by contract

Notification of loss
- usually considered as a strict obligation, no question of taci.., fact that insured did not know is immaterial or he could
not have reasonably known.
How
- the …stipulated – within 3 days as in Scottish Union National Insurance Co. Ltd v Native Recruiting Corporation 1934
AD 458

Usual – immediately forthwith or as soon as possible ….

Sleightholme Farms Pvt Ltd v National Farmers Union 1967 1 SA 13.

Reasonable time depends on circumstances

Time to investigate cause of effect is usually the purpose.

Royal Mutual v Mubaiwa 1990 4 SA 177

Radar Holdings v Eagle Insurance Company
Ndawana v Naglo
- insurable interest
- risk – description, alteration
- premium fault where pay
- claim when pay
discloser in a reasonable ..
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- contract
- disclosure
- agent
- ordinary business relations
- notitication of broker
- causation
- obligation of a broker

Subrogation
- Subrogation – substitution of one party for another as creditor
- In insurance the doctrine provides for the substitution and reimbursement of an insurer which has indemnified its
insured under a policy of insurance.
- Insurer may reimburse itself against its insured out of the proceeds of any claims that the insured may have against
third parties ….loss

Castellain v Preston 1883 11 QBD 380

- Insurer may also have the right to take charge of proceedings against 3rd parties who are liable for loss to insured.

- Insured remains holder of rights against a 3rd party so if insured discharges 3rd party from liability insurance company
cannot insist on observance thereof.

Origins in Roman
3rd party who pays another’s debt can claim reimbursement from that other person 1918 OPD 31

Ackerman v Louser – receipt of doctrine

Commercial Union Insurance Co of SA v Lotter
Royal Mutual v Mubaiwa sup

Purpose
- related to indemnity. Insured cannot receive and retain compensation from both insurer and a 3rd party.
- Insured can simply release 3rd party from liability when claim from Insurance Co.
- Cost of insurance company be kept low where insurer is in a position to recoup loss from other sources than premium
- Also a person who has causal lass to another must bear the consequences so when sued the 3rd party cannot invoke a
defence that

Person is insured
- Subrogation is confined to 3rd parties and indemnity. Fire, liability motor does not apply to non-patrimonial
- Subrogation cannot be invoked against the insured who has caused loss but can do so against members of household
where insured has such rights.
- A donation could be subject to subrogation – e.g out of sadness, guilt pay for funeral expenses etc. Gift must have
made a reduction in the loss
- Partially or totally substantially for loss of interest

Requirements
- contract of insurance must be valid
- insurer must properly discharge obligation to insured and not just partially – insured must be satisfied of repairs.
Insured’s loss must have been fully compensated. If insurance not adequate, insure cannot lay claim on payment
by 3rd party.

Rights of Insurer
- Insurer can claim from a 3rd party who has received a benefit from a 3rd party …..loss. Whether payment was
voluntary.
- Insurer has right to conduct proceedings against 3rd party insurer has no independent claim – it simply enforces claim
of insured for its own be next
- Insured must assist insurer

Duties of Insurer
- Insurer must not prejudice position of insured through an infavourable settlement.
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- Any cost awarded in favour of 3rd party who successfully defe…the case are payable by insured. But since action is for
the benefit of insurer, insurer must bear costs.

Defences available to 3rd

- release from liability
- settlement and release of claim by insured or insurer
- contacts must contain on express subrogation clause
- merely declaratory of common law.

Salvage and Rights thereunder

Insurer’s right to salvage arises where there is total loss.
- If object is totally destroyed or so damaged as not to be of original use and value to insured or if insured is deprived of
possession for reasonable time and recovery is unlikely or uncertain.
- Related to where an insurer has paid insured for loss but the object is still in existence
- Insurer then entitled to the remains of the object or if recovered to the whole

M Zahn Investments Pvt Ltd v General Accident Insurancae at SA Ltd 1981 4 SA 143.

Rt at Salvage
Consequence of indemnity purpose is to prevent
- Right of insured to claim if ownership is transferred from insured to insurer.

Agent is agent of insurer not insured

- abstract reasoning applied by court

Caveat agency Subscriptor

1912 AC 716

Widow – 2 cottages
Clerk taking over responsibility of solicitors , facilitated conveyancing of 2 doc.

Newsholme
Opposite

Formulated own question on law of agency

Link the issue of agency to brokers
Duties arising therefrom

Outline duties of agents/brokers

Obey instructions
Skill
Honesty
Accountability

Commerce has altered duties and scope of brokers duties

Conflict of interest arising herefrom
Insurers pay agents (brokers)
Who pays the …calls the tune
- not compulsory
- obtain cover

5 Contract Interpretation
- As in all cases, one who avers must prove the averment. So one who avers that a contract of insurance exist must
prove the existence of the contract. With a contract of insurance usually a policy document exists.
- Contents can be expressed by word or deed. 2 stage inquiry
1 which words and declarations form part of the contract and need interpretation
2 interpretation
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General evidence rules apply in addition the p…evidence rule is especially important i.e. where parties entrust words to be
embodied in a doc the doc becomes the sole record of the transaction. NO evidence outside the contract is accepted to p…that
certain words form part of the contract.
- Acceptance of the words as such indicated by signature. Usually a term to say that or is embodiment of contract is
included
1 What are the advantages of retaining – is there any purpose served by warranties?
2 Defects of warranties – Detrimental effect of warranties.
3 Warranties so horse that insurance policies are invalid
4 Breach – Null and void
5 Effect of warranties on likelihood of recovery.
6 Effect of warranties – Burden, Reforms
7 Provision of misrepresentation Do they not serve the same purpose? Are they worth?

It is not worth paper that it written on. – What is the meaning at the end of the

Should a proposal be considered as part of the contract.

Nullification
Strict duties – take st

Certification of truth
good faith
- extra caution required
- to ensure liability

Conditions

Regulations of risk – fairness on parties

Removal of controversy

Insurer has no remedy based on warranty, whether or not representation is false unless representation is material.

Insured cannot waive protection offered and measure over, d.. agreement.

Representation – a pre-contractual statement or non disclosure that affects the conclusion of the contract – assessment of
risk/premium

Representation don’t form part of contract unless the insured has warranted them to be true.
SA Eagle Insurance Co. v Norman Welthagen Investments (Pty) Ltd 1994 (2) SA 122.

Promissory warranties as to the future are not representations as intended in statute so retain full common law effect.
- orrect statement of age immaterial at common law incorrect statement at age material.

Subrogation
What is?
Subrogation means
- Substitution of one party for another as creditor – Oxford dictionary

Intermediaries
Agency law governs the relationship between insurance intermediaries, insurers and insured concealing that agency defies exact
meaning. Intermediary therefore employed as a generic term to include all types of insurance functionaries.

When does one come across intermediaries

- Business of insurance largely transacted through intermediaries usually two classes:
1 Insurance company not being natural people transact through representations, and some clients
corporate do the same
2 People resort to intermediary as solution for convenience, also a marketing solution for co.

Agent taken as an intermediary who has authority to conclude juristic act.

Others not authorized to conclude juristic acts but stand in special relationship with insurer.
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Types of intermediaries
- those who canvass for insurance bus Zim leg on this?

In reality it is difficult to draw line who is whose principal for what e.g. a broker may be instructed by a proposer to obtain
insurance cover or he may be instructed to receive premium on behalf of insurer.
However cannot act simultaneously for both

Misrepresentation by intermediaries
Sometimes misrepresentation by an intermediary results in conclusion and avoidance of insurance e.g. Qilingile case
Bottom line, an intermediary who is guilty of misrepresentation is personally liable for damage he causes. All requirements of
delictual liability must be satisfied for an intermediary to be held liable

Causation important consideration – person who concluded contract was in fact misled by the representation in insurance Poole
and Mclenan v Nouse 1918 AD 404

An insurance broker is an intermediary between insurance company and insured.

A broker is not tied to an insurance company can have business with all insurance companies. Broker acts as a professional
and where instructed by insured, acts on his behalf.

Duty to act with reasonable care and skill

Is most important and is a natural of the agreement Gordon v AA Mutual Assistance Ltd 1988 (1) SA 398 David trust v Aegis
Insurance Co. (2000) 2 All SA 297 2000 (3) SA 289.

Issues arising re duty

1 What is level of skill and knowledge
2 Can standard be attained by average broker or specialized broker

Durr v Assa Bank Ltd 1997 (3) All SA 1 ZW brokers registered. 1997 (3) SA 448 Broker required to exercise the degree of care
and skill which is ordinary exercised by reasonably competent members of the profession who have the same rank and
profession specialization as his.
- evidence of other members of profession acceptable
- code of conduct

Second only is one to obtain insurance coverage. Within reasonable time and advise insured accordingly of terms arranged.
- Lenaets v J SN Motors 2002 All SA 337 2001 (4) SA 1100.

- Implied authority to conclude contract of insurance on behalf of insurance relates to all acts reasonably incidental to
execution of instructions Pacific and general Insurance Co. v Hazell 1997 LRLR 65.

Failure to obtain cover may result in brokers liability – Lenalts v JSN Stender v Raubenheimer 1996 (2) SA 670.

Broker must investigate insured’s exact needs to assess applicable insurance cover National Oilwell (UK) Ltd v Davey Offshore
1993 (2) Lloyds Rep 582.

Duty not to insure with insolvent insurer Osman v J Ralph Moss Ltd 1970 (1) Lloyds 313 and also inform after contract of
possibility of failure to honour claim.

Duty to assist insured to disclose material information. Insured bound by acts of omission by broker.

Rabinowitz v Ned Equity Insurance 1980 (1) Sa 403

Kelly v Pickering 1980 (2) SA 758 (epileptic fits) 1980 (4) SA 326 (AP) but contrast Roberts (Kenneth) v Patrick Selwin Plaisted
1989 (2) Lloyds Rep 341 where displeasure was expressed at the fact that an insured who has made full disclosure to a broker
could still find himself uninsured because of broker’s failure to make full disclosure.

Broker must disclose material information to insure O and R Jewellers Ltd v Terry (Michel Jom Jordine Insurance Brokers 1999
Lloyd representation 436.

Broker liable for incorrect information inserted into proposal

Cheshire and Co. v Vaughon Bros (1920) 3 KB2 Co.
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Pickering v Syfin Holdings Ltd 1981 (4) SA 467.

Broker has duty to warn of need to make discloser

Stander v Raubenheimer 1996 (2) SA 670
Claud R Ogore and Co. v Reliance fire sp… 1975 1 Lloyd 52.

Duty to advise if lapse if insurance cover immediately

London Borough of Bromley v Ellis
A Laff and Son 3rd P 1971 1 Llogos rep 97
But no general duty to renew unless contracted to the effect. Failure of which there is personal liability Utd Marketing Co. v
Hasham Kara 1963 2 ALLER 553.
Practice may demand duty.

Duty to assist disclosure of material facts at renewal and any changes in terms.

Duty not to cancel without authority.

Duty to assist with a claim but not common. Must be negotiated anew does not aise by mere brokerage.
Duty to account for fun…
Duty to act in good faith must perform in interest of insured. Must be frank and honest and not make secret profit.
Should not let personal interest come into it.

Rights of broker
To retain policy as lien for expenses incurred.
Right to be remunerated
Right to reimbursed and indem…for expenses incurred.

Remedy
Damages where above duty is breached usually a…t that would have been payable by insurer had insured and a successful
claim.

Defences
- red responsible for causing loss
- Newbury International v Reliance National Insurance Co. 1994 (1) Lloyds 83.

Insurance agents
Statutory definition

Public usually meets mandatory who acts on behalf of insurer to solicit applications from prospective insured and transmit
proposals to insurer. They act as independent contractors and not employess.

Liberty Life
Colonial Mutua Life Association Society v McDonal 1931 AD 412.

An Insurer liable if agent has authority to perform act on behalf of insurer.

Completion of Proposal
Usually done by agents frequently by asking a filling in answers then obtaining signature – Pickery v Kelly
Sometimes sign first then answer. It is there that problems arise when insurer avoids liability.
- Insurers have apparently approve practice of proposal filing by agents.

Some legal limits on the enforceability of agreement. The basic feature of the doctrine of consideration is the idea of reciprocity
something of value in the eye of the law must be given for a promise in order to make it enforceable as a contract Thomas v
Thomas (1872) QB 851.
A promise purely on charitable grounds or an informal gratuitous promise does not amount to a contract.

- By contrast, in SA doctrine of valuable consideration forms no part of SA law and an undertaking to pay a premium is
not a requirement for the validity of a contract of insurance. However, no insurance is possible without a premium
with payment of the premium given as a condition precedent to or suspensive condition to the liability of insurer
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SA Eagle Versekeringsmpy BPK v Steyn 1991 4 SA 841. AJ Shepherd Edms Bpk v Santon Insurance Reineke
2000 TSAR 217 1985 1 SA 399

Premium
Not so much counter performance but insured’s proportionate share of total cost of spreading risk over a community of exposed
persons.
- Premium in nature of monetary performance or acceptable negotiable instruments e.g. cheque.
- Amount to be ascertainable/certain
In the case of a continuing contract parties agree that insurance will come to an end ipso facto if premium is not
paid by a certain time.
- So that insurer does not assume risk without having paid a premium

Hw create need for payment

- Payment required as a formality for coming into being of contract

- Intention of parties subject to duty of insurer to suspensive condition

- Qualification of insurer’s duty to resolution.

Duty to pay
- There must be an obligation to pay premium National Employers Mutual A.. Insurance Association v Myreson 1938
TPD 11
- liability of insurer does not commence till proposal is accepted and premium is paid. Further – insurer agreed to pay
compensation subject to and inconsideration of payment of premium.
- Where obligation is created failure to pay amounts to breach enabling insurer to resile from contract but must inform
insured so that obligation is extinguished Penderis and Gutman v Liquidators, short term bus AA Mutual Insurance
Association 1992 4 SA 836.
- Contract therefore voidable and election to resile must be exercised and other party notified
- Associated Mangorese Mines Ltd SA Clasons 1954 3 SA 768

Formality
Formality not duty
No automatic counter obligation to pay on an insurance contract. An insured can choose to pay or not and an insurer cannot
claim premium or breach National Employers Mutual Gen Insurance Association v Myerson 1938 TP11 but insured cannot claim
performance by insurer unless the formality of paying premium is met.
None payment = no performance

Suspensive condition
No cover prior to payment and insurance fully operative upon payment of premium

Consequences
Insured may not require insurance to perform obligation without performing obligation to pay Lake & other v No v Reinsurance
Corp Ltd 1967 3 SA 124 so if loss occurs before premium is paid breach first or premium deducted from compensation.

Time of payment
- Premium to be paid within stated time late payment affects validity of contract. In finalizing contract, continuance of
contract Steyne Estate v SA Mutual Life Annual or monthly, depending on agreement between parties.
- Payment dates stipulated and must be adhered to.
- Grace period given usually 15 days but also dependent on contract.
- Noirrepairable harm due to non payment contract does not automatically lapse on grounds of failure to pay premium
but election to cancel remains.
- Lapse period stated in contract.
- Insurer has choice to elect to cancel but must notify insured otherwise insured may pay and demand compensation.
- Grace period usually applies to renewal loss happening within period of grace covered even where premium unpaid.

Form of Payment
- legal tender, cheque stop order debit order
Cheque
- condition upon cheque being not unless cheque paid as unconditional payment
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Stop order
Bank insured’s agent and must compensate insured should it fail to effect stop order while there are funds in bank – so bank
has to make good any loss arising from failure by insurer to pay due to non payment of loss unless payment was at request
insurer and insurer agreed to bear rights. Insurer has not claim against bank but must look to insured.
Penderis and Gutman v Liquidators, Short term Bus AA Mutual Insurance 1992 4 SA 836

Debit order
If insurer insists on DO insurer bears risk of malfunctioning of electronic system.

Who pays
Immaterial – insured, agent or other interest party in the continued existence of insurance.

To whom : Insurer or authorized agent

Payment to agent is payment even if agent fails to transmit

Place

Waiver
- Acceptance of premium after breach of condition or discovery of breach indicates acceptance to continue with the
policy Hermings v Scepture 1905 Kh 365
- Acceptance of premium by agent and remittance with information of breach – insurance must return the $ forthwith or
risk liability British Industry Co. v Word 17 CB 645 – 649

Knowledge/notice of information about misrepresentation etc from whatever source but continued acceptance of premium on
same policy at rate originally agreed means right to avoid contract waived and cannot subsequently avoid contract.

No risk no premium
Premium if paid before risk begins co. be recovered e.g. medical insura…..Because premium paid for risk.

If interest turns out to be less than amount insured there must be a return of the overplus premium but only if over insurance is
made in good faith if risk is divisible a part is not run, then the return of a proportional part of premium may be returned.

Several policies same risk, exceeding value of interest = return on the polices.
Once risk has begun no return of premium.

Risk may attach only in part in which case risk is divisible and potion relating to where risk did not attach is recoverable.
But if not divisible then no part retirement.

Insurers reserve the right to terminate risk at any time during currency so that they can write off risk when the course of their
business in a particular year renders it prudent to do so or enables them to get …of a liability.

Doctrine as to divisible potion does not apply to fire because all goods usually treated as

Illegal insurance
- premium paid under an illegal insurance not recoverable
- in pari delicto potion est conditio possidentis
- but if no risk has been run, insured may recover premium but give not ice intension to abandon contract. If contract is
initially legal but illegal later then, both parties get premium back.
- If contract is illegal because of unknown facts e.g stolen car then premium recoverable Com v Bruce 12 East 225.

Mistake of law e.g. as to existence of insurable interest means assured must submit to loss.
Horse v Peal Life 1904 1 KB 558.

No return of premium under invalid policy e.g. misrepresentation, fraud by insured.

Formation
Genral rule offer, acceptance consideration an intention to create legal obligations

Who makes offer

Insured/insurer
Insured completes proposal form, std mass produced
 13

Essential areas of agreement

Premium risk duration subject matter of insurance

Proposer deemed to have agreed to usual forms of insurance though different form and type, sent when compared to application
in General Accident Insurance Corp v Cronl 1901 17TLR 233, Cronk required to pay premium but today it is specified that
contract subject to usual terms and condition
Rust v Abbey life 1979 (2) Lloyds
Copy should be available on requiest
NO binding contract until premium is paid where acceptance is subject to payment of premium Canning v Farquanor 1886 1 KB
554
- until acceptance, either party ..to withdraw

Formalities
Form – English law does not specify the form of contract an oral contract is valid but usually recorded in a policy.

Cooling off period to …of doorstep insurance salesman

Insurance act on form of information insurance

Covernotes …
OFFER …
- offer intended a such
- offer must be complete
- offer must be communicated
- offer must be in place at time of acceptance

Who makes offer

- insured to insurer when fill up proposal Adie & Sons v Insurance Corporation Ltd 1898 14 TLR 544

Real negotiation usually takes place when dealing with contract outside ordinary cover.

Usual contents of proposal form.

Description of proposed association risk proposed.

Circumstances affect the risk
History of proposer

Proposed assured – name, address, occupation stating one of many occupations not fatal provided rate of premium is the
same Perins v Marine and General ra….Insurance 1859 2 E… 317 Exch
A w.. merchant/banker
Contract voidable where rates differ and omission is material. Unless insurers are precluded from denying knowledge.

Acceptance of cover note – claim to be determined according to cover note a not main contract British SA Co v The New
Zealand Insurance Co. 1913 SK 138

But company usually sends cover note upon receipt of proposal to inst. Sign and send covering be informal, verbal
Duration of cover
- upon acceptance, cover expires and insurance policy takes over. Roberts v Security Co (1897) 1 QB
- upon refusal conditions of contract relevant is it upon rejection, is period stated. If stated it does not follow that cover
available to end. Stockton v Mason Vehicle and Gen Insurance Co and Arther Edward Insurance Ltd insurer may
terminate within 30 days.

Does not necessary cease to be in force upon expiry either.

- if insurer is obliged to communicate refusal, this must be communicated otherwise contract is valid
- sending by post inadequate
- knowledge must be communicated
- If supposed to return premium but do not liability covers until premium is returned.
- If there is notice of rejection require therefore notice applicable.
- If acceptance is to be communicated and is not, failure to communicate acceptance of exp. Of cover note takes hold.
- Catwright v MacCormack Trafalgar Insurance Company Ltd 3rd Party 1963 ALLER 11 time runs from midnight.
 14

Cases discussing cover notes Dicks v SA Mutual Fire & Gen Insurance Co. Ltd 1963 (4) SA 501
Taylor v Allen (1966) 1 QB 304C
Cartwright v MacCormark (1963) 1 ALLER

Acceptance of offer
Offeror to be informed of decision by offeree – Van Straaten v Liebaet 1907 EDC 231.
Policy dispatch tantamount to acceptance
British oak Insurance Co. Ltd v Atmore 1939 TPD 9
A demand for premium means acceptance Kahn v African Life Assurance Society Ltd 1932 WLD 160

Renewal
Renewal of Insurance is formation of new contract as is reinstatement of contract Steyn’s Estate v SA Mutual Life Association
Society 1948 91) SA 359 except where in life policy there is provision for revival on old terms.

No automatic right to renewal – Southern Insurance Association Ltd v Cooper 1954 (2) SA 354

Duration of Cover note

Cover lapses automatically at end of period.
Insurer may cancel cover note
Stockton v Mason & Vehicle & General Insurance Co. Ltd & Arth Edward Insurance (1972) 2 Lloyds Rep 430.

Warranties Davies
2 classes affirmative and promissory
affirmative warranty
- averment of the actual existence of a fact e.g. good health of insured
- possession of a driver’s licence

Promissory warranty
Conduct of the insured during the subsistence of contract e.g. taking reasonable care to keep vehicle in good and efficient repar.

Advantages of warranties
1 enable avoidable of the difficulties of establishing the defence of misrepresentation

Proving misrepresentation
- statement untrue
- statement’s materiality
- statement induced contract
Oblowitz Bros v Norwich Union 1924 CPD 349

2 Insurer may repudiate insurance policy regardless of materiality

3 Misrepresentation goes to existence of contract whilst breach goes to liability under the contract i.e. assumption is
that contract is valid but not liable Woodall v Pearl Assurance Co (1919) 1 KB 593
OBS at the end of the day the difference is the same. If prove non existence no liability but perhaps the courts
approach to contract validity is stricter then in avoidance of liability.

Because of the confusion elated to the term warranty, condition, the mere styling of a contractual term as warranty
does not classify contract as such, it is not conclusive.

Lewis v Norwich Fire Insurance 1916 AD 509 at 515.

Sacks v Western Union Assurance Co 1907 TH 257

How classify warranty?

A mere description of risk is not a warranty

Farr v Motor Traders’ Mutual Insurance Society 1920 (3) KB 669

 15

In application car will be used in one shift but used in two shifts while the other was under repair. Later involved in
accident but while working in one shift. Insurer tried to avoid policy but held use in one shift mere description of
risk.

Effect being that while vehicle is being driven in one shift it is covered but while driven in two shifts not covered.

Provincial Insurance Co v Morgan and Foxon (1933) AC 240.

Use of lorry to carry coal not exclusive covered while carrying coal but not while carrying timber.

Effect.
- contract of insurance
- terms – may be general terms if insurance contract

Acceptance what is?

Discussion ongoing no acceptance
Method
Formal but no condition
Issue of policy – conclusive of acceptance
- no recission
Pear Life 1909 2 KB 288
Acceptance of premium – raises presumption of acceptance conduct

Insurer makes offer

Coupon insurance – signing – acceptance
Notification – registration with insurers

Effect
Duty of disclosure ceases. If material fact is …after the insurances no need to disclose.
Parties bound
No fresh terms

Description of risk
Life – age weight height
Full description of property
Liability

Circumstances affecting risk

Aimed at ascertaining special circumstances
Present past health, situations of b….history
- experience
- insurance relations – denial of cover

IUAMY 98-100 description of cover

Effect of proposal form

- filled proposal form is an offer usual proceeds from insurer therefore shows terms in which they or willing to contract
therefore bound to issue policy in accordance v proposal.

Cover note
Issued in all …life insurance
Purpose Julien Praet et Cie S/A v HG Poland Ltd 1960 1 Lloyds Rep 420

Blank cover notes issued to agent …agent c…….therefore company may be …….Marshall v Western Corack Fire
Insurance Co. 1914 18 WLR 68

Policy accepted on condition that no insurance to take place unless premium paid. Premium paid 4 days after proposer had
fallen and suffered serious injuries. Held insurer not bound by insurance cause risk altered
Conning v Forquahor
Contract voidable at the option of insurer
 16

Unconditional acceptance binds insurer even if a formality of the contract is payment of performance

Non disclosure of change will not entitle insurer to avoid contract but insurer not liable for loss before premium

Cover not in place and unless acceptance is communicated but where there is a unilateral offer by insurer & one fills in the
form. Filing in forms should constitute binding contract.

Signing and sealing of insurance constitutes acceptance which need not be communicated to proposer loss on 26 and
acceptance with retrospective effect on 27. Insurer liable
Roberts v Security Co. Ltd
Silence ….not acceptance but an ins…who acts on offer is regarded as having accepted insurance.
Insurance Act.
 17

James North ZW

A calss shareholders 2/3 to appoint A directors.

B class shareholders 1/3 to appoint B directors.

Board of Directors of James North

1. B Director - Mattinson snr

2. A Directors
3. Ordinary directors Mattinson, Kelly Hurst

Dec 1988
Mattinson fired but refuses
Kelly appointed Managing Director

30 January 1989
Letter written by legal rep
- Mattinson suspended
- Extraordinary General Meeting to be convened so as to remove Mattinson from office and ratify his suspension.
31 January Kelly resigns but to work 3 months notice
31 January Hurst issues notice of meeting to be held on 2 March 1989 to effect above, purportedly by Board of Directors.

2/3 meeting held. All shareholders present. Resolution remains Mattinson passed 2/3 majority

Objections raised
1. meeting not duly convened as it was not convened by BOD
2. M snr tendered resignation dated 28 February and appointing M as director for B
3. Resolution not duly passed because ref to as special resolution and special resolution to be passed by 3/4

28 March
Board of Directors meeting held, present Merrington, Hurst, Kelly. Passed resolution ratifying suspension of M and terminating
employment.

30 March
Mattinson caused locking of gates, advising Kelly no longer MD because of resignation and investigation.

James North, Kelly and Hurst petition Court so that M does not trespass.

Issues
1. Validity of meeting of 2 March
2. Validity of meeting of 28 March

* It seems to me, however, that failure to comply with the requirements of S103 in that there was no meeting of directors to
convene the extraordinary meeting of directors to convene the extraordinary meeting should not impair the validity of the
meeting itself p.234I.

Had a meeting of the directors of James North been held to consider a requisition by Siebe to convene the Extraordinary General
Meeting, the views of the directors of Siebe would have prevailed because they owned the majority of the shares in James North.
If the requisition of the Extraordinary General Meeting had been made by a minority, the position might have been different. 236
D-E.

Re Special Resolution
Mere notice as special resolution does not mean that they had to be passed as special resolution. If an ordinary resolution
sufficed for the purpose of giving effect to the action proposed, it would be pedantic to required a special resolution merely
because the notice convening the meeting so described the resolution F-G.

The fact that notice purported to have been issued by order of the Board of Directors does not invalidate notice because all
members were aware that Board of Directors has not met.

Although validity of meeting of 2 March upheld, it does not mean that the business of the meeting was valid.
 18

What business conducted

1. resolved Mattinson be removed from office
2. ratify all action re suspension.

Mattinson was an employee of James North, who paid him. His purported suspension by Siebe a shareholder was of no effect
because these were not the acts of James North. 237 D-E.

28 March meeting
Meeting of Board of Directors adopted and approved resolution of 2/3

Argument
No quorum at meeting because Kelly had resigned as of 31 January
Counter argument Kelly was serving notice so remained director till end of April.

Decision
Art 94 articles of … - office of director to be vacated if, by notice in writing (director) resigns from office. It automatically followed
that he vacated office as director as of 31 January. There is no question that his resignation had to be accepted before it could
take effect.

Notice pe could only apply to his capacity as an employee of James North. There was no meeting of shareholders to continue
his appointment as a director after 31 January. The Chair of James North had no authority to request or direct Kelly to continue
as director after his resignation.

It follows that any resolution adopted at meeting of 28 March must be regarded as a nullity because no quorum at meeting p.238
G-J p.239 A-B.

Could shareholders of James North remove Mattinson from office.

While there is a conflict between Article 84 and Article 94, such a conflict could not have been the intention of the parties. Article
94 must mean directors other than A or B.

WARRANTIES

Closely related to the requirement that prospective insured must disclose all facts relevant for the determination of risk and
premium is the undertaking made by the insured that what representations are made in the proposal are accurate. In making the
undertaking the insured guarantees the accuracy of the representations.

However, unlike the requirement for disclosure that undisclosed material needs to be material, material indicated as warranties at
English law, did not have to be material.

Dawsons Ltd 1922 AC 413 Yorkshire Insurance Co v Campbell 1917 AC 218.

Breach of warranty is perceived as an alternative and preferable cause of action for insurers because of the less onerous burden
of proof.

Advantages of warranty

- Insurer can sue on basis of breach of contract as opposed to a delictual action based on misrepresentation.

Warranties impose strict duties on the insured to do certain things either to reduce or control risk after conclusion of contract.

What is a warranty?

A strict contractual undertaking by the insured that certain representations are correct or that certain duties will be performed.

- A distinction is drawn between a mere representation, and a term of contract a warranty must be present in the contractual
documents evidencing agreement between the parties to the insurance contract. A warranty may be contained in the proposal
form that is declared as the basis of the contract
Sacks v Western Assurance Co Ltd 1911 CPD 293.
SA Eagle Insurance Co Ltd v Norman Welthagen Investments Pty Ltd 1994 2 SA 122.
 19

- A term must be established to be a clear undertaking so insurance must have agreed to be bound come what may. A term that
states that a contract will become void if it not observed or that the observance of the term is a condition precedent to liability is
considered as a prima facie evidence of a warranty.

An assumption absolute liability for the correctness of answers provided in the proposal form and acceptance of those terms as
the basis of the contract creates a warranty.
Dawson v Bonnin
Morris v Northern Assurance Co 1911 CPD 293
Yorkshire Insurance Co Ltd v Ismail 1957 (1) SA 353
Heslop v General Accident Fire & Life Insurance 1962 (3) SA 511
Qulingele v SA Mutual Life Assurance

Types of Warranties
A warranty may be affirmative and promissory or it may be a warranty of fact, knowledge, opinion.

Affirmative warranty where insured warrants the truth of a representation e.g. that he is in possession of a driver’s licence as in
Maze v Equitable Trust & Licence Co of SA Ltd 1938 CPD 431.
Affirmative warranty relates to the past and present state of affairs.

A promissory warranty relates to the future that insured will perform act X e.g. that business person will keep up to date correct
information of business and the books will be locked in a fire proof safe Kliptown Clothing Industries v Marine & Trade Insurance
Co of SA Ltd 1961 (1) SA 103.

Warranty of fact – that a state of affairs does/not exist irrespective of insured’s person knowledge of the state of affairs.

A warranty of knowledge warrants that to the best of insured’s knowledge, a state of affairs exists or not Yorkshire Insurance Co
Lt v Ismail 1957 (1) SA 353.

Breach of Warranty

- Considered as breach of contract once an act of breach has been committed, it cannot be undone or cancelled by subsequent
conduct. E.g. if the insured has wrongly warranted that he has a driver’s licence he cannot rectify his breach by subsequently
obtaining a licence Maze v Equitable Trust & Licence Co of SA Ltd 1.

A warranty imposes strict liability on the insured to fulfill the conditions

Froli v London Assurance Co 1931 EDC 186.

Consequently failure to comply with contract due to an innocent mistake or inadvertence is not excusable. Also the fact that the
warranty was based on false information by others or fault of a third party is not acceptable.
Beyers Estates v Southern Life Assurance 1938 CPD 8. insured did not disclose that he had cancer because Doctor had not
told him.

Heslp v General Accident Fire Assurance

It is not material that misrepresentation is made in good faith as opposed to bad faith.

- No need for causal connection between breach and loss Gordon v The Transatlantic Fire Insurance Co 1905 T/E/146

If wording requires doors to be kept locked, and at some time insured neglects this duty, but if on the occasion there is no breach
of this condition when loss occurs this is not considered. Cole v Bloom 1961 (3) SA 422.

Only the insurer may waive warranty unless the insurer is estopped from relying on breach of warranty.

Or if compliance with warranty becomes illegal then one did not comply.

What happens if a warranty is breached.

Position in English law is that contract becomes voide. However, at SA law normal contract applies.
When breach of contract is relied upon, breach
Clause II proposes.

- Warranty
 20

- A written term of contract where insured warrants – through the force of words or operation of law, that certain facts are
correct or that he will undertake due performance of obligation specified therein.
- Enables insurer to avoid policy and repudiate contract from breach of warranty not withstanding that the contract of the
warranty may not have been material to the risk and that the breach may not have caused loss in respect of a claim is
brought.
- Applies to conditions that are precedent to the liability of the insurer.
Words like – this proposal serves as the basis of the contract.
- however, insured may not see extent of obligation no.1
- technical words are not necessary.
- A warranty is devoid of requirement of materiality. Consequently it enables the insurer to avoid difficult of proving
misrepresentation
Example
- a married woman who uses maiden name – considered breach of warranty though marital status has nothing to do
with risk Dunn v Ocean Accident & Guarantee Corporations 1933 45 LILR 276.
- A man warrants not being attended to by a medicine man – insurance void if attended to.
Yorkshire Insurance v Campbell 1917 AC 218 – wrongly stated breach of horse so insurers could avoid liability when
horse died.
- Allen v Universal Automobile Assurance 1933 45 LLR 55
An answer that a car had been bought for 285 pounds when it had costed 271 pounds was considered breach of warranty.
- A stove pipe 3 ft long does not answer a warranty that it is 2 ft long New Castle Fire

When the assured answered that he is 30 it was ruled that he was in breach of contract when it proved that was 35.

In American case of Abbott v Shawmut Mutual, it was held that insurer was discharged from liability when the insured answered
that the property was mortgaged for 6600 pounds when in fact is was mortgaged for 6684 pounds.

- Alteration of use
A description of use of goods may be warranted and alteration of use may make the description cease to be correct.
- in G F Watkinson & Co v Hallet 1938 61 LILR 145 propose described self as paper board manufacturers when in fact
they were paper merchants owing to the misdescription the risk was not covered.

If there is an express condition in the policy that any alteration increasing the risk will render policy void, the description of the
premises can amount to an absolute warranty.

If there is a warranty that the subject matter of insurance comes within a particular classification defined in the policy and it does
not the policy will be invalid regardless of the risk.

Warranty as to the truth of information

-a warranty irrespective of knowledge requires subjective truthfulness

A policy can be invalidated if an insured says he has no disease when he does but he does not know – even if the accuracy of
the answer can only be tested by a post mortem!

Promisory warranty
- that a given state of affairs will continue to exist.

5. CONTRACT INTERPRETATION

- As in all cases, one who avers must prove the averment. So one who avers that a contract of insurance exist must
prove the existence of the contract. With a contract of insurance usually a policy document exists.
- Contents can be expressed by word or deed 2 stage inquiry.

1. which words and declarations form part of the contract and need interpretation
2. interpretation of the words.

General evidence rules apply in addition to parol evidence rule in especially important i.e. where parties entrust words to e
embodied in a document the document becomes the sole record of the transaction. No evidence outside the contract is
accepted to prove that certain words form part of the contract.
- acceptance of the words as such indicated by signature. Usually a term to say that is embodiment of contract is
included.
 21

Terms usually consensual but sometimes the terms may be naturally implied by law i.e. parties specifically agree on the
applicability of a tem so law does not exactly determine meaning of terms between warranties sometimes implicit e.g. sea
worthness of a slip as well as subrogation. Legislation also implies terms

Consensual terms
- expressly and tacitly stated.
- There are obligatory and non obligatory

Obligatory
-impose positive duty on the insured to fulfill a term

Non Obligatory
A positive duty is not imposed these are either suppositions or conditions. A supposition makes the obligations arising from the
contract dependent on some event e.g. it is assumed that insurance contract is concluded before the act insured against has not
occurred.

- Good faith is implicit in the contract – Truckers Land & Development Corporation v Houls 1980(1) SA 645.

Interpretation is a of law and is aimed at determining the common intention of the parties as expressed in terms of contract – this
the general/goldern rule of interpretation.

Consensus presumed as basis of contract. While there are a lot of rules on interpretation of contracts, there are some priority
rules. Judicial decisions offer insufficient guiding on relationship between rules of interpretation. Some rules always applied
Primary rules
1. words should be read in contract and the contract as a whole.
2. e.g. word should have effect

Secondary rules

Words used in contract ascertain meaning of contract not blanket term attached to it.

Grammatical meaning
- plain, everyday meaning through constant usage in community courts usually use dictionaries and previous judicial
interpretation but one must

Exceptions
- words with a technical meaning different from the ordinary meaning.
- If application will lead to an absurdity results in the unintended meaning
- Ordinary meaning not static

Context
Have regard to rest of contract all terms of contract must be read in conjunction.
Margin nots part of the contract

Recital or preamble not really put of contract, only subordinate to operate party of contract but not divorced from contract.

Intermediaries/Brokers

The public face of insurance is mainly the intermediaries – Insurance brokers – the Paul Mukondos

It is through these people that insurance business is usually conducted.

Why
- Insurance co usually cooperates and it is through these people that business is conducted.
- Brokers are a convenient way of dealing with insurance contracts to negotiate for favourable deals.
- Though agency is a term found in many branches of law, in insurance it has acquired its own meaning i.e. an
intermediary who has authority to negotiate insurance business on behalf of an authority.
- There is the second aspect i.e. agent contracted by an insurer but does not have authority to do certain acts e.g.
employees, assessors, doctors.
 22

The consequences of actions of brokers are determined by the person on whose behalf the broker has acted.
- a broker may be contracted by a proposer to obtain insurance cover but at the same time be contracted to receive
premium on behalf of the insurance contract or grant interm cover.

MISREPRESENTATION

Brokers/agents are renowned for misrepresentation leading to conclusion of a contract.

In the process of determining liability for the misrepresentation, questions that are asked are – to what extent is the principal
liable?
- liability of broker depends on the satisfaction of delictual grounds of liability.
- A critical essential element is proof that the other party was in fact misled – in order to prove causation.
- A principal can also be liable for agents’ wrong.

Broker
- an intermediary between insured and insurer
- brokers are different from canvassers they are not tied to a particular insurer, insurance broking is a profession.

Duties of a broker

1. Duty to act with reasonable care and skill

this is the most important duty which is implied by law in every profession. Care and skill are a natural of the agreement –
Rabnowitz v Neal Equity Insurance Co 1980(1) SA 403.

Of importance are two consideration

- what level of skill
- is standard that can be attained by an ordinary average broker.
Level of skill required is that of the profession to which the broker belongs.

Statute provides for certain levels of performance to a limited extent through requirement that a broker be regarded.

- duty is that required to be exercised by reasonably competent members of the profession who have the same rank and
profess the same specialization evidence of other brokers may be accepted
- a business code
- duty to obtain insurance cover – primary duty – in a reasonable time
- to advise insured promptly of the terms of the cover.
- Authority to conclude cover on behalf of insured – all acts ordinary incidental to the conclusion of the insurance
contract.
- Broker liable for failing to obtain cover in time
- Duty to investigate insured’s needs so that insurance obtain actually covers the needs.
- Duty not to insure with an insolvent insurer – so must know business environment after conclusion of contract must
also warn insured of any like chosen insurer will not be able to pay claim.
- Must discuss and ensure that insured discloses all material information. Insured is bound by omissions of broker –
Kelly v Pickters 1980(2) SA 758
- Broker must disclose all material information of which he is aware
- Broker may however be liable to insured if he fails to disclose

Duty to deliver policy

- must assure that insured gets policy or must keep it safe until so that insured can verify correctness of information.
- Duty to advise as to meaning of policy.
- To advise when cover has lapsed
- Not to cancel contract without authority
- To assist with claim not general but must be written into the contract when done duty
1. establishment of loss
2. completion of claim in time
3. receive payment
4. transmit it to the insured
- Insurer not discharged from liability if pay to broker unless broker authorized to receive payment
- Duty to account and render account
 23

- Act in good faith

- Act in the interest of the contract
- Not to enter into contract of competing mandates
- Not to make a secret profit

Must comply with:

Rights
- to retain policy as a lien against any expenses incurred
- right to be remunerate – fee
- right to commission – insurer
- right to be reimbursed and indemnified for any losses
- a broker who introduces new business to the insurer
- contract must be concluded

Insurance Agents

- Statutory definition
An insurer will only bear consequence of a juristic act concluded by a person with authority

Insurers complete proposal forms on behalf of insurance co or something with approval of only the knowledge of agent with
authority to bind insurer can be imputed on the insurer or when he has been instructed to obtain information e.g. doctors,
assessors.
6 Bawden v London Endinburg & Glasgow Assurance Co 1892 2 QB 534

Proposer almost illiterate with one eye. Proposer dictated answers. Agent then warranted that no information insurer liable.

7 Drysdale v Union Fire Insurance Co

Agent who filled in proposal after satisfying himself of the condition of the premises held liable.

8 Simon v Equitable Marine & Fire

Agent had been correctly informed of use of premises but said that premises used to other business note was made without
knowledge and authority of insured.

Premium
Premium is the other bargain in insurance, the insured’s part of the contract. No insurance is possible without
- premium
- liability of insurer usually does not attach where premium has not been paid.
- If premium is not paid within a certain time, contract comes to an end
Depending on wording of the contract payment of premium is critical

Duty
There may be an agreement that payment of premium will take place failure of which the insured is considered to be in
breach – insurer can then resile from contract.

Formality
Prepayment may be a formality to validity of contract. There is no obligation to pay, no breach no liability

Payment suspensive
- cover comes into being when premium is paid, contract can become operative retrospectively upon payment.

Resolutive – contract payment = validity

Time of Payment
Critical for validity of contract and liability of insurer

Payment dates usually predetermined wording critical.

If no date is put – payment due when insurance expires. Cover commence at conclusion of insurance. No harm in late payment.
 24

Time specified
- insurer has election to cancel contract or accept late payment
- insurance may lapse by operation of time so no need for formal rescission.
- Payment may be a way to review contract
- Critical in continuing contract are the days of grace. – contract expires after days of grace expire

How pay
By legal tender-cheque, cash
If pay by cheque it must reach and be cleared before the expires

Who pays premium

Anyone can pay no need for insurable interest

To whom – insurer or his agent at appointed place.

Return of premium
- usually only possible if there is proof that cover was induced by fraud
- sometimes insurer runs no risk – object destroyed before effective contract, so return premium
- but sometimes, risk is run through no return
- if contract is void for lack of consensus
- if no insurable interest
- conditions apply and they are not met
- where there is breach of warranty and insurer cancels contract

Interim contract
- taken before the full cover is given while finalise preliminary
- duration is limited. Granting cover does not oblige insurer to grant full cover.

Usually granted during a reminder, renewal.

- premium payable
- warranties apply, disclosure, some duties
- automatically lapses when cover note the expires.

Claim
- a valid contract
- suspensive conditions must have been fulfilled.
- Peril must have occurred during currency of contract
- Loss must have occurred
- Lost must be proximately

Critical to this is the notification of loss

Amount that can be claimed sometimes limited by contract
- insurance must prove his loss

Notification of loss
- usually considered as a strict obligation, no question of fault, fact that insured did not know is material or he could not
have reasonably known.

How
- this is stipulated – within 3 days as in Scotish Union & National Insurance Co Ltd v Native Recruiting Corporation 1934
AD 458.

Usual – immediate for or as soon as possible are used.

Sleiight Holme Farms Pvt Ltd v National Fire Union 1967 1 SA 13

Reasonable depends on circumstances

To investigate cause and effect is usually the purpose

Royal Mutual v Mubahea 1990 4 SA 177.
 25

Radar Holdings v Eagle Insurance Co

Ndawana v Naglo

Subrogation
- Subrogation – substitution of one party for another as creditor
- In insurance the doctrine provides for the substitution and reimbursement of an insurer which has indemnified its
insured under a policy of insurance.
- Insurer may reimburse itself against its insured out of the proceeds of any claims that the insured may have against
third parties loss

Castellian v Preston 1883 11 QBD 380

- Insurer may also have the right to take charge of proceedings against third parties who are liable for loss to insured.

Insured remains holder of rights against a third party so if insured discharges third party from liability insurance company cannot
insist on observance thereof.

Origins in Roman

- related to indemnity. Insured cannot receive and retain compensation from both insurer and a third part.
- Insured can simply release third party from liability when claim from insurance company
- Cost of insurance can be kept low where insurer is in a position to recoup loss from other sources than premium
- Also a person who has caused loss to another must bear the consequences so when sued the third party cannot
invoke a defence that person is insured
- Subrogation is confined to third parties and indemnity. – Fire, liability, motor. Does not apply to non partrimonial
- Subrogation cannot be invoked against the insured who has caused loss, but can do so against members of household
whether insured has such rights.
- A donation could be subject to subrogation – e.g. out of sadness, guilt pay for funeral expenses etc. Gift must have
made a reduction in the loss
- Partially or totally substituting for loss of interest

Requirements
- contract of insurance must be valid
- insurer must properly discharge obligation to insured and not just partially – insured must be satisfied of repairs.

Insured loss must have been fully compensated. If insurance not adequate, insurer cannot lay claim on payment by third party.

Rights of insurer
- Insurer can claim from a third party who has received a benefit from a third party loss.
Whether payment was voluntary.
- insurer has right to conduct proceedings against third party insurer has no independent claim – if simply enforces claim
of insured for its own benefit.

Duties of insurer
- insurer must not prejudice position of insured through an unfavourable settlement.
- Any cost awarded in favour of third party who successfully depending the case are payable by insured. But since
action is for the benefit of insurer, insurer must bear costs

Defences available to third party

- release from liability
- settlement and release of claim by insured or insurer
- contracts must contain on express subrogation clause.
- Merely declaratory of common law

SALVAGE AND RIGHTS THEREUNDER

Insurer’s right to salvage arises where there is total loss

- If object is totally destroyed or so damaged as not to be of original use and value to insured or if insured is deprived of
possession for reasonable the recovery is unlikely or uncertain.
- Related to where an insurer has paid insured for loss but the object is still in existence.
 26

Insurer then entitled to the remains of the object or if recovered to the whole.

M Zhan Investments (Pvt) Ltd v General Accident Insurance of SA Ltd 1981 4 SA 143

Right of salvage is a consequence of indemnity purpose is to prevent.

- Right of insured to claim of ownership is transferred from insured to insurer.

Bradford v Symondson (1881) 7 QB 456

Defendant an insurance company had insured a vessel belonging to a third party, lost or not lost. Believing that the vessel was
overdue and could be lost, effected a policy of reinsurance with plaintiff. Unbeknown to both parties the vessel cargo had
arrived safely. When the truth came out, defendant refused to pay the premium contending that at the time of insurance, there
had been nothing to insure, no risk so no need to pay premium. Plaintiff instituted an action to recover premium.

Basis of Defendant’s argument

There was no risk to be run all the time of the policy of reinsurance so no need for premium.

Plaintiff’s argument
There was no risk when policy of reinsurance was effected because policy was intended to cover past as well as future losses.

Brett LJ
The mere fact that the voyage insured was ended does not prevent the policy of reinsurance from attaching.

Argument that there was no insurable interest on the part of defendant under policy, now what was the insurable interests of the
assured under the policy? The insurable interest was the risk which he ran under the former policy … Now it seems to me that
the question of insurable interest in this case comes to be the same question precisely as the question whether the risk ever
attached. The risk attached and as long as it attached under the first policy or under second policy, the defendant’s interest
attached for the same time and during the whole same pe therefore was insurable interest.

This decision seems to me come to this, that were the subject matter insured has been or … will be at risk, the policy attaches to
it and covers it, whether the policy be made before or during or after the time when the subject matter was at risk, if that risk is
properly described in the policy.

Analysis
Is this an equation of risk with insurable interest i.e. if object be at risk then the plaintiff had insurable interest.

Bramwell J
The interest of defendant was in his possible liability and that the existence of loss being uncertain to his knowledge, he might
insure against it. I am (not certain) not satisfied.

George and Others v Royal Exchange Ass Corp (1900) (2) KB 214
Insurance brokers on behalf of third party. Policy effected to cover for loss of vessel did not arrive at Yokohama on or before 31 st
December 1898. Plaintiff claimed on basis of insurance when vehicle do not arrive.
Defendant refused to pay on the … that
1 there had been concealment of …………..
2 people on whose behalf plaintiff effected alleged policy had no insurable interest in the subject matter insured.

Plaintiff’s action of behalf of one Rouse and another. Insurance had in fact been effected because goods arriving after 31. 12
deadline. Mr Rouse then obtained an insurance from defendant. Insurance policy was known as appi polic or honow potic
when in the event of a loss the policy is deemed a full and sufficient proof of interest.

Where evidence at trial discloses that the transaction which is the basis of the claim is illegal, the court cannot properly ignore
the illegality and give effect to the claim.
 27

Statutes forbid making of an assurance upon a British ship without further proof of interest than the policy the policy being on
illegal document no effect can be given to the claim ex turpi causa non oritur action. No court ought to enforce an illegal court
or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract.

Concealment of material fact. Plaintiff did not disclose the speculative nature of the policy.

Policy proof of interest means possible existence of a business interest – an interest which may be hard to prove or may not
admit of legal proof as an insurable interest between some business interest.
Rouse argues that the instituted agent to disclose and agent had not had chance to disclose the speculative nature of the
insurance.
Bottom line – no insurable interest in a wage ppi treated as illegal so any interest goes with that conclusion.

Rixom v Southern Life Association 1939 SR 70

3 people in partnership obtained insurance for their lives for 10 years. Premium paid out at partnership 3 000
pounds paid to executor ………. Partnership changed when one of the team became an employee. However the
event not communicated to insurer. Executor sought to claim 1/3 of the money which he alleged had been
wrongfully paid to the remaining partner and employee.

Was there an insurable interest in all the individuals, in the lives of the three individuals mentioned in the policy?
Original policy of 1924 signed by 3 parties had option to convert assurance into a joint whole life assurance. Option exercised in
1934 when there were 2 partners and one employee.

If the 3 parties had an insurable interest in each other in 1924 then that is all that is required under the law and the defence that
there was no insurable interest falls away.

The insurable interest falls to be determined as at the date of commencement of policy.

Exercise of option = extension of original contract. It does not constitute separate contract.

Harse v Pearl Life Ass Co 1904 1 KB 558

Agent of insurance co. represented to plaintiff that an insurance effected by him on the life of his mother would be a valid
insurance. Plaintiff then effected insurance and paid premium. Representation made in good faith. Plaintiff then sought to
recover premium.

Unless there can be introduced an element of fraud, duress or oppression, or difference in the position of the parties which
created a fiduciary relationship to the plaintiff so as to make it inequitable for the contract to insist on a bargain than they made
with the plaintiff, he is in the position of a person who has made an illegal contract and has sustained a loss as a consequence of
misconduct of law and must submit to that loss. Plaintiff cannot recover premiums.

Griffith v Fleming & Others (1909) 1 KB 805

Claim by surviving grantee of a policy insured effect by plaintiff and late wife against insurance company. Insurance covered
joint lives.

Defence
At the time of the making of the policy plaintiff had no insurable interest in the life of his late wife:
2 wife committed suicide
3 plaintiff paid premium

Halford v Khymer 10 B & C 724

The word interest act means pecuniary interest.
2 classes in which the law presumes pecuniary interest and does not go into the extent of the sum assured. The one case is that
of the interest of a man in his own life – Wanewright v Bland 1835 1 Moor R 481.
The second exception is that a wife making an insurance on her husband’s life need not prove that she was interested therein
Reed v Royal Exchange Ass Co. 1836 M & W 32. But it is said that a husband is presumed to have such an interest in the life
of his wife just as there is interest of a wife in the life of her husband so as to enable her to insure his life without proof of actual
interest or extent thereof. Because of now able to earn. Now that husband may reasonably look for pecuniary aid from wife, the
husband has a reasonable expectation in case of need of assistance from a wife in case she acquires and holds property.

Partners would normally obtain joint insurance in order to obtain protection against the loss to surviving members of the firm
likely to arise from the withdrawal of capital.
 28

How would things tend if husband did not have insurable interest?
Case decided on interpretation of statutes and not on basis of pecuniary interest of husband in wife’s life.

The husband is presumed to have an interest in the wife’s life in such a sense that it is unnecessary to give affirmative
evidence as to the existence of an interest

Court a quo had decided that husband, by reason of the value of his wife’s services to him had an insurable interest in her life.

Wilson v Jones LR Ex 139 @ 150

I know no better definition of insurable interest … that if the event happens the party will gain advantage. If the event does not
happen, he will suffer a loss.

Halford v Kymer interest must be a legal interest and not a mere chance or expectation.

A man does not have pecuniary interest in the sense of pecuniary interest arising from loss of some legal interest = a man’s
interest in his own life is not of a pecuniary interest.
- Question of husband’s interest in his wife’s life is not a question of property at all.

Market v London & Scottish Ass Corp Ltd 1927 CPD 202
Proceeds of insurance policy made payable to assignments of deceased. When the beneficiary sought to claim it was argued
that he did not have insurable interest in the life of the insured. Defendant also argued that since the insurance was effected in
favour of the plaintiff, he should show that he had insurable interest.

Argument rejected, it being held that principle applies to the person making the insurance.

Porter on Insurance – when one person insures his own life and designs another to receive may payable, that person so
designated may sue without showing an assurable interest. Stipulation in favour of third party valid
Gerinch v General Accident Fire & Life.

Petrofina (UK) Ltd & Ors v Magnaload Ltd & Anor 1984 QB 127
Contractors took out an all risks insurance policy. Policy insured main contractor, subsidiary of contracting company and a
consortium of companies who leased land. Main contractors in turn sub contracted a company which incurred a loss during the
dismantling of Hydrajack. When man contract claimed, defendant pleaded subrogation on the grounds that it was a subrogated
claim brought at instance of or for the benefit of the new husband who insured third and fourth parties and had indemnified them.

Contractors had been paid out of their claim and their insurers now sought to exercise their right of subrogation by suing the
defendant.

Section 1. The insurers will indemnify the insured against loss of or damage to insured property whilst at the contract site from
any cause not excluded hereinafter.

Insured party works and temporary works erected.

Construction plant and equipment

Insured contract construction erection and testing of extension.

9 Nature of interest insured

A Thomlinson Hauliers Ltd v Hepburn (1966) AC 451
A firm of carriers insured goods in transit cigarettes stolen in transit due to negligence of owners. On making claim on policy it
was argued that the policy was a liability policy and since carriers were not liable to owners they could not recover from the
insurers. Held that policy covered goods and not liability this to case in casu.
Section 1 covered all risks of loss or damage. Second insured property excluded cost of replacing or reacting in so property
which is defective in workmanship.
 29

Section 2 covered contractual liability of contractors to maintain the court works during maintenance pe
Section 3 covered third party liability

Since there is separate coverage of liability S1 must therefore cover property.

If policy was on goods, then carriers could as bailees, insure for their full value, holding proceeds in trust for the owners.

Waters v Monarch Fire & Steel 1856 5 E & B 870 – a bailee is entitled to insure and recover the full value of goods bailed.

A bailee or mortgagee has by virtue of his position and his interest in property a right to insure for the whole of its insured value,
holding in trust for the owner or mortgagor the amount attributable to their interest. To hold otherwise would be commercial
inconvenience and would have no justification in casu gens.

Convenience would allow insurance to take insurance with head contractor where there are multiple contractors otherwise each
subcontractor would take out his own insurance = more paper work.
Premium might be out of proportion with the value of insurance.
Therefore a head contractor ought to be able to insure the entire contractor works in his own name and a sub contractor ought to
be able to recover the whole of the loss insured.

10 Littlejohn v Norwich Union Fire Insurance Society 1905 TH 374

Plaintiff sought to recover 1500 pounds due under a policy of insurance issued by defendant. Defendant argued that plaintiff had
no insurable interest in the goods insured and that if he did, the amount of his insurable interest did not amount to 1500 pounds.

The goods destroyed in the fire belonged to wife of insured.

Did plaintiff have insurable interest?

Plaintiff married out of community of property. Goods belonging to wife. Store run by plaintiff – husband with total control of
good and sole manager.

Lucena v Crauford - leading case on insurable interest.

Dealt with the question whether king had insurable interest in ships. Kind had no title to the ships but had physical detention of
the goods – held that he had insurable interest.
Chambre J – want of property not enough to prove that there was no insurable interest.
“that a man must somehow or other be interested in the preservation of the subject matter exposed to perils follows from the
nature of the contract … but to confine it to the protection of the interest which arises out of property is adding a restriction to the
contract which does not arise out of its nature … A man is interested in a thing to whom … may arise or prejudice happen from
the circumstances which may attend it “in quantum mea interfuit i.e. quntum mihi abest quantumque lucranori potui – To be
interested in the preservation of a thing is to have benefit from its existence, prejudice from its destruction.

Hooper v Robinson (98 US 528)

Injury from its loss or benefit from its preservation to accrue to the assured may be sufficient and a contigent interest thus
arising may be made subject to the policy.

Honcox v Fishing Insurance Co 3 US Circ Ltd 132

An insurable interest is sui generis and peculiar in its texture and operation. It sometimes exists where there is not any present
property or jus in re or jus adem.

On these grounds it seems to me that the contract of marine insurance may extend to protect every kind of interest that may
subsist in or be dependant upon things exposed to the dangers to which maritime adventures are subjected.

Trade Insurance v Barrachiff 46 Amre Rep 792

Insurable interest is not based on legal or equitable title. An insurable interest is a much broader thing than title either legal or
equitable. There is no distinction between marine and fire policies as to the kind of degree of interest necessary to constitute the
basis of the policy.

Goulston v Royal IF & F 276

Husband has an insurable interest in his wife’s property even though he has no legal estate.
 30

“The principle to be deduced from these cases appears to be this. If the insurer 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 jusadrem to
the thing insured, his interest will be insurable.

Need for courts to lean towards finding for an insurable interest for after the underwriters have received the premium, the
objection that there is no insurable interest is often as nearly as possible a technical objection and one which has no real merit as
between assured and insurer. In Glis v Stock 12 QBD 571 per Lord Osler.

Question to ask:
1 Was husband in a worse position after his wife’s property insured by him had been burnt
2 Whether he suffered loss thereby

He was 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 as it was before the fire.
It is to his interest that the business be conducted in the future as it was in the past so he had insurable interest.

In case of doubt insurance to be construed in favour of insured than insured. Since insurance do not ask about ownership – it
cannot have been important to them. If then the proposer was not asked about ownership of the property it must be considered
that the rise did not require that information as a ……… precedent.

Gutman NO v Standard General Insurance Co 1981 4 SA 114

SA Railways & Harbour v WM Anderson 1917 CPD 121
An insured’s trustee in insolvency sought to recover for the loss by fire ito policy taken out by insured prior to a purported sale by
him of his bus to a company to be formed by him as a director.

Insurer denied that insured was owner of the property covered by the policy at the time of the fire.

Contract of sale invalid because it was between one and same person.

Insured had recover lost interest in the property as ownership never passed he did not part with the possession of insured goods.

Malcher v Malcomess 1883 3 EDC 271

Plaintiffs partners carrying on business in co-partnership at Kwistown. Plaintiffs insured produce and general merchandise
contained in a building against fire. Goods belonged to were under the general control of their customer.

The law requires uberrima fides on the part of the insured so that he not only states all matters within his knowledge which he
believes material but all which in point of fact are so.

Concealment of anything material constitute fraud

Malcomes knew of his customer’s fraudulent behaviour did not disclose it was his duty to so disclose information.

Failure to inform insurer that neither property in goods, nor possession nor control was plaintiff’s – this was fatal.

If the plaintiffs disclosed neither property, nor possession nor control, did they have insurable interest in this property.

The assured must have an interest to support the policy, and this must be a subsisting right or interest in the property to be
assured which will be recognised as such in law. A mere expectancy is not an insurable interest nor is a right binding only in
honour. A trustee may insure for the benefit of trust, if he has possession. So may a bailee of goods in trust so may on
equitable owner and so may any person who would be responsible for the consequences of loss by fire – although he possesses
no estate or interest in the property at the time.

Any equitable or legal estate or right that may be prejudicially affected or any responsibility which may be brought into ….. by fire
will confer on insurable interest.

But a mere creditor has no insurable interest in the property of his debtor.

If creditor has a lien or has actual possession or has control of the property of his debtor either for purposes of realization or
because of assignment whether such control be conferred by the act of the debtor or by … of the law there is insurable interest.

The principles which govern insurance require the utmost degree of good faith, uberrima fides.
 31

Either party may be innocently silent as to the grounds open to both to exercise their judgment upon.

The insured need not mention what the underwriter knows nor need he mention what underwriter aught to know.
Or what he takes upon himself knowledge of or
What he waives being informed of
Ration – prevention of fraud and encouragement of good faith.
Test
Was there under all circumstances at the time of policy a fair representation

Steyn v Malmesburg Board of Executors & Trust Assurance Co 1921 CPD 96

Plaintiff a farmer owning several properties. Leased one to another for 3 years on the farm were stacks of chaff which were
insured on his behalf by secretary of defendant.

At time of insurance, stack belonged to lessee, lessee was to use the stack to feed cattle. If the stack was not used to feed
cattle, it would be used as fertilizer. Lessor’s interest in the stack was the fertilizing elements. If stack destroyed by fire plaintiff
lose fertilizer. On the whole I am inclined to the view that the plaintiff did have insurable interest in the stack because if burnt the
soil on the form valued lose contingent benefit.

Disclosure
Should have disclosed lease aspect.
If an applicant is not the owner of the property to be insured that fact need not be disclosed if it in no way affects the risk. Bt if
the nature of the interest such a way that it affects risk the nature of the interest must be …….

Commercial Assurance Co v Kern NO 1944 EDC 215

The insured had on 17/12/42 donated his car to his son. He had previously insured car in his name.

Once the assured is deprived of his insurable interest in the insured car, the policy ceases to have any validity.

RM Insurance Co (Pvt) Ltd v GCM (Pvt) Ltd 1995 1 SA 698 25

Resp (GCM) had on insurance policy which obliged insurer (RM Ins) to pay to insured or dependants compensation in the event
of the insured suffering accidental death or disablement or receiving medical attention as a direct result of an accident causing
bodily injury whilst as a member of air crew carrying out duties stated, in mounting into or dismounting from any fixed wing
standard type of civil aircraft being used for personal, private or industrial aid.

One Bruce Smith was endorsed as a beneficiary of the insurance policy and died while piloting a Cessna plane. Insurer argued
that it had repudiated liability ito exclusion clause.

“Insurer shall not be liable to pay any compensation under this policy iro bodily injury resulting from an accident sustained
directly/indirectly by on insured person by any breach on the part of insured of any air Navigation Act, order or regulation of air
worthiness … or by the insured’s failure to comply with any instruction of the pilot.
Insurer argued that the above exception applied because
-Bruce Smith flew aircraft want valid licence.
- had not conducted more than 5 take offs and landings in an aircraft of the same class within 90 day or air craft flown
without a valid radio licence

GCM argued that exception applied only where there was a causal link between loss and breach.

Court a quo held that wording of exception did not exclude principle of causation insurer had to establish causal nexus between
breach and loss.

Exception having been inserted in the policy for purposes of exempting defendant from liability which, … for its provision, would
have been covered was to be construed against defendant with the utmost strictness, for it was the duty of the defendant, in
framing policy it exempt its liability in clear and unambiguous terms. Onus of proving applicability of exemption on insurer.

It is a fundamental principle of insurance law that, in the absence of a clearly expressed intention to the contrary the insurer is
only liable for loss proximately caused by peril insured against so insurer is liable if the direct, dominant effective or operative
cause falls within risk covered by policy and not liable if it is …. Perils excepted.
 32

If exception had simply read resulting from an accident sustained by an insured person by reason of any breach on the part of
the insured it would be properly construed as relating to the proximate cause. However, use of the words directly/indirectly
critical.

Use of these words did not exclude the principle of causation so defendant aught to aver that

Mutual & Federal v Outshoorn Municipality 1985(1) SA 419

Contract of insurance unknown @ Roman law.
Duty of disclosure not common to all types of contract though all contracts are bona fidei. There is no magic in the expression
uberrima fides. There are no degrees of good faith. The distinction is between good faith or bad faith. There is no room for
uberrima fides as a third category of faith in our law.

In my opinion, it cannot be used in our law for the purpose of explaining the justice basis of the duty to disclose a material fact
before the conclusion of our law has no need for uberrima fides and the time has come to jettison it.

Test for materiality

Prudent insurer test applied at English law.
Test favourable to insurer. Reasonable insured test favourable to an insured since the std of judgment is the objective judgment
of a prudent insured.

Royal Mutual v Mubaiwa 1990(4) SA 177

If words are ambiguous, recourse may be made to the nature of the contract, purpose for which it was concluded or nature and
purpose of the particular term in which the words appear.

Elusdem generis
A contextual device-apply words in context used to restrict the meaning of general words by reference to specific words in their
immediate vicinity.
Geneus = common demoninator. When particular words are descriptive of various species of a single genus, and are followed or
preceded by general words, the latter may be limited so as to be descriptive of the species of the relevant genus.

Rule used to give effect to the object and nature of contract – Royal Mutual/Mubaiwa.

Rule embodies a presumption and is to be applied with caution.

S v Buthelezi 1979 3 SA 1349

Statute referring to “any place of entertainment, café, eating house, race course or premises or place to which public are granted
to have access. Interpreting this crusgen generis conclusion was that does not include court house or police station because,
while public has access, these are not entertainment places.

- where words are sufficiently detailed as to exhaust the entire genus, general words may extend the latter or they may
be extended ex abundant cautela i.e. out of an abundance of caution.

At the same time, a genus cannot be inferred from specific terms. S v Makandigona 1981(4) SA 439 S3C of Prevention of
Corruption Act ref to any receipt, account or other document.

Limiting application
Application of the elusdem generis rule may be expressly excluded “this clause is not to be interpreted elusdem sometimes
phrases like “in particular” may be used.

Expressio Unis est exclusio alterius

May be in direct conflict with ………. If a document contains a special reference to a particular thin, it is prima facie assumed
that the parties intended to exclude everything else, even that which would have been implied in the circumstances had it not
been for the special reference.

Strict interpretation
Prejudicial clause e.g. Penalty clause to be strictly interpreted limitation or exclusion or an insurer’s liability because insurer
drafts contra proferendum. However, if the term is clear, there is nothing ambiguous about the words are given effect . An
example of the strict interpretation is the Quod minimum rule – semper in obscures quod minimum est sequitar – interpret
ambiguous, unclear contracts in such a way that the least possible burden is placed on the debtor.
- to be applied if other rules fail to resolve ambiguity
 33

Contraprentum rule – verba cartarum fortius accipluntur contraperforatium

- rule applied after exhausting other approaches and failing to get clarity
- sometimes confused with quodminimum
- contract must construe against the party who drafts or on whose behalf it was formulated because author of the words
has opportunity to express self in clear language.

Quod min and control coincide if a promisee is also the proferens of a particular contract. In case of conflict contra prevails.

Good faith
A primary requirement in insurance
Must be exhibited at all times during the contractual relationship
Either party may avoid the contract if there is misrepresentation.
- rt of insure to receive correct and complete information about material facts.
- Insured must state all information in his knowledge which he believes to be material.
- Concealment = fraud.

No need to mention what insurer knows or what he ought to know or what he takes upon himself the knowledge.
What he waives of being informed of what lessens risk.

Insurer is bound to know every cause which may occasion natural peril
- difficulty of voyage
- kinds of seasons
- probability of lighting
- earth quakes

Occasioning political perils

- ruptures of states
- war

Probabilities of safety from continuance of peace insured may not speculate about what may or may not be in the mind of
insurer.

Answers are representation unless they are made part of the contract then they become warranties. Warranties result in
avoidance of contract.
Misrepresentation then prove that answer is untrue or fraudulent or that it was untrue and material
What is material is what a reasonable man might consider material or what might lead an insurer to refuse the risk or demand a
high pre, not what insured may thing.

Joel v Law Union 1908 2 KB 863

Yorke v Yorkshire Ins 1918 1 KB 662
Mutual Life Ins Co. v New York 1925 AC 344
Representations – insured can recover money only if it is innocent

Fraud and recovery

Party alleging misrepresentation must prove it.

Materiality
- Facts indicative of exposure to risk
- Dangerous occupation/high risk hobby
- Characteristics making a person vulnerable medical history
- Geographical situation
- Previous record of insurance proposal e.g. declined proposal, cancelled.

Colonial Ind v Provincial Insurance 1922 AD 213

Financial or business integrity
Styn v Ordenal 1988 4 SA 7 – failure to disclose that unrehab insolvent.

President Verserling v Trustbank 1989 1 SA 208

Insured failed to disclose that due to lack of funds could not pay premium continuous liquidity problems.
 34

Van Zy & Maritz v SA Special Risks Insurance 1995 2 SA 331

Insured may be prone to causing risk to materialise.

Fouche v Corp of Londo Assurance 1931 WLD 145

Premises used to be a brothel.
Richards v Gardian 1907 TH 24

Farmer sickness
State facts correctly as far as is known. Good health

Misdescription
Construction of house, material used

Merkin R 1976 39 MLR 478 p216 Merkin

Uberrima fides strikes again
First
Doctrine of non disclosure, coupled with prudent insurer test in practice means that the insured must possess …… powers to
discover what a reasonable insurer would regard as material. Many matters regarded material would be considered useless by
any reasonable proposer.
Criminal convictions 24 years old considered material.
Past refusal to grant a moto policy considered material for a fire policy. Logical view is that if an insurance company considers
issues material, it would ask re… questions.

A reasonable insured test is not hard to apply for it s merely a reasonable man test which judges have become proficient in
applying. No judge can pretend to be a prudent insurer. The only was to discover what a prudent insurer considers material is to
ask him and this allows an insurance company to bring in evidence of other insurers.
Lambert – treatment of previous convictions as material issue of a document that is false in any material respect.
Hodgin – wrong or misleading answer is given to questions posed
Non disclosure S83A – failure to volunteer answer to insurer because no specific question has been as requirement s of non
disclosure pose more threat than requirement of misrepresentation.

It is immaterial that insured misrepresents negligently or innocently. [strict liability] if information is inaccurate, insurer is said to
have been prejudiced by inaccuracies.

The insurance Amendment Act is a feeble attempt to improve the position of the insured at common law.

Misrepresentation of common law, statement must be:

- a statement of fact not opinion or law
- untrue or inaccurate
- material to the making of the contract
- statement of present or past fact not future
- induce insurer into finalizing contract

Moral Hazard Reynolds & Anderson v Phoenix Assurance Co 1978 2 Lloyds Rep 440
Claimant accused of conspiracy to defraud during currency of insurance and later acquitted.
I have no doubt that every insurer would like to have the most complete information about the moral make up of each proposer
but that is not the test. The test is whether the circumstances in q would influence his judgment in determining whether he will
take the risk. The insurer’s thirst for knowledge however understandable is not therefore the required criterion. A good example
of what I have in mind is that many of the witnesses maintained that any allegation of fraud made against a proposer must be for
the insurer to investigate such allegations and decide on their truth … I find this attitude wholly unacceptable.

Ewer v National Employees Mutual 1937 2 AIIER

Court rejected claim that ought to disclose all claims ever made on any other subject matter as well as any other refusal by an
insurer. Court in rejecting said such a requirement would be a grt gravity and complete novelty.

Knowledge of agreement
Carter v Boehm authority insurer ought to know about war danger etc.

Ayrey v British Legal & United Provident Ass 1917 1 KB 136

 35

Insurance for life cover. Disclosed in writing that fisher may bt not Royal Naval Reserve – disclosed to snr insurance mgr
drowned. Insurer did not succeed on basis of non disclosure because informed.

Reciprocal duty
Carter v Boehm – policy would be equally void if insurer conceal

Horry v Tate & Lyle Refineries 1982(2) Lolyds 416

1980 recommend reasonable man test.

Warranties
A strict contractual term by which insured undertaking that certain representations are accurate or certain duties will be
performed.

Historically insurer entitled to conceal contract from minute breach occurred regardless of materiality or that breach may not have
contributed in any way to the loss ird which a claim was brought.

Bank of Nova Scotia v Hellenic Mutual War Risks Assosn Bermida Ltd 1991 3 911 ER 1
Insurer is in the event of a breach of a warranty automatically discharged from all liability for losses suffered after occurrence of
breach. No need or room for election as was the historical position.

Warranties must be honoured come what may regardless of impossibility of performance and absence of fault.

Lewis Ltd v Norwich Fire Union Insurance Co 1916 AD 509

A warranty is a statement or stipulation upon the exact truth or exact performance of which the validity of contract depends.

Norwich Fire Union Insurance v SA Toilet Co 1924 AD 212

Kliptown Clothing in Pty v Marine Trade 1961 1 SA 103
Jodarn v NZ Insurance 1968 2 SA 238
Qingele v SA Mutual Life 1993 1 SA 69
SA Eagle Insurance v Norman Welthagn Investments 1994 2 SA 122
Botha’s Trucking v Global Insurance Co 1999 3 SA 378

If misrepresentation was alleged – prove materiality if warranty no need to prove materiality.

Creation of warranty
- prove that not a mere term of contract or representation but that it is a provision forming part of contract of insurance.
Sacks v Western Ass Co 1907 TH 257
- term is a strict undertaking so insured agrees to be bound come what may
- warranty only if it is a vital term Bernard v Faber 1893 1 QB 340
Union Insurance Society of Caution Ltd v Georg Wills 1916 1 AC 281 term is vital if important tosby matter. E.g.
material in assessment of contract risk.
- Parties can employ terms to effect that statement considered fundamental e.g. contract will be void if not observed or
observance is a condition precedent.
- These are prima facie evidence of
Lewis v Norwich
Sacks v Western 1907 TH 257
Commonly insurers require insured to assure absolute liability for correctness and to accept these as the basis of contract.

Types of warranties
Affirmative - warranties the truth of representation e.g. I possess a driver’s licence – past or present.
Promissory = to the further – keep record of business in a fire proof still remained to another building at night.

Causal connection between breach of warrants and loss not required.

Qilingele v SA Mutual Life Assurance 1993 1 SA 69

Rejects the reasonable person test in Mutual and Federal. Suggested establish
1. likelihood of influence
2. concepts of reasonable insurer, reasonable insured, or mad which connote value judgment do not get into the pla…
3. enquiry as to materiality involves the question whether representation was significant in so far as assessment was
concerned and more specifically whether assessment of risk particular insurer as opposed to assessment in abstract
was influenced by representation.
 36

4. Test involves a comparison between how the insurer would have assessed the risk in Q if there is incorrect
representation or how it actual assessed risk in the light of that representation.

Criticised in Clifford & Liberty Life Assurance v De Waal 1999 4 SA 1177.

Regulation of Insurance business

Why regulate – S5

- To protect the public which interest invests significant sums of money. Insurers deal with trust money.
- Insurance is inherently hazardous and recent happenings in the financial services sector has shown that failure to
adhere to sound business principles may negatively affect thousands of people.
- There is no equality in the bargaining power of the parties. People largely depend on good faith of insurers. There is a
fiduciary relationship. Public needs protection not just in relation to solvency of insurers but also in respect of unfair
insurance contract terms or unfair trade practices.

Regulatory authority
Vests in Minister of Finance who appoints commissioner of insurance who acts in consultation with insurance and pensions
insurance pensions and appointed.

Responsibility of C……..s5
Ex Parte Parity Insurance Co Ltd 1966 1 SA 463
Reg of Insurance v Joburg Insurance Co (2) 1962 4 SA 548

Protective measures
- prohibition of unregistered persons from carrying on business S7
- strict qualifications for registration S8 as amended
S3 insurance regulation S! 49/89

RISK

Insurance as noted before covers risk

Kent v SA National Life Assurance Co 1997 (2) SA 808

Defined the circumstances or facts that are a potential source of undesirable change as risk. Risk is also the possibility of harm.
Lavens v Colonial Mutual Life Ass 1986(3) SA 373, Lake Prudential Supra.

If change however undesirable occurs as a result of inherent vice or wear and tear due to natural behaviour of object do not
represent rek.

Bethlehem Export Co Pty Ltd v Incorporate General Insurance 1984(3) SA 339

This is because it is certain that the car will wear out the slipper will wear out etc. It is a certainty. However, the moment that
uncertainty is apparent to the time at which that inherent vice will occur, risk may exist.

Sasson & Co Ltd v Yorkshire Insurance Co 1923 16 Loyds LR 129

It is the existence of risk and its transfer from the person directly affected by the risk to the person who can make good the loss
from the materialization of risk that constitutes the basis of insurance.
Sydmore Engineering Works Pty Ltd v Fidelity Guards Pty Ltd 1972(1) SA 478.

However, if the assumption of risk is an ancillary obligation is an agreement then no risk. At the same time not every agreement
to cover risk amounts to insurance e.g. repair/replacement of electrical indemnification
Sydmore supra
Department of Trade and Industry
Medical Defence Union

The general guideline is that the undertaking to cover risk must be an independent undertaking that is why in Sydmore, the
agreement by a security firm transporting money was not considered as insurance. The undertaking was a natural co…… of the
principal obligation to transport the money, the risk to loss of the money bery a normal part of the business.
 37

Different tests have been advanced

1. Is risk within control of the contracting party bearing that risk.
2. What is the principal object of the contract – an agreement to bear a risk will be on insurance contract only if it is
an independent performance representing the substantial part of the contract.

How does one describe risk?

Of concern is:
1. extent of harm probable
2. the probability that harm will materialise.

The above inform a potential insured’s decision at two levels:

- should I take out an insurance
- how much cover

For the insurer the concern is whether to cover is whether to cover at all as well as how much premium.
Consequently it is critical to properly describe what is being covered because insurer’s eventual performance is directly related
and elephant on the description.

One describes
1 event
2 object
3 peril
4 circumstances
5 any qualifications
6 any limitations

Event
The entire occurrence which will render an insurer liable into a particular contract.

Object
This is the thing that is subject to a particular peril or that is instrumental causing loss. To what does loss attach is the question.
Sometimes however, since risk is the probability of harm in general a particular risk need not be described with reference to a
risk object e.g. liability resulting from driving a car.

Peril Lourness v Colonial Mutual Life Ass 1986(3) SA 373

Inherent in a contract of insurance is a thoroughly considered prognosis about materialization of the risk involved. Prognosis
possible if hazard is taken into account.
Peril is a fact which when regarded prognostically contain the possibility of harm. Peril is a source of potential loss. It is causally
connected with harm/loss.

Circumstances affecting risk

These are indicative of the peril can be subjective – personality character of insured e.g. honesty/dishonesty and carelessness.
Can also be objective – material used to construct a building where a vehicle is used – urban etc.

Circumstances can be qualified in relation to time and place with time limiting duration or hour etc e.g. night time, day time or
period or conduct.

Extent
- amount payable/degree of loss.

Limitations and exceptions

These restrict the extent of insurer’s liability
e.g. cover damage caused to a car as long as it is not a result of riot etc.

Example of limitation
Often insurance will not cover consequences of war/disturbance.

War – state of condition of government contending by force no need for formal declaration of war, of official recognition.

Riot – the carry out by att of people of some common probability mischief.
 38

However, one can have an all risks insurance cover however arising etc or from whatsoever cause:
London & Provincial Leather Ltd v Hudson 1939(3) SA ALL ER 857
Holmes v Paye 1930 2 KB 301

Alteration
Event upon which insured bases a claim must in all respects fall within the confines of description. Insurer is not liable if altered
risk materializes.
- theft from place a not covered if it occurs at B
- if identify of object as described changes insurer is not liable in case of a loss – passenger
vehicle/goods etc.
- some changes increase probability the trend is to provide for consequences of alteration but sometimes
one is required to notify insurer of any alteration but reserving it to insurer to cancel contract.

Causation
Insurer’s duty dependent upon peril causing loss. A claim requires causal nexus between peril for loss.
Unless specified otherwise causation bears some meaning as that attached in other areas of law. Two levels of inquiry
- is there a factual link
Minister of Police v Skosana 1977 (1) SA 31
Simar & Co v Barclays National Bank 1984 (2) SA 858
- to what extent is X liable for factual consequences.

Claim will succeed if there is a factual causal link between peril and loss test is the conditio sine qua non one
- but for X there would not have been a loss.
Was peril the conditio sine qua. Is there a sufficiently close relationship.

Test for determining

Usually insurance seeks to answer whether the cause as defined more ten the consequence as defined.
The principle in lure non remorta causa sed proxima spectatur says it all.

Insurer liable only if the fact for which the claim is brought is the result of a proximate cause included in the perils insured against
or that its liability will be excluded if the proximate cause was excluded.

Rabinowitz v Ned Equits Insurance Co 1980(1) SA 403

Agiakatsikas v Rotterdam Insurance Co 1959(4) SA 726
Incorporated Gen Insurance v Shooter a/a Shooters’ Fisheries 1987(1) SA 842

The rule is generally incorporated expressly or similar appropriate words. However, when not expressly incorporated it is still
taken to apply because it is generally believed that it represents intention of the parties.

Blackshaws Pty v Constantia Insurance Co Ltd 1983(1) SA 120

Inherent vice excluded

Abako Ltd v Std Gen Insurance 1995 2 SA 575.

Proximate cause is the dominant cause, direct, actual, effective.

Indirect or fortuitous is not a proximate cause therefore no legal causation.

Causality not necessarily related to time, it is related to efficiency.\

Leyland Shipping v Norwich Fire Insurance Society 1918 AC 350

No need for cause to be the sole cause

Oelofsen v Gigna Insurance Co 1991 (1) SA 74

The proximate cause rule may be expressly excluded

RM Insurance Co Ltd v CGM 1995 (1) SA 698

Can also extend range of consequences that are covered.

Usually use of words

 39

“directly or indirectly” – exclude

Cover
- Agiakatsikas supra
- Rabinowitz supra

NB Exclusion of proximate cause rule does not remove need for causation in general. RM Insurance supra.

Intervention
Occurrence of an independent intervening cause affects causa
Narusactus interventions.

Excluded peril occurs then an included peril or vice versa.

In the absence of a nousactus interventions, insurer is affected was …….. an independent cause between the excluded peril and
loss. If no then no liability if yes then liability.

Rootberg v Guardian Assurance Co 1995 CPD 174

Law Union & Rock Inc Co v De Wet 1918 AD 663
K & S Dry Cleaning Equipment v SA Eagle Ins 2001 3 SA 652.

Conduct of Insured
Conduct of insured causes loss – terms of contract important but ask
- is conduct within descriptive of risk?
- Is it included in cover
- Public policy, contra bones mores
- Mere fact that individual is responsible does not vitiate contract and liability
- Generally no fault (legal) no effect on liability of insure.
- Negligence – clear terms must exclude insurers liability.
Otherwise negligence covered. Insured has to prove recklessness.
Santam Ltd v CC Designing CC 1999 4 SA 199.

Intentional Conduct
In the absence of an agreement a contract of insurance excludes consequences of insured’s own deliberate

Niemand v African Life Assurance Society 1969 3 SA 259

Govt of RSA v Fibre Spiners 1977 (2) SA 324
Shooter t/a Shooters v Inc General Insurance 1984 (4) SA 269

Most contracts in fact specify that own conduct is not covered.

Beresford v Royal Insurance Co Ltd (1) 1938 AC 586

On ordinary principles of insurance contract law, an assured cannot by his own deliberate act cause the event upon which the
insurance money is payable.

Suicide
Life insurance does not cover suicide while sane.

Minimisation of loss
- a general duty to avert loss exists – sane as implied duty not to cause loss
- a contract may contain specific contract to the effect.
 40

WARRANTIES

Closely related to the requirement that prospective insured must disclose all facts relevant for the determination of risk and
premium is the undertaking made by the insured that what representations are made in the proposal are accurate. In making the
undertaking the insured guarantees the accuracy of the representations.

However, unlike the requirement for disclosure that undisclosed material needs to be material, material indicated as warranties at
English law, did not have to be material.

Dawsons Ltd 1922 AC 413 Yorkshire Insurance Co v Campbell 1917 AC 218.

Breach of warranty is perceived as an alternative and preferable cause of action for insurers because of the less onerous burden
of proof.

Advantages of warranty

- Insurer can sue on basis of breach of contract as opposed to a delictual action based on misrepresentation.

Warranties impose strict duties on the insured to do certain things either to reduce or control risk after conclusion of contract.

What is a warranty?

A strict contractual undertaking by the insured that certain representations are correct or that certain duties will be performed.

- A distinction is drawn between a mere representation, and a term of contract a warranty must be present in the contractual
documents evidencing agreement between the parties to the insurance contract. A warranty may be contained in the proposal
form that is declared as the basis of the contract
Sacks v Western Assurance Co Ltd 1911 CPD 293.
SA Eagle Insurance Co Ltd v Norman Welthagen Investments Pty Ltd 1994 2 SA 122.

- A term must be established to be a clear undertaking so insurance must have agreed to be bound come what may. A term that
states that a contract will become void if it not observed or that the observance of the term is a condition precedent to liability is
considered as a prima facie evidence of a warranty.

An assumption absolute liability for the correctness of answers provided in the proposal form and acceptance of those terms as
the basis of the contract creates a warranty.
Dawson v Bonnin
Morris v Northern Assurance Co 1911 CPD 293
Yorkshire Insurance Co Ltd v Ismail 1957 (1) SA 353
Heslop v General Accident Fire & Life Insurance 1962 (3) SA 511
Qulingele v SA Mutual Life Assurance

Types of Warranties
A warranty may be affirmative and promissory or it may be a warranty of fact, knowledge, opinion.

Affirmative warranty where insured warrants the truth of a representation e.g. that he is in possession of a driver’s licence as in
Maze v Equitable Trust & Licence Co of SA Ltd 1938 CPD 431.
Affirmative warranty relates to the past and present state of affairs.

A promissory warranty relates to the future that insured will perform act X e.g. that business person will keep up to date correct
information of business and the books will be locked in a fire proof safe Kliptown Clothing Industries v Marine & Trade
Insurance Co of SA Ltd 1961 (1) SA 103.

Warranty of fact – that a state of affairs does/not exist irrespective of insured’s person knowledge of the state of affairs.

A warranty of knowledge warrants that to the best of insured’s knowledge, a state of affairs exists or not Yorkshire Insurance
Co Lt v Ismail 1957 (1) SA 353.

Breach of Warranty
 41

- Considered as breach of contract once an act of breach has been committed, it cannot be undone or cancelled by subsequent
conduct. E.g. if the insured has wrongly warranted that he has a driver’s licence he cannot rectify his breach by subsequently
obtaining a licence Maze v Equitable Trust & Licence Co of SA Ltd 1.

A warranty imposes strict liability on the insured to fulfill the conditions

Froli v London Assurance Co 1931 EDC 186.

Consequently failure to comply with contract due to an innocent mistake or inadvertence is not excusable. Also the fact that the
warranty was based on false information by others or fault of a third party is not acceptable.
Beyers Estates v Southern Life Assurance 1938 CPD 8. insured did not disclose that he had cancer because Doctor had not
told him.

Heslp v General Accident Fire Assurance

It is not material that misrepresentation is made in good faith as opposed to bad faith.

- No need for causal connection between breach and loss Gordon v The Transatlantic Fire Insurance Co 1905 T/E/146

If wording requires doors to be kept locked, and at some time insured neglects this duty, but if on the occasion there is no breach
of this condition when loss occurs this is not considered. Cole v Bloom 1961 (3) SA 422.

Only the insurer may waive warranty unless the insurer is estopped from relying on breach of warranty.

Or if compliance with warranty becomes illegal then one did not comply.

What happens if a warranty is breached.

Position in English law is that contract becomes voide. However, at SA law normal contract applies.
When breach of contract is relied upon, breach
Clause II proposes.

- Warranty
- A written term of contract where insured warrants – through the force of words or operation of law, that certain facts are
correct or that he will undertake due performance of obligation specified therein.
- Enables insurer to avoid policy and repudiate contract from breach of warranty not withstanding that the contract of the
warranty may not have been material to the risk and that the breach may not have caused loss in respect of a claim is
brought.
- Applies to conditions that are precedent to the liability of the insurer.
Words like – this proposal serves as the basis of the contract.
- however, insured may not see extent of obligation no.1
- technical words are not necessary.
- A warranty is devoid of requirement of materiality. Consequently it enables the insurer to avoid difficult of proving
misrepresentation
Example
- a married woman who uses maiden name – considered breach of warranty though marital status has nothing to do
with risk Dunn v Ocean Accident & Guarantee Corporations 1933 45 LILR 276.
- A man warrants not being attended to by a medicine man – insurance void if attended to.
Yorkshire Insurance v Campbell 1917 AC 218 – wrongly stated breach of horse so insurers could avoid liability when
horse died.
- Allen v Universal Automobile Assurance 1933 45 LLR 55
An answer that a car had been bought for 285 pounds when it had costed 271 pounds was considered breach of warranty.
- A stove pipe 3 ft long does not answer a warranty that it is 2 ft long New Castle Fire

When the assured answered that he is 30 it was ruled that he was in breach of contract when it proved that was 35.

In American case of Abbott v Shawmut Mutual, it was held that insurer was discharged from liability when the insured
answered that the property was mortgaged for 6600 pounds when in fact is was mortgaged for 6684 pounds.

- Alteration of use
A description of use of goods may be warranted and alteration of use may make the description cease to be correct.
 42

- in G F Watkinson & Co v Hallet 1938 61 LILR 145 propose described self as paper board manufacturers when in fact
they were paper merchants owing to the misdescription the risk was not covered.

If there is an express condition in the policy that any alteration increasing the risk will render policy void, the description of the
premises can amount to an absolute warranty.

If there is a warranty that the subject matter of insurance comes within a particular classification defined in the policy and it does
not the policy will be invalid regardless of the risk.

Warranty as to the truth of information

-a warranty irrespective of knowledge requires subjective truthfulness

A policy can be invalidated if an insured says he has no disease when he does but he does not know – even if the accuracy of
the answer can only be tested by a post mortem!

Promisory warranty
- that a given state of affairs will continue to exist.