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SOUTH AFRICAN LAW OF CARGO INSURANCE

SOUTH AFRICAN LAW OF CARGO INSURANCE


Andrew Robinson1

INTRODUCTION

Scope and structure of the chapter


14.1 This chapter focuses on those areas where South African law has developed
differently from English law,2 and avoids dealing with general insurance principles that
are not relevant to marine cargo3 insurance. The chapter relies heavily on four main fairly
readily available sources, namely, the current marine insurance section in the insurance
chapter in volume 12 of The Law of South Africa 4 ; the textbook developed from
the LAWSA chapter entitled General Principles of Insurance Law 5 ; the marine insurance
chapter in Gordon & Getz 6 ; and the marine insurance chapters in Professor John Hares
book, Shipping Law and Admiralty Jurisdiction in South Africa.7
14.2 Few scholarly works ever achieve the accolade that they are bedtime reading, but
a two-volume work8 by Professor Van Niekerk falls squarely into that category. The
Development and Principles of Insurance Law in the Netherlands from 1500 to
1800 takes the reader on a serious adventure through the legal writings and legislation of
the Netherlands during the golden era of the development of Roman-Dutch law. If
anything, it reveals the fragmented and often haphazard way in which insurance law
developed, bedevilled by issues of geographic and economic self-interest or the
predominantly strong views of influential writers of the day.
14.3 The LAWSA chapter is currently being updated by the learned authors and their
labours will hopefully result in a new edition of LAWSA and a further textbook on
insurance principles in the very near future. This will fill a gap of almost 10 years when
the only other generally available commentary is that contained in the two very useful
chapters of Professor John Hares work referred to above.
14.4 Over the years, there have been constant calls for the development of South African
legislation to deal with insurance contracts generally.9 This is because there is ongoing
legislative and judicial confusion regarding the principles to be applied to issues of
marine insurance. Writing before the publication of the LAWSA volume, and the work of
Reinecke et al. and John Hare, Douglas Shaw QC, commenting on the effect of section
6(1)(b) of the Admiralty Jurisdiction Regulation Act,10 stated:
Unfortunately, therefore, the South African law of marine insurance is the Roman-Dutch
law applicable to the Republic11 There is no satisfactory work on the law of marine
insurance in South Africa and the sources are not such as are normally available to the
practitioner, but it is to be hoped that the courts will recognize that marine insurance
always has been a topic on which there has been a substantial degree of uniformity.12

Sources of South African law

Roman-Dutch law
14.5 Lord Diplock has stated that:
The contract of marine insurance is highly idiosyncratic; it involves concepts that are
peculiar to itself such as sue and labour, subrogation, abandonment and constructive
total loss, to give but a few examples. The general law of contract is able to throw but
little light upon the rights and obligations under a policy of marine insurance in the
multifarious contingencies that may occur while the contract is in force.13
Mr Justice Viljoen commented on this statement, saying:
Subrogation is a well-known concept in South African insurance law but the others
referred to are completely foreign to our law and peculiar to English marine insurance
law.14
The South African law15 of marine insurance has its roots in the Roman-Dutch
law,16 which forms part of the common law of South Africa. Until 1910, there was no
unified South Africa. From 1652 to 1806, the Dutch colonised the Cape, whereafter the
English took over governance, but did not displace Roman-Dutch law. Only in 1879, by
the General Law Amendment Act, was the English law of marine insurance imported into
the then named Cape Colony. However, the Act also stated that for any future English
statute to apply in the Colony, it would have to be re-enacted in the Cape. An example of
a statute that was not re-enacted is the 1906 Marine Insurance Act. Many Dutch settlers
left the Cape Colony from the 1830s and established the two land-locked republics of the
Orange Free State in 1854 and the Transvaal in 1852. On the east coast, the colony of
Natal was settled from 1839 largely by the English and annexed to the Cape in 1844. In
Natal and the Transvaal, the pre-1879 Roman-Dutch sources were applied. In 1902, the
General Law Amendment of the Orange Free State made the law of the Cape Colony
applicable there. This ordinance was only repealed in 1977, and this had the effect of
unifying the law of the post-1910 provinces; however, as Professor Hare has noted:
it could surely not have had the effect of deleting from South Africas judicial
precedent all marine insurance case authority decided in England, the Cape Colony and
the Orange Free State in the 98 years they were subject to English law? At the very
least, such authority must still be persuasive to a South African court.17
It follows that unless specifically included in a policy, English law will not govern a policy
of marine insurance. Furthermore, marine insurance was not a subject-matter over which
the English High Court of Admiralty had any jurisdiction and, accordingly, section 6(1) of
the Admiralty Jurisdiction Regulation Act will not apply English law to questions of marine
insurance, though English case law, in practice, will have a persuasive influence on many
marine cargo insurance issues.18 The South African courts, accordingly, will apply the
Roman-Dutch law unless the parties have contractually selected some other regime in
terms of section 6(5) of the Admiralty Jurisdiction Regulation Act. It is very common for
South African policies to contain a term stating that the policy and any dispute arising in
respect of that policy are to be governed by English law but with the dispute to be heard
in South Africa. This reflects the very close connection that has existed between South

African underwriters and brokers and the Lloyds market, a relationship enshrined in
legislation.19 This does not mean that South African legislation can be ignored, however,
particularly with regard to domestic consumer protection legislation.20
14.6 As for the Roman-Dutch law of marine insurance, the view of many practitioners is
that the sources and principles of the Roman-Dutch law of marine insurance are difficult
to determine, are rooted too firmly in the past and are untested by our courts. This makes
it difficult for practitioners to properly and accurately advise clients on the effect of the
terms and conditions of marine insurance agreements. Whilst the history and
development of the Roman-Dutch law of marine insurance is not without considerable
interest and fascination,21 it has had little real impact on the practice of marine insurance
in South Africa. For all practical purposes, underwriters and brokers will usually refer to
either the Marine Insurance Act of 1906 or the decisions of various courts (not restricted
to English courts) on the interpretation of any provision of the Institute Clauses.
Judicial precedent
14.7 It has been written that the doctrine of precedent is probably the most significant
connection between South African law and Anglo-American law and the most important
divergence from the Roman-Dutch law as well as the other legal systems that grew out of
the ius commune .22 The doctrine of precedent has been endorsed by the Constitutional
Court, which has stated that it is a fundamental principle of justice that like cases should
be determined alike to create legal certainty.23 In terms of this doctrine, the ratio
decidendi (being a ruling made by a court on a question of law that is then applied to the
accepted facts in order to decide a case) may, depending on the particular courts status,
have either no authority, persuasive authority or binding authority on other courts,
depending upon the status of those other courts. Of course, even binding precedents can
be ignored in certain circumstances where, for example, the need to develop the law
justifies this. This is especially so now that the South African Constitution has
empowered the courts to develop the common law. Precedents can only be established
from judgments that are published and are, as such, accessible to the public. It follows
that some lower courts decisions do not create any precedents at all. There are three
main courts that will be affected by the principle of judicial precedent. These are, first, the
Constitutional Court, which has a purely constitutional jurisdiction, and is bound by its
own decisions, which will bind all other courts when considering constitutional issues.
This court is unlikely to hear marine cargo insurance cases. Secondly, the Supreme
Court of Appeal, which is absolutely bound by the decisions of the Constitutional Court,
and is bound by its own decisions and those of the former Appellate Division. Decisions
that predate the Constitution may not be binding where they do not reflect the values of
the Constitution. Thirdly, the High Court, which has various divisions, some of which have
appeal jurisdiction, from a single judge to a panel (usually three) of judges. These courts
are absolutely bound by the decisions of the Constitutional Court and the Supreme Court
of Appeal. However, they are not bound by decisions of high courts outside their division.
Statutory sources of law

14.8 There are two South African statutes that are immediately relevant to marine
insurance: the Short-term Insurance Act24 and the Admiralty Jurisdiction Regulation
Act.25 The Short-term Insurance Act deals mostly with the administration and regulation
of the short-term insurance industry, and no mention is specifically made to marine
insurance, although it clearly relates to such insurance by reference to a transport
policy. However, it does contain two provisions that deal with the effect of any nondisclosure or misrepresentation, which differ considerably from similar provisions in the
1906 Marine Insurance Act. The Admiralty Jurisdiction Regulation Act specifically refers
to marine insurance, and provides that any claim for, or arising out of, or relating to a
contract of marine insurance is to be regarded as a maritime claim and any such claim
must be brought before the relevant South African court exercising its admiralty
jurisdiction.

The application of English law


The practice: incorporation of English law
14.9 Most cargo policies issued by South African underwriters, or through South African
brokers, will incorporate one or other of the Institute Cargo Clauses, including the clause
that the insurance is subject to English law and practice.26 However, even where a policy
and the Institute Clauses refer to English law and practice, this will not necessarily trump
South African statutory provisions, especially where the provisions have been drafted so
as to protect the assured.27 That said, there is a great deal that is common between
English law and South African law and most South African marine insurance specialists
are quite comfortable in applying English law when construing policies.
14.10 The respect for English law in marine insurance matters is such that for many years
the Association of Marine Underwriters of South Africa and the Marine Law Association
of South Africa have debated the provisions of new legislation based on a draft Marine
Insurance Act. This draft28 in its current form is based very much on the 1906 Marine
Insurance Act. Following the current work of the English Scottish Law Commission into
issues of insurance law generally, interest in reviving this project has grown in recent
times, and more work on a draft marine insurance contract bill (which may simply amend
the Short-term Insurance Act) is expected, but there is no immediate prospect of an Act,
or an amending Act being promulgated.
Will the South African courts uphold a choice of English law?
14.11 Somewhat controversially, the Admiralty Jurisdiction Regulation Act provides a
formula29 to determine what law should be applied to any particular maritime claim. In
essence, the relevant provision tries to draw a distinction between those claims that
would have been dealt with by the English High Courts of Admiralty, and those claims
that fell outside the embrace of those courts. Marine insurance fell outside the jurisdiction
of the High Court of Admiralty and it therefore came as no surprise that the then
Appellate Division in Incorporated General Insurances Ltd v. Shooter t/a Shooters
Fisheries 30 held that the law applicable to marine insurance was Roman-Dutch law. It
was, to some extent, a result of this decision that led most South African underwriters

and brokers, many of whom were steeped in the traditions of English law and practice, to
amend their policies by making it clear that the entire policy was subject to English law
(whilst reserving the right to litigate through the South African courts).
14.12 However, as the recent judgment of the Supreme Court of Appeal in The
Mieke case31 has shown, even where a dispute under a policy (which in this case was a
hull policy) which clearly stated that it is subject to English law, is litigated before a South
African court, that court will be entitled to have reference to South African consumer
protection legislation, such as that found in the Short-term Insurance Act. In this Act, for
example, the question of material non-disclosure is dealt with in a way quite different
from how it is being dealt with under English law, particularly in the Marine Insurance Act
of 1906. Whilst this judgment is not without its difficulties, it is probably safe to say that,
where the parties agree that the policy will be subjected to English law, the South African
courts will apply English law as it would be applied had the matter been adjudicated upon
in England, save for any consumer protection legislation.

Consumer protection
14.13 The incorporation of a foreign law clause will not exempt the parties from certain
domestic laws in the event that the policy is regarded as a short-term policy in terms of
the Short-term Insurance Act.32 If the policy is regarded as a domestic policy, then the
provisions of that Act will apply. Of particular importance will be the provisions within that
Act relating, specifically, to the terms, or conditions, of short-term policies and to
policyholder protection.33
14.14 The Short-term Insurance Act does not refer to marine insurance policies as such.
However, the Act does refer to the broader notion of transportation insurance. The
definition of transportation policy34 in the Act describes such a policy as involving risks
relating to the conveyance of goods by air, space, land and water, or to the storage,
treatment or handling of such goods. As most marine insurance policies cover goods on
a warehouse-to-warehouse basis, this definition is certainly wide enough to cover all
goods-in-transit insurance on the usual terms, such as the Institute Cargo Clauses. The
definition in the Act also appears to be wide enough to cover the storage of goods for
extended periods prior to or following transit as are commonly insured as extensions to
marine cargo policies. This creates the interesting conundrum that whilst the Institute
Cargo Clauses incorporate English law, the 1906 Marine Insurance Act would probably
not regard land carriage or storage cover as marine insurance.35 It is certainly the
practice in South Africa for brokers and underwriters to regard all transportation
insurance, whether or not it has a marine element, as falling under marine and that
transport insurance is brokered and underwritten as such.
14.15 In terms of the recently promulgated Consumer Protection Act,36 there is an
obligation on the insurance industry to ensure that the Short-term Insurance Act is
aligned to the consumer protection measures provided for in the Consumer Protection
Act by October 2012. In light of this, it has been suggested that the only sensible way of
doing this would be to amend the current edition of the Policyholder Protection

Rules.37 These rules are issued in terms of section 55 of the Short-Term Insurance Act
and have the purpose of providing protection to a policyholder, who is defined as a
natural person acting otherwise than solely for the purposes of the persons own
business.38 The rules do not affect companies or similar legal entities.
14.16 The Consumer Protection Act has created a legal framework governing the
relationship between the suppliers of goods and services and the protected consumers,
namely, small businesses with assets or an annual turnover of less than R2 million and
all individuals. In the circumstances, and when it comes to the insurance of goods, the
Consumer Protection Act is unlikely to have any significant impact on the vast number of
marine insurance cargo policies issued in South Africa, but there will remain some
policies that will be affected.
14.17 Bracher elegantly states the difficulty that insurers will face, as follows:
The Consumer Protection Act requires every limitation on risk and liability, any
assumption of risk by the consumer, any indemnity imposed on the consumer and any
acknowledgment of a fact by the consumer to be drawn to the consumers attention
clearly and in plain language with an explanation as to the nature and effect of the
provisions. Seeing that insurance policies essentially deal with risks, liabilities and
indemnities, the task of expanding the [Policyholder Protection Rules] is a challenging
one.
For example, rule 6.1 states that the wording of every provision of the policy [must have]
a reasonably precise ascertainable meaning, whereas the plain language test in the
Consumer Protection Act is quite different and has subjective elements. The rules also
deal with various administrative issues regarding the relationship between brokers and
underwriters, the termination of the policy, provisions that are void and the handling of
and the time limits relevant to the handling of claims. In The Mieke decision,39 the
Supreme Court of Appeal made it clear that it would apply a consumer protection
approach when considering issues of marine insurance (and, no doubt, all other types of
insurance too). The Policyholder Protection Rules may be varied when the insurance is
subject to the Consumer Protection Act,40 which will apply to claims involving protected
consumers or any consumers with limited bargaining power.

The position of Lloyds underwriters


14.18 Lloyds underwriters are authorised to carry on business in South Africa.41 This
authority has been established by legislation, currently the Short-term Insurance Act .
Lloyds is obliged to appoint a South African representative who is permanently resident
in South Africa.42 This representative is charged with ensuring that Lloyds complies with
the relevant provisions of the Short-term Insurance Act.43 The representative is required
to have its principal place of business in South Africa.44 A claim against a Lloyds
underwriter can be brought out of any competent South African court.45 A marine
insurance claim, being any claim for arising out of or relating to marine insurance or any
policy relating to marine insurance,46 may be brought out of such a court in the exercise
of its admiralty jurisdiction. A transportation policy, as referred to in the Short-term

Insurance Act, includes a contract providing insurance benefits for goods conveyed by
water.47
14.19 In proceeding against Lloyds, the claimant may cite the Lloyds representative as
the nominal defendant or respondent and any summons or application papers may be
served on that representative.48 The Lloyds representative may similarly conduct
proceedings as a nominal plaintiff or applicant on behalf of the particular underwriter. In
either case, the Lloyds representative may be substituted by the true party at any time
before judgment.49
14.20 Lloyds is obliged to provide security in a Lloyds South African Trust for the
discharge of the Short-term Insurance Act obligations of Lloyds underwriters in South
Africa. This means that in the unlikely event of a Lloyds underwriter not making payment
of a judgment debt, the claimant can have recourse to the trust for satisfaction.50

FORMATION OF A CONTRACT OF MARINE CARGO INSURANCE


14.21 In general terms, South African law and the Constitution recognise as a
fundamental principle that parties are free to contract on such lawful terms as they agree
upon. A contract of insurance is therefore concluded when the parties thereto are in
actual or constructive agreement with its terms. There are no formal requirements at
common law, nor are there any legislative requirements relevant to marine insurance.
Nor is there any requirement that a formal, written policy document be provided or that
the policy be notarised or registered - although many cargo policies will require that a
transferrable certificate be issued reflecting that insurance cover is in place. This is
particularly so in the commodity trades. Slips (being a temporary embodiment of the
contractual terms pending the issue of a superseding policy) are rarely used in South
Africa. A marine insurance policy need not be signed by the underwriter.
14.22 There is no legislative definition of a contract of insurance. LAWSA quotes the
following definition from the judgment in Lake v. Reinsurance Corporation Ltd 51 :
[A contract of insurance is a] contract between an insurer (or assurer) and an insured (or
assured), whereby the insurer undertakes in return for payment of a price or premium to
render to the insured a sum of money, or its equivalent, on the happening of a specified
uncertain event in which the insured has some interest.
14.23 In order to give effect to its purpose, a typical contract of marine insurance will
contain the following express or tacit terms: first, that the insurer will indemnify the
assured for its loss; secondly, that the assured will pay a premium; and thirdly, that the
insurers obligation to indemnify is dependent on the occurrence of an uncertain or
unplanned event. Furthermore, the cargo assured must also have an insurable interest in
the cargo at the time of its loss - but this does not mean that the question of insurable
interest is a term of the contract, even though the obligation of the insurer to indemnify
the assured is often dependent on the assured having an insurable interest at the time of
the loss.

14.24 Having an insurable interest is what separates insurance contracts from wagering
contracts52 - although in South Africa at least, brokers and insurers issue policies with
clauses that will allow a named assured to be indemnified even though at the time of the
loss the insurable interest is clearly vested in some other party. These clauses are called
various things from ex-works clauses to honour clauses, but the policys intention is
clearly to provide cover where there is loss prior to the named assured having any
interest in the goods in terms of a contract of sale. The cover is usually offered subject to
the requirement that the assured first exhausts its legal remedies against the seller
before claiming under the policy. Due to the honourable nature of the relevant term,
insurers do not challenge any demand for indemnity, and such cases have not, and have
little prospect of being, the subject of any judicial inspection. The general view is that they
would, in any event, be unenforceable.
14.25 Apart from the above issues, for a contract of insurance to be concluded, there
must, in general terms, be an offer made by the potential assured to the insurer (usually
in the form of a proposal) that may lead to some negotiation and modification regarding
the risks and exceptions and the period of insurance. Acceptance53 of the proposal by
the insurer concludes the agreement. It is, of course, open to the parties to impose
formalities that may determine the validity of the contract, for example, that the insurance
agreement be reduced to writing.

Utmost good faith and good faith


The good faith requirement
14.26 In considering the cornerstones of contract, Wille states54 :
At every stage of the contracting process, from the negotiations through to the
performance of the obligations undertaken in the contract, the parties are required to
behave in a manner consistent with good faith. As an ethical value or controlling principle
founded upon community standards of fairness and decency, good faith underlies and
informs the entire law of contract, shaping its content and finding concrete expression in
its technical rules and doctrines.
Its influence is indirect - good faith does not provide, by itself, a basis for striking down or
refusing to enforce an agreement, or any of its provisions. Nor is it a term of every
contract that the parties must perform their obligations in accordance with the dictates of
fairness and good faith.
14.27 Prior to the decision in Bank of Lisbon and South Africa v. De Ornelas,55 RomanDutch law provided a remedy of the exception doli generalis, which allowed a prejudiced
party relief where the other party to a contract had acted with dolus to the prejudice of the
first party. The Bank of Lisbon case removed this remedy, but the obligation to exercise
good faith remained. Quite what is meant by good faith in marine insurance contracts
remains unclear. This is evidenced by some alarming developments in non-marine
insurance, where claims supported by fabricated documents56 that were inflated by
10%57 have been allowed. However, in marine insurance, the concept of good faith

remains a prerequisite.58 As for the requirement of utmost good faith, whilst there exists
case law and literature that classifies insurance contracts as contracts of utmost good
faith, this notion was finally rejected in Mutual and Federal Insurance Co
Ltd v. Municipality of Oudtshoorn.59 The then Appeal Court referred to the expression
utmost good faith as alien, vague [and] useless [and] without any particular meaning
in law.
14.28 Hare60 suggests that it may be arguable that the Municipality of Oudtshoorn case
can be distinguished in that it deals with non-marine insurance issues and that a court:
should be able to find, on balance, that the utmost good faith became part of South
African law through the conduit of English law - but only in relation to the duty to disclose
and misrepresentation. And because the bulk of South African marine insurance is
underwritten on the London market, or is re-insured there, it would be preferable for
South African law not to seek to diverge from English law, and the English standard of
utmost good faith in relation to marine insurance.
However, currently, the approach taken is that contracts of insurance, like all other types
of contract, are simply contracts of good faith. The parties must therefore display good
faith towards each other during the course of their negotiations prior to concluding the
contract. Put simply, insurers make undertakings on the basis of the information provided
by the assured, accepting, in good faith, that all pertinent information has been given,
and that the information is true.
14.29 A party to an insurance contract who wishes to proceed on the basis of breach by
the other party of the pre-contractual duty of good faith must satisfy all the requirements
for misrepresentation.
14.30 In the insurance context, the need for the assured to disclose information has both
historical and practical elements and may have much to do with past unequal bargaining
positions. It has been suggested61 that the obligations on the assured have been
extended well beyond what was originally required - but in the cargo insurance context,
this cannot be the case where so much of the business is underwritten either on a
declaration basis or at short notice.
14.31 As for the post-contractual or continuing duty of good faith, there is little clarity; in
practice, the issue often arises where the assured brings a fraudulent claim. In South
African Eagle Insurance Co Ltd v. KRS Investments CC,62Nugent JA stated, obiter, as
follows:
Perhaps an insured does have a duty - whether tacit or implied - to act in good faith
towards the insurer for the duration of the contract. And perhaps the deliberate
submission of a false claim is a breach of that duty entitling the insurer to terminate the
policy. But if that is so then on ordinary principles of our law the insurer would be relieved
of liability only from the time of termination, and the rights and obligations that had
accrued before then would remain extant.

The Short-term Insurance Act63 confuses the status of good faith further by including a
section64 that states:
A short-term policy, whether entered into before or after the commencement of this Act,
shall not be void merely because a provision of a law, including a provision of this Act,
has been contravened or not complied with in connection with it.
It is not yet clear how the courts will interpret this section, as it seems to have been
drafted extremely widely. However, it seems unlikely that the courts will ignore the
principles of good faith and will not allow contracts concluded with the intent to commit
fraud or allow a party to benefit from his or her own wrongdoing.
Non-disclosure and section 53 of the Short-term Insurance Act 1998
14.32 The duty to disclose information appears to rest on the shoulders of an assured at
various times: when providing information requested in a proposal form produced by an
insurer or its agent or broker; producing information that might fall outside of the
questions posed outside of the proposal form but which may affect the risk; during the
course of cover and the period of the running of the contract of insurance; at the time of
renewing of the insurance. Additionally, the contract itself may require disclosure at
various stages - including during the course of the cover and at the time when claims are
submitted to the insurer, when duty does not operate retrospectively.
14.33 An assured bears a duty of disclosing to the insurer relevant information prior to the
conclusion of any contract of insurance, as well as at the time of the renewal of the
contract. It has been said that the pre-contractual duty to disclose is delictual and not
contractual - in certain circumstances a breach of the duty to disclose being a
commission of the delict of misrepresentation.65 Van Niekerk argues that the obligation
does not arise ex lege as held in theOudtshoorn Municipality case,66 but that it derives
from an underlying and generally applicable duty of good faith.67
14.34 In Bruwer v. Nova Risk Partners Ltd,68 all three types of disclosure clauses were
relevant - a pre-contractual disclosure, a term in the contract requiring disclosure and a
term requiring an on-going disclosure. The latter required the assured to disclose to the
insurer all facts that are material to the acceptance of the insurance or the premium that
is charged, failing which the insurer may, at its option, declare the policy void. The
clause went on to say that the duty applies also during the currency of the policy, any
changes must be reported immediately. The clause exhorted the assured to disclose all
material facts that may be of relevance to the [insurer]. The insurer chose to focus on
the breach of the contractual terms imposing a duty of disclosure on the assured and
ignored the possible argument that the assured breached its delictual duty of disclosure.
The court accordingly interpreted the terms of the contract regarding disclosure and
applied the provisions of section 53(1)(a) and (b) of the Short-term Insurance Act, and
the court was not obliged to consider the question of any delictual duty of disclosure.
14.35 Section 53(1) of the Short-term Insurance Act69 states as follows:

53(1) Notwithstanding anything to the contrary in a short-term policy contained, whether


entered into before or after the commencement of this Act,

(a) the policy shall not be invalidated;


(b) the obligation of the short-term insurer thereunder shall not be excluded or
limited; and
(c) the obligations of the policy holder shall not be increased,

on account of any representation made to the insurer which is not true, whether or not
the representation has been warranted to be true, unless that representation is such as
to be likely to have materially affected the assessment of the risk under the policy
concerned at the time of its issue or at the time of any renewal or variation thereof.
The words at the time of its issue make it clear that the provisions of section 53(1)(a)
apply to the pre-contractual (and hence delictual)70 duty of disclosure. It simply is not
clear whether the section can be extended to relate to contractual or delictual
disclosure stante contractu.
14.36 In all probability, the question of materiality of any term seeking to apply a postcontractual duty will depend upon the wording of the particular term. With regard to
materiality, section 53(1)(b) of the Short-term Insurance Act states:
(b) The representation or non-disclosure shall be regarded as material if a reasonable,
prudent person would consider that the particular information constituting the
representation or which was not disclosed, as the case may be, should have been
correctly disclosed to the short-term insurer so that the insurer could form its own view as
to the effect of such information on the assessment of the relevant risk.
14.37 In The Mieke decision,71 the court confirmed that there is a difference between the
test for materiality as applied by the Short-term Insurance Act72 and that applied by
section 18 of the Marine Insurance Act 1906. The central difference between the two
tests is that, in terms of the Short-term Insurance Act, the test of materiality is based on
what a reasonable prudent person would decide is relevant information to be disclosed,
whereas the test under the Marine Insurance Act 1906 is what a prudent insurer would
determine as material when fixing a premium or taking the risk.
14.38 As the Supreme Court of Appeal has made abundantly clear, the purpose of
section 53 of the Short-Term Insurance Act was to favour the assured.73 Its main purpose
was to reduce the effect that a breach of a warranty, by the misstatement of an
immaterial or noncausative fact, has on the contract of insurance, or any claim relating
thereto. The harshness of the effect of the warranty has been summed up in
the obiter remarks of Schutz J, who said of this section (as it appeared in the 1943
Insurance Act) that its purpose was to detoxify the warranty by removing its potential for
abuse, without outlawing its legitimate use.74
The remedy of avoidance

14.39 The insurer may declare a policy to be void from its inception if a material
misrepresentation (i.e., giving of false information) or material non-disclosure (i.e.,
withholding of information) induced the insurer to enter into or renew the contract. Until
the policy is declared void, it remains valid and enforceable. 14.40 The insurer bears the
onus of proving that:

(a) the assured himself or someone for whose act the assured is responsible (e.g., a
broker) made the misrepresentation/non-disclosure;
(b) the misrepresentation/non-disclosure related to a material fact of which the
assured had or could reasonably have acquired knowledge;
(c) the misrepresentation/non-disclosure actually induced the insurer to enter into the
contract or induced it to do so on terms or for a premium it would not otherwise have
agreed to.

14.41 The test for materiality of the misrepresentation or the non-disclosure is set out in
section 53 of the Short-term Insurance Act.75

Formalities, insurable interest and illegality


Formalities
14.42 In South Africa, it is not essential that a contract of marine cargo insurance be in
writing or contained in a written policy; although, in practice, a policy will normally be
issued, it is not necessary for the policy to be notarised or registered. Where necessary,
a certificate of insurance will be issued that is transferrable. The validity and legality of
insurance contracts is dealt with by section 54 of the Short-term Insurance Act.76
The Act states:
54. Validity of contracts

1) A short-term policy, whether entered into before or after the commencement of this
Act, shall not be void merely because a provision of a law, including a provision of
this Act, has been contravened or not complied with in connection with it.
2) If a person has entered into a short-term policy with a short-term insurer who was,
in terms of this Act, prohibited from entering or not authorised to enter into the shortterm policy, or with another person who is not a short-term insurer but who has in
terms of a short-term policy undertaken an obligation as insurer, that person, by
notice in writing to such short-term insurer or other person, or the Registrar by notice
to such short-term insurer or other person and in the Gazette, may cancel the shortterm policy, whereupon that person shall be deemed to be in the same legal position
in respect of such short-term insurer or other person as if the policy had been
cancelled by that person on account of a breach of contract by such short-term
insurer or other person.
3) Any contract entered into before the commencement of this Act the entering into of
which is contrary to this Act or which contains terms prohibited by this Act, shall not
be void nor shall the performance of its terms be unlawful merely because of any
such fact.

4) For the purposes of the validity of a short-term policy the payment of a premium
under a short-term policy to a person authorised as contemplated in section 45, shall
be deemed to be payment to the short-term insurer under that short-term policy.

Insurable interest
14.43 Roman-Dutch law regarded the principles of insurance from the perspective of the
obligation of an insurer to indemnify an assured for its patrimonial loss.77 There was no
doctrine of insurable interest. It appears that English law developed such a doctrine in
order to distinguish wagering contracts from contracts of insurance.78 Notwithstanding
this, it is generally the view that an insurable interest in the goods is a requirement in
South Africa,79 although it has been said that the South African courts simply ask the
question: was the contract a wager or not?80 If it was, then it is clear that Roman-Dutch
law regarded wagers as being unenforceable on grounds of public policy.81 In practice,
most South African insurers will have to be persuaded that the assured had an insurable
interest before they will consider indemnifying the person claiming under the policy.
14.44 The origin of the requirement of insurable interest differs in the different provinces.
In the Cape Province, which took over the relevant provisions of the English Gaming Act
1845, the requirement for an insurable interest lies in these statutory origins. In the
provinces, where the law is based on Roman-Dutch law, the courts have accepted the
view of the Roman-Dutch writers that all gaming or wagering contracts are
unenforceable. In this way, an insurable interest is required throughout South Africa.
14.45 The significance of the object of insurance is that there can be no claim for
compensation or satisfaction under a contract of insurance without there being an object
insured. In Mostert v. Cape Town City Council,82 the court stated that a person cannot
insure unless he has some insurable interest. In Pienaar v. Guardian National Insurance
Co Ltd,83 the court held that an insurable interest must be shown to have existed at the
time of the loss. If there was no such interest, no loss would have been suffered by the
assured, and the assured would not be entitled to indemnification. This confirmed, in the
context of indemnity insurance, the position taken by the court
and Castellain v.Preston,84 where the court stated that an assureds insurance interest is
the object of the insurance and that only those who have an insurable interest can
recover.
14.46 In marine cargo insurance, issues of insurable interest do arise from time to time,
but these matters normally arise out of confusion regarding the terms of the contract of
sale where the place of delivery, and the transfer of the risk of loss or damage in and to
the goods, has either not been adequately determined, or the circumstances of the loss
make it difficult to establish who had insurable interest at the time of the loss. All too
often, parties to a contract of sale are ill-disciplined in the use of standard trade terms,
such as the Incoterms of 1990, 2000 and 2010, with the terms of the sale contradicting
the terms or conditions contained in the standard trade terms.

14.47 The leading case under South African law that attempts to provide a definition of an
insurable interest is Littlejohn v. Norwich Union Fire Insurance Society,85 in which
Wessels J held, with a brevity that the House of Lords might have emulated in the
leading case of Lucena v. Craufurd,86 that:
[t]he principle to be deduced from these cases appears to be this: If the insured can
show that he stands to lose something of an appreciable commercial value by the
destruction of the thing insured, then even though he has neither a jus in re nor a jus ad
rem to the thing insured, his interest will be an insurable one.
As in the Lucena decision, Wessels did not emphasise the fact that the interest must
have a legal basis.
14.48 In Macaura v. Northern Assurance Co Ltd,87 the assured sold all of the timber on
his estate to a company in which all of the shares were held by him. Prior to the company
paying for the timber, the timber was destroyed by fire. The timber had been insured by
Macaura himself rather than by the company which owned the timber at the time of the
loss. The House of Lords held that the assured had no insurable interest in the timber
despite the fact that he was the only person who was interested in the preservation of the
timber and was the person who would receive the benefit of any profit and would carry
the burden of any loss. In reaching its decision, the House of Lords reasoned that the
destruction of the timber by fire was not the cause of the assureds loss but the fact that
the company had no other assets against which the assured could claim his purchase
price. This rather technical approach was questioned in the South African context by De
Villiers J in Phillips v. General Accident Insurance Co SA Ltd 88 and Steyn v. AA
Onderlinge Assuransie Associasie Beperk.89 There is no judicial authority on the issue of
insurable interest in a marine cargo insurance context in South Africa and, accordingly,
we have to rely on the Phillips, Steyn and more recent decisions for general guidance as
to the approach a South African court would take.
14.49 In the Phillips case, the facts trump fiction in almost every detail. The assured and
his wife fell under the influence of a palm reader who persuaded Mrs Phillips to part with
some jewellery so that it could be blessed at church to remove bad vibrations. Not
surprisingly, the palm reader (and the jewellery) never returned and underwriters
subsequently rejected Mr Phillips claim for an indemnity on the basis that he had no
insurable interest in jewellery owned by his wife. The court held that the real test was not
whether Mr Phillips had an insurable interest but:
whether the contract, having regard to all the surrounding circumstances and especially
the intention of the parties, amounts to a betting or wagering agreement. If there is any
doubt, the benefit should, in my view, be given to the insured, having regard to the fact
that normally the company has throughout the period of insurance accepted the
insurance premiums and that such a defence is really a technical one.
The court referred to Mr Phillips experiencing a certain satisfaction in seeing his wife
wearing the jewellery and that he felt under an obligation to replace the jewellery. He
accordingly had an insurable interest.

14.50 The court followed the same approach in the Steyn case,90 where the assured
claimed an indemnity under a household policy in respect of a house which he occupied
for free in terms of a settlement agreement with the provincial administration that owned
the house. The underwriters rejected a claim on the basis that the assureds right to stay
in the house free of charge did not constitute an insurable interest as the provincial
administration could evict him or demolish the house at any time.
14.51 The court held that the requirement of insurable interest is an English law
requirement that did not apply in South Africa. This ignored prior authority that showed
that an insurable interest was a requirement of Roman and Roman-Dutch law.
14.52 The Durban & Coast Local Division of the High Court took a conservative approach
in Manderson v. Standard General Insurance Co Ltd 91 and held that the requirement of
an insurable interest is based on considerations of public policy, which is evidenced by
the laws distaste for and refusal to recognise gambling contracts. In holding that an
employer did not have an insurable interest in a car owned and driven by an employee
during the course of the employers work, the court emphasised the fact that for
somebody to have an insurable interest, they must stand to suffer a real loss as a result
of the damage to the vehicle. It was not sufficient that they would lose business because
the employee was unable to carry out his functions. For the employer to recover under
the motor policy, the employer would have to suffer a monetary loss as a result of the
diminution in value of the vehicle itself.
14.53 In Refrigerated Trucking v. Zive,92 the court took a much broader view. In finding
that an employer had an insurable interest in an employees right to indemnity under a
liability policy, the court held that:
It seems then that an insurable interest is an economic interest which relates to the
risk which a person runs in respect of a thing which, if damaged or destroyed, will cause
him to suffer an economic loss or, in respect of an event, which if it happens will likewise
cause him to suffer an economic loss. It does not matter whether he personally has rights
in respect of that article, or whether the event happens to him personally, or whether the
rights of those of someone to whom he stands in such a relationship that he will
nevertheless be worse off if the object is damaged or destroyed, or the event happens.
14.54 In Lynco Plant Hire and Sales v. Univem Versekerings Maakelaars,93 the court held
that a member of a close corporation (a close corporation is a legal entity where the
owner of the entity owns a member interest) was entitled to insure motor vehicles in his
own name even though the motor vehicles were obtained by the corporate entity in terms
of the lease agreements concluded with that entity. The court held that it was sufficient to
show that the assured stood to lose something of appreciable commercial value and as
the member was under a contractual duty to repay to the close corporation any insurance
paid out in terms of the contract of insurance, the member had an insurable interest.
14.55 In Brightside Enterprises v. Zimnat Insurance Co,94 a van was owned by a director
of the company but the company insured it. The court, in upholding Brightsides claim for
indemnification following a hijacking, held that if the assured derived a benefit or

advantage from the existence of a thing, that constituted sufficient insurable interest
since prejudice or loss of the benefit or advantage were occasioned to the assured if the
thing was lost, damaged or destroyed. The court went on to hold that, provided the
contract was not a gambling agreement, prejudice to the assured alone was sufficient to
found insurable interest. The judge made the comment that the notion of insurable
interest is just one of the considerations in assessing whether or not the agreement was
a wager.
14.56 In summary, the South African courts appear to be inclined to take an extremely
broad approach as to whether or not someone has an insurable interest. Following
the Littlejohn case,95 it is clear that if an assured stands to suffer a commercial loss, we
assured has an insurable interest. Usually, someone will suffer a commercial loss only if
there is a legal basis for him or her suffering a loss. The Phillips case ignored this
requirement by holding that the husbands moral or social obligation to replace his wifes
jewellery gave him an insurable interest.
Problem issues of insurable interest
14.57 Practically, in the marine insurance context, insurable interest problems present
themselves in two fairly common circumstances.
14.58 The first and most often encountered is the regular problem of trying to identify who
is on risk where goods are lost or damaged during transit. Obviously, this is determined
by reference to the sales contract or chain of sales contracts, which do not always
produce the result that the broker and assured expect it to. Clearly, the assured and its
broker must ensure that they properly understand the terms of sale up and down the
chain of contracts so that where there is a risk, that risk has been properly insured in the
name of the correct party. Where the named assured is not on risk at the time of the loss,
but underwriters nonetheless agree to pay out to that assured, then this cannot be
regarded as an indemnification under the terms of the policy. As a result, the
underwriters will not be subrogated to that assureds rights of recourse as these rights
are non-existent given that the assured had not suffered a loss.
14.59 The second issue is the so-called gentlemans agreement clauses found in many
policies. A clause of this nature provides that even if the assured is not on risk at the time
of the loss, underwriters undertake to indemnify the assured. For example, a South
African assured may hold an open marine policy for all its imports. An overseas supplier
is constructing a power plant for that assured on the basis that risk in and to the
components of the plant only pass to the South African assured once the plant is
operational. A component of the power plant is damaged prior to installation and the
South African assured lodges a claim for indemnity under this clause.
14.60 This clause is designed to cover the situation where the assured had no risk in and
to the goods at the time of the loss but nonetheless requires the insurer to indemnify the
assured for a loss as if the insurer was on risk. Although there is no South African judicial
precedent directly in point, simply put, if the assured stands to lose nothing by the loss or
destruction of the property, then the assured simply has no insurable interest and that

interest cannot be created, in law, by a clause of this nature. Roman-Dutch law has no
difficulty with the concept of one party being able to contract for the benefit of a third
party - the stipulatio alteri - and there should be no difficulty in recognising that a
warehouseman should be in a position to contract for insurance not only for his own
liability but also for the interests of the owners of the cargo. In practice, cargo logistics
companies (such as freight forwarders, warehousemen and transport brokers) who are
suitably licensed to do so, offer insurance cover to cargo interests on a fairly broad
basis.96
14.61 Given the courts rather broad and haphazard approach to insurable interest, it is
submitted that South Africa should follow the example of Australia97 and New Zealand
and adopt suitable legislation to resolve the matter. Even if a definition of insurable
interest receives some sort of legislative attention, it is extremely unlikely that the
definition will be drafted so widely that it will deal with the practical issues of ex-works
clauses, gentlemens agreements or sellers interest clauses.
Insurance lost or not lost
14.62 This phrase is recognised as providing cover for goods that, unbeknown to the
assured or the insurer, have already suffered loss or damage when the contract of
insurance is concluded. The South African courts have approached the question of
insurable interest where the insurance covers the cargo lost or not lost98 in much the
same way as the English99 and the Australian courts.100 In the case of London &
Lancashire Insurance Co Ltd v.Puzyna,101 an etching was insured for carriage and the
assured only acquired an insurable interest during the course of transit. The position is
analogous to that of a free on board (FOB) buyer, who has no insurable interest until
the time when the goods are loaded aboard the vessel, and can only recover for loss of
or damage to the goods prior to loading if the insurance is on a lost or not lost basis,
and not under the current Institute Cargo Clauses. In thePuzyna matter, it was held that
in South Africa, the words lost or not lost are effective, first, to cover a loss that has
taken place (unknown to both parties) before the insurance has been arranged, and
secondly, to cover the case where the insurable interest was only obtained by the
assured after the loss had already occurred. In that case, Herbstein J said102 :
If the etching had been destroyed prior to the commencement of the transit such loss
would not have been recoverable under this policy for it would not have occurred within
the limits of the policy.
This approach is also consistent with the approach to transit adopted in the English
authorities,103 that is to say, that an extended warehouse-to-warehouse clause does not
entitle the assured to recover for a loss during a period within which he had no insurable
interest unless the cargo is insured lost or not lost.
Illegality and public polic y
14.63 It is a general requirement of contract law that contracts be lawful. A contract is
unlawful or illegal when it is prohibited by the common law or legislation.104 The common
law considers that all contracts that are contrary to public policy or good morals are

illegal. The lawfulness or otherwise of a contract may relate to the conclusion of a


contract, the performances in terms of the contract, the purpose of the contract and the
execution of the contract.105 The unreasonableness of the contract, or the hardship that it
may produce, is not relevant unless that consequence was to be regarded as against
public policy. Generally, the power of a court to declare a contract contrary to public
policy is exercised sparingly.106 There are, as yet, no South African decisions on the
topical question of whether or not the payment of a ransom in piracy matters is unlawful.
South African insurers are faced with this issue from time to time, mostly where cargo on
board ships hijacked by pirates is released on the payment by owners (or their insurers)
of a ransom with owners then declaring general average and, in due course, claiming a
contribution from the cargo interests. The generally held view, based on the old
authorities, current legislation and the public need for kidnap and ransom policies, is that
the securing (and ultimately paying) of general average contributions (which include
ransoms that are paid to pirates) following the release of cargo is not to be regarded as
unlawful. Given that most cargoes are insured on the basis of the Institute Cargo
Clauses, South African insurers and practitioners follow the judicial developments in
England very closely.107

OPEN COVERS, POLICIES AND CERTIFICATES

Open covers, policies and certificates of insurance


Policies and clauses in use
14.64 In almost every instance, marine cargo insurance is underwritten on the terms
contained in one or other of the well-known Institute Clauses. The most common clauses
are the Institute Cargo Clauses (A), depending always upon the products in question or
the type of cover required. The edition most commonly utilised is that issued in 1982. The
2009 edition of the Institute Cargo Clauses, whilst common, has not been universally
accepted. Despite the standard form clauses stating that they are to be used only with
the new Marine Policy Form, the Institute Clauses will usually be found in a bespoke
policy where an express reference to the relevant Institute Clauses, and their
incorporation into the policy, will be made.
14.65 Open marine covers are a common feature of the logistics market, (so long as the
agents are licenced intermediaries) where cargo interests tick the box indicating that
they require the forwarder or transporter to arrange all risks insurance on the cargo
interests behalf. The cargo and its value are then declared to the insurer on a monthly
basis.
14.66 Where required, insurance certificates are issued in a form that enables them to be
negotiated, which is important for cost, insurance and freight (CIF) sales. Many policies
will make it a requirement that the original insurance certificate will be surrendered, along
with other claim documents, before the insurer is obliged to indemnify the assured. It is a
feature of the South African insurance market that underwriters will allow insurance
agencies, and even brokers, to issue policies of insurance on behalf of the insurer.

Interpretation and construction of policies generally


14.67 In Van Zyl NO v. Kiln,108 Shutz JA commented on the interpretation of insurance
policies as follows:
The main principles of interpretation of the policy applicable in this case are to be found
in Fedgen Insurance Ltd v Leyds 1995 (3) SA 33 (A) at 38B - E:
The ordinary rules relating to the interpretation of contracts must be applied in construing
a policy of insurance. A court must therefore endeavour to ascertain the intention of the
parties. Such intention is, in the first instance, to be gathered from the language used
which, if clear, must be given effect to. This involves giving the words used their plain,
ordinary and popular meaning unless the context indicates otherwise ( Scottish Union &
National Insurance Co Ltd v Native Recruiting Corporation Ltd 1934 AD 458 at 464 - 5).
Any provision which purports to place a limitation upon a clearly expressed obligation to
indemnify must be restrictively interpreted ( Auto Protection Insurance Co Ltd v HanmerStrudwick 1964 (1) SA 349 (A) A at 354C - D); for it is the insurers duty to make clear
what particular risks it wishes to exclude ( French Hairdressing Saloons Ltd v National
Employers Mutual General Insurance Association Ltd1931 AD 60 at 65; Auto Protection
Insurance Co Ltd v Hanmer-Strudwick (supra at 354D - E)). A policy normally evidences
the contract and an insureds obligation, and the extent to which an insurers liability is
limited, must be plainly spelt out. In the event of a real ambiguity the contra
proferentem rule, which requires a written document to be construed against the person
who drew it up, would operate against Fedgen as drafter of the policy ( Kliptown Clothing
Industries (Pty) Ltd v Marine and Trade Insurance Co of SA Ltd 1961 (1) SA 103 (A) at
108C).
See also the dictum quoted by King J in Barnard v. Protea Assurance Co Ltd t/a Protea
Assurance 109 :
Now it is an accepted principle in interpreting insurance contracts that it is the duty of the
insurer to make it clear what particular risks he wishes to exclude. The principle is stated
by May in the following terms: No rule in the interpretation of a policy is more fully
established, or more imperative or controlling, than that which declares that, in all cases,
it must be liberally construed in favour of the insured so as not to defeat without a plain
necessity his claim to an indemnity which in making the insurance it was his object to
secure.
King J proceeded110 :
From this it would follow that if a term in a policy (term in the sense of designation) is
capable of both a broader and narrower meaning it is that which is favourable to the
insured, in other words to the upholding of the policy, which must be employed.

WARRANTIES, EXCLUSIONS CONDITIONS AND OTHER TERMS

Warranties
Warranties defined

14.68 In Roman-Dutch law, a distinction is drawn between the essential (or material or
vital) terms (or stipulations) of a contract, on the one hand, and the non-essential (or nonmaterial or subsidiary) terms (or stipulations) on the other.111 A breach of an essential
term gives the innocent party the option of treating the whole contract as discharged,
while the breach of a non-material or subsidiary term only entitles the innocent party to
claim damages. The position compares with that under English law where, for example,
in sale of goods cases, a condition is a fundamental term of the contract and a warranty a
subsidiary term, whilst in insurance law a warranty is a fundamental term, and a condition
may be a lesser term, or may be elevated to the status of a warranty if it takes the form of
a condition precedent. In view of the confusing nature of the English terminology, the
South African courts are encouraged to use the Roman-Dutch distinctions rather than
those used in English law. Nevertheless, in marine insurance, with regard, for example,
to the implied warranties as to seaworthiness, it is common practice to use the English
term warranty because the law is based on the cases that preceded the English Marine
Insurance Act 1906 where the term warranty was used. In those circumstances, a
warranty will be treated, as it was in the English common law, and is under the Marine
Insurance Act 1906, as a provision that must be strictly complied with. In Lewis
Ltd v. Norwich Union Fire Insurance,112 the Chief Justice, Innes CJ stated that a warranty
was a statement upon the exact truth of which, or the exact performance of which, the
validity of the contract depends.
14.69 Hare suggests113 that in the marine insurance context, the meaning to be ascribed
to a warranty under English and South African law is the same. Hare also cites two South
African cases that held that English law applies to warranties in general insurance law.114
14.70 Hare115 points out that there are two types of warranty in marine insurance: the
affirmative warranty and the promissory warranty. An affirmative warranty states clearly
that a certain state of affairs exists at the time when the warranty is made. As the name
suggests, a promissory warranty obliges the maker of the promise to fulfil the promise to
do, or not do, something during the currency of the policy, or that a certain state of affairs
will exist during the period of the policy.
14.71 As Hare116 comments, the distinction is important given the wording of section 53 of
the Short-term Insurance Act. As we have seen,117 a policy will not be invalidated, nor will
an insurers obligation be excluded or limited, on account of any representation made by
the assured to the insurer which is not true, or where information is not disclosed,
whether or not the representation or non-disclosure has been warranted to be true and
correct, unless that representation or non-disclosure is likely to have materially affected
the assessment of the relevant risk under the policy concerned at the time of its issue or
at the time of any renewal or variation of that policy.
14.72 The representation or disclosure will be regarded as material if a reasonable,
prudent person would consider that the information disclosed or not disclosed, should
have been correctly disclosed to the insurer so that the insurer could form its own view as
to the effect of such information on the assessment of the relevant risk. Hare118 refers to
this as the contextual objective test.

14.73 There is some debate as to whether section 53 is referring to an affirmative


warranty or to a promissory warranty, that is, are they both to be regarded as
representations or do they only apply to affirmative warranties?119 The position remains
unclear and Hare has suggested that a revision of section 53 is necessary. In his view,
there is no rational reason for distinguishing in that section between promissory and
affirmative warranties. The influence of English law remains.120
14.74 An insurer is entitled to waive any breach of a warranty. However, where there has
been a breach of an affirmative warranty as provided for in section 53, then the insurer
can repudiate the contract. As most affirmative warranties will be breached before cover
incepts, the policy would, in fact, be void ab initio and the insurer is obliged to return any
premium earned. Where there is the breach of a promissory warranty, the insurer is liable
for any losses up to the date of the breach, and is entitled to retain any premium earned
up until that date. By contrast, where there has been a misrepresentation, the insurer is
entitled to cancel the contract, which is void ab initio by reason of the misrepresentation.

Exclusions
The nature of exclusions
14.75 Reinecke121 notes that the old Roman-Dutch law policies did not refer to the nature
of the perils insured against, but to the time and place when the peril occurred. The risks
covered were very wide, and it was necessary to specifically exclude any perils not
covered. Reinecke122 notes that certain perils or losses were ipso jure excluded. These
included wear and tear123 and inherent vice. Defective or inadequate packing of cargo
amounted to inherent vice.124 Heat, sweat and spontaneous combustion (or similar) cover
is often specifically sought, and provided, for dry goods shipped in bulk.
14.76 The insurer will bear the onus of establishing that a particular loss or peril
specifically excludes the insurers liability. Clauses that are inserted into insurance
contracts for the purpose of exempting an insurer from liability for a loss, which, but for
the exclusion provision, would have been covered, are construed against the insurer
with the utmost strictness because of the duty on the part of the insurer, in framing the
policy, to exempt its liability in clear and unambiguous language.125
14.77 The ordinary rule is that an assured must prove that his claim falls within the
primary risk insured against, whilst the onus is on the insurer seeking to avoid liability to
prove the exception.126
Causation
14.78 Few topics better illustrate the confusion that can arise out of the reception into
South African law of English principles than causation. As Hare127 has put it:
More perhaps than any other area of marine insurance law, the English law concept of
causation which has been largely adopted into South African law of marine insurance is
[an] anathema to civilian lawyers.

A claim under a contract of insurance requires the assured to prove a causal link
between the peril and the loss or occurrence as set out in the contract.
14.79 In South African law, two causal issues need to be investigated128 : the factual
cause and the legal cause. In order to establish a claim, the assured must first establish
a factual causal link, and if there is no factual causal link between the peril insured
against and the actual loss or occurrence, then the event insured against has not
occurred and the assured will have no claim.129 The test for determining factual causation
is the but for or causa sine qua non test, which entails a process of elimination of
causes, usually proceeding from the result backwards. If the assured establishes factual
causation, it is then necessary to determine the insurers liability for the factual
consequences, sometimes referred to as legal causation. For the insurer to be liable,
there must be a sufficiently close link between the peril and the loss or occurrence for the
peril to be the legal cause of the loss or occurrence.130
14.80 The test for establishing the extent of the insurers legal liability is the proximate
cause test. The insurer will not be liable for any loss not proximately caused by a peril
insured against. A proximate cause is a cause proximate in efficiency, not in time, and
should be determined by applying common sense standards131 and seek to give effect to
and not defeat the intentions of the parties.132
14.81 In the Incorporated General Insurers v Shooter t/a Shooters Fisheries 133 , the then
Appellate Division was faced with a number of marine insurance issues, two of which
were: which law should be applied to the contract of insurance and what was the
proximate cause of the loss. Whilst this is a hull insurance matter, the approach of the
court would probably have been the same had this been a case of goods lost. The fishing
trawler Morning Star was insured in terms of two policies (hull and war risks,
incorporating the Institute War and Strikes Clauses) on the then standard wording of the
Lloyds SG policy. The trawler was detained in Mozambique by the authorities. The
skipper and engineer were arrested and convicted by a lawfully constituted Mozambican
tribunal, for unlawful fishing. They were fined R167,000, which had to be paid within 15
days. The fine was not paid and the Mozambican authorities sold the trawler. The arrest
and impounding of the vessel was a peril insured against. The loss from the failure to pay
a fine was not.
14.82 In a somewhat terse judgment, the majority of the Appeal Court followed
the Blackshaw case,134 which had held that the interpretation of insurance clauses in a
policy is, generally speaking, a question of law.135 That law was Roman-Dutch law
applicable in South Africa by dint of the policies being domestic policies as defined in the
then applicable section 63(1) of the Insurance Act136 and the operation of section 06(1)(b)
of the Admiralty Jurisdiction Regulation Act.137
14.83 The court of first instance held that the interception and arrest of the trawler and its
continued detention by the Mozambican Government until its confiscation and sale by
that Government was a single continuous process.138 In assessing the position, Galgut
AJA held:

No difficulty arises when one cause only has to be considered. The difficulty arises when
there are two or more possible causes. In such a case the proximate or actual or
effective cause (it matters not which term is used) must be ascertained, and that is a
factual issue.139
The judge then went on to hold:
In my view the confiscation did not result from the arrest of the trawler, it resulted from
the failure to pay the fine. That failure was therefore the proximate cause of the
confiscation of the trawler. The fact that the [assured] was unable to pay the fine is
irrelevant. The issue is not his ability to pay the fine. The issue is what caused the
confiscation. That, as we have seen, was the fact that the fine was not paid. That was not
a peril covered by the risk clause.140
Given the decision in this case, Hare141 questions whether the first stage test of factual
causation would be applied in marine insurance matters in South Africa. The RomanDutch law test was not argued fully in the Shooters Fisheries case as it appears that both
counsel had conceded that in order to succeed, the assured must show that the loss
was proximately caused by the peril insured against.142
14.84 Where a loss is caused by two perils operating simultaneously at the time of the
loss, the one being wholly excluded and the other falling within the risk as described, the
insurer is held not to be liable.143

Conditions144
14.85 In South African law, conditions determine obligations. They qualify the operation
and consequences of the whole contract. They operate quite differently from the English
law notion of conditions precedent. Indeed, it is the use in contracts subject to South
African law of English contract terms, where condition and warranty have meanings
different from those given them by South African law that has created considerable
confusion of interpretation. InResisto Dairy (Pty) Ltd v. Auto Protection Insurance Co
Ltd,145 the then Appeal Court made the point that the conditions in the contract in
question were simply undertakings by the assured and, as such, were to be regarded as
the terms of the contract. The words condition precedent to any liability indicated that
the so-called conditions were material to the contract.146 Unfortunately, underwriters and
brokers continue to use the phrase condition precedent (usually without providing for
any clear consequence in the event of a breach of the condition precedent) no doubt
under the influence of policies drafted by London brokers and insurers.

ALL RISKS

All risks defined


14.86 Most marine cargo policies issued in South Africa will incorporate the A version of
the relevant Institute Cargo Clauses, which provide cover for all risks (not certainties147 )
subject to the exceptions contained in those clauses. These exceptions are quite often

amended in the main policy, either through the introduction of further exceptions or by
removing or ameliorating the exceptions.
14.87 In the absence of the Institute Clauses, and depending on the wording used,
Roman-Dutch law would regard certain perils or losses as always being excluded, such
as wear and tear and inherent vice.148 The fact remains that there are very few South
African cases that deal with the concept of all risks and given the local reliance on the
Institute Cargo Clauses and policy forms based on English precedent, English marine
insurance law and precedent on this topic, although no longer binding, will remain of
great persuasive force.149 By way of just one of many possible examples, it is likely that
the judgment of Lord Sumner in British and Foreign Marine Insurance v. Gaunt,150 where
he defined all risks, will be followed.151

Burden of proof
14.88 In the case of Bethlehem Export Co (Pty) Ltd v. Incorporated General
Insurance,152 the South African courts considered the inter-relationship between the
burden of proof under all risks cover and the exceptions, in particular, the exclusion of
loss or damage caused by inherent vice. In this case, three consignments of allegedly
fresh asparagus were shipped by air from Johannesburg to Frankfurt where they arrived
in a discoloured and apparently deteriorated condition. The consignment was insured on
all risks terms with an extension of the cover to include all risks including deterioration in
terms of the Institute Frozen Food Clauses. As the consignment consisted of fresh
asparagus, the assured relied on the basic all risks terms rather than deterioration under
the Institute Frozen Food Clauses. It was contended that a fortuitous casualty, which
could not, however, be identified, occurred during the flight. The assured advanced
certain possible explanations as to how the deterioration could have been caused, for
example, by a drastic change in temperature in the hold, or stowage next to a piece of
machinery that had been exposed to the sun during the day, or by extended stops of the
aircraft or a fault in the air conditioning system. However, Phillips AJ found that the
assured had not discharged the onus of proof, and one of the main reasons for his
decision was the strong evidence that the asparagus may not have been in good
condition at the outset of the journey. In terms of the onus of proof, Phillips AJ held
that:153
The insured may discharge the onus of showing on the probabilities that the loss was
caused by a casualty, i.e. an external and fortuitous event, by showing that (a) the goods
were shipped sound (b) that they arrived damaged, and (c) that the damage is of such a
kind as to raise a presumption of some external cause. Then the burden is on the
underwriter to prove that the loss in fact occurred in some way for which he is not liable.
As to (c), it is essential for an insured who relies on a change in the condition of the
goods to show that the change was not due to the natural behaviour of the subject
matter.
As there was a doubt about the condition of the asparagus at the commencement of
transit and further doubt as to whether it arrived damaged or merely deteriorated in the

natural way, and as, finally, the damage was not of such a kind as to raise a presumption
of some fortuitous cause, the assured failed, in particular on grounds (b) and (c). In
effect, the assured was obliged to prove a negative, namely, that the deterioration was
not caused by inherent vice.154

Limitations and exclusions on all risks

Wilful misconduct
14.89 Generally, losses insured against include the negligent and, arguably,155 grossly
negligent actions of the assured or those for whom they are vicariously or otherwise
liable. Intentional acts are excluded as they cannot be considered as risks, that is, such
acts exclude the necessary accidental or fortuitous elements of risk. In practice, the
concept of wilful misconduct will be introduced into most South African policies via one or
other of the Institute Clauses (where loss or damage caused by wilful misconduct is
excluded).156 In any event, a loss directly caused by misconduct of the assured would not
be an indemnifiable loss as it would not be fortuitous and it would amount to a fraud on
the insurers.
14.90 In Rouwkoop Caterers (Pty) Ltd v. Incorporated General Insurance Co Ltd,157 the
court, whilst considering whether negligence on the part of an assured prevented the
assured from recovering under a policy, held that it was a well-accepted principle of
insurance that, depending upon the type of policy, negligence on the part of the assured
is no bar to a recovery under the policy and that an assureds duties extended no further
than to refrain from intentionally causing the happening of the risk.158
14.91 There is an implied term in every policy precluding the liability of the insurer if the
event insured against is deliberately caused by the assured or a third party acting within
his privity and consent.159 If a policy contains a term that includes intentional conduct,
then that term will be unenforceable as being contrary to public policy.160
14.92 What of illegal (which may or may not be deliberate) acts? In the Shooters
Fisheries 161 case, the assureds vessel was arrested and detained in Mozambique on
the grounds that it had been fishing illegally. Friedman J, in the court a quo considered
the case law on public policy and stated:
Bearing in mind that public policy is a rather fluid concept which may vary according to
time, to place and to facts and circumstances, it seems to me that the only principle to be
deduced from the aforegoing is that, depending upon the nature of the crime and upon all
other relevant facts and circumstances, it may be against public policy to permit a claim
under a policy of insurance where the accused has been guilty of either illegal or unlawful
activities.162
Having found the fact that the assured had been fishing illegally, the judge went on to
note that:
the claim was not brought about by a deliberate act on the part of the plaintiff or by
his wilful or even intentional misconduct. In addition, I am satisfied that even if assuming

that the activities of the plaintiff were illegal and that such illegality brought about the
[loss], it would not be contrary to public policy to allow him to recover in this case.163
As for intentional acts, it seems clear that, in the absence of an agreement to the
contrary, a contract of insurance excludes from the risk the consequences of the
assureds own deliberate or intentional acts or omissions.

Ordinary wear and tear


14.93 Certain losses were ipso jure excluded under Roman-Dutch law, and wear and tear
was such a loss,164 not being a fortuity but something that in the ordinary course of
events must happen. In The Wave Dancer,165 Scott JA in the minority judgment had
occasion to consider the meaning of wear and tear, stating that:
A loss caused by wear and tear is one which is inevitable in the ordinary course of
events. It arises in consequence of a part simply wearing out or by general debility
brought about by use. Both in English law and Roman-Dutch law the insurer of a
ship166 would not be liable for loss caused by ordinary wear and tear, unless the policy
provided otherwise.167
It is not unusual for second hand machinery to be imported into South Africa. The
machinery must be declared as such, must undergo a pre-shipment inspection and the
practice is to insure the cargo under the (slightly amended) Institute Cargo Clauses
(B).168

Inherent vice: insufficiency of packing


14.94 In Blackshaws (Pty) Ltd v. British Engine Insurance Co of SA Ltd & Another,169 a
decision of the Cape Supreme Court, the exclusion of inherent vice was held to extend to
insufficiency of packing, notwithstanding the doubts ofArnould on this issue.170 In this
case, a printing machine was insured (on a warehouse-to-warehouse basis) in terms of a
policy that indemnified the assured against all risks of loss or damage to the subjectmatter insured excluding loss damage or expense proximately caused by inherent vice
or nature of the subject matter insured. The policy also included the 1963 edition of the
Institute Cargo Clauses (All Risks) that specifically excluded inherent vice. The machine
had been packed into containers and was insured for a voyage from Norway to Cape
Town. On assembly, the machine had clearly been severely damaged in transit. The
assured maintained that the machine was damaged by movement of various parts of the
machine in the containers occasioned by reason of defective packing. No peril was
specifically identified as being the cause of the damage. The insurers took an exception
to the claim as pleaded on the basis that the damage was caused by inherent vice,
namely, the defective packing.171 In holding that the exception applied, Voss J said172 :
In my opinion damage caused by defective packing does not arise due to an external
cause but rather due to the nature of the insured object itself. Hence the basic principle
remains, viz, that damage caused by defective packing is not recoverable.

On appeal to the Court of Appeal173 (as it was then known), Trengrove JA adopted
Scruttons definition of inherent vice174 where that author said by inherent vice is meant
the unfitness of the goods to withstand the ordinary incidents of the voyage, given the
degree of care which the shipowner is by contract to exercise in relation to the goods.
The learned judge also quoted numerous English writers and judicial precedents where
defective packing was regarded as inherent vice. He concluded that he was satisfied that
in this instance the defective packing of the machine constituted inherent vice in the
subject-matter insured. As a result of this defect, the subject-matter was rendered
peculiarly susceptible to damage arising from internal causes.175
14.95 As to inherent vice generally, the South African courts will consider as persuasive
the decision of the English Supreme Court in Global Process Systems Inc v. Syarikat
Takaful Malaysia Berhad (The Cendor MOPU),176 where it was held that the exclusion of
inherent vice would only apply where inherent vice was the sole cause of the loss.177

Delay and insolvency


14.96 Under Roman-Dutch law, the contract of marine insurance covered perils of or
incidental to the navigation of the sea, but the risks were described not so much by
reference to the nature of the perils insured against, as with reference to the time and
place of their occurrence. Cover was provided against any peril or fortuity occurring in
connection with or during a sea voyage.178 As a result, Dutch policies specifically
excluded certain perils. However, it does not seem as though loss caused by delay or
insolvency would be ipso jure excluded under Roman-Dutch law. The fact remains that
most modern policies specifically exclude loss, damage or expense caused by insolvency
or delay, even where the delay is caused (or proximately caused under the 1982 edition
of the Institute Cargo Clauses) by a risk insured against.

Unseaworthiness and unfitness


14.97 The concept of seaworthiness and any general doctrine of a warranty of
seaworthiness were unknown to Roman-Dutch law.179 There is an implied warranty of
cargo worthiness in cargo policies (i.e., that the ship is reasonably fit to carry the goods
to the destination contemplated in the policy).180 There is no implied warranty in a policy
on goods that they, themselves, are seaworthy, but the insurer is not liable for loss
caused by inherent vice.181 As most cargo policies include the terms contained in the
Institute Clauses, the express terms of exclusion clauses 5.1 and 5.2 will more likely,
than not, apply.182

WAR, STRIKES AND TERRORISM

The limitations on cover for war and strikes risks


War, civil war, revolution, rebellion, insurrection and civil commotion
14.98 It would appear that where insurance contracts exclude risks such as war,
disturbance, riot and civil commotion, the approach in South African law is similar to that
taken in English law.183

14.99 In Lindsay and Pirie v. General Accident Fire & Life Assurance Corporation
Ltd,184 Soloman AJA made the following instructive comments when considering whether
a state of affairs amounted to a civil commotion:
what is meant by a state of civil commotion: The term is used in association with the
words riot, rebellion, insurrection, etc., and we must assume that each of these
expressions was intended to apply to a different state of things, even though they may to
some extent overlap and though it may not be possible accurately to define the limits of
each. Now the collocation of civil commotion with riot and rebellion would seem to
indicate --- if indeed any inference can be drawn from that fact --- that there are certain
features common to them all, and, however that may be, I do not think that we can go
wrong if we say that civil commotion was intended to mean something between riot and
insurrection, something more than a mere riot but less than an actual insurrection. A riot,
as understood by English law may be committed by as few as three persons, but it
would, I think, be an abuse of language to apply the term civil commotion to such a
disturbance. The word commotion, as was said by Lord Justice Buckley in the case
of London and Manchester Plate Glass Company v Heath,185 connects turbulence or
tumult and, I think, violence and intention to commit violence. But the expression civil
commotion in my opinion means something more than that, for it implies not only that
there is a disturbance on a somewhat extensive scale amongst the citizens of the state
but also that it is directed to a common purpose. It would be out of the question, for
example, to describe a brawl or riot of a few persons, even though it might occasion
tumult, as a civil commotion. The distinctions appears to me to be very much one of
degree, and it is quite impossible to lay down any hard and fast rule on the subject, or to
say when a disturbance has become sufficiently serious to be described as a civil
commotion. Each case must be judged on its merits, and it is for a Court of Justice to
determine upon the facts of each case whether or not the condition of things established
at the trial amounts to proof of civil commotion or not.

Terrorism
The cover for terrorism
14.100 The South African Special Risk Insurance Association Limited (SASRIA) was
created in 1979 out of the threat of politically motivated violence following the riots and
civil commotions during 1976. SASRIA is now a limited company with the South African
Government as the sole shareholder.186 In essence, this is a government reinsurance of
risks that were being excluded in most policies by insurers. The scheme covers loss of or
damage to property within the Republic of South Africa. The risks included, inter alia, loss
or damage to property related to or caused by any act calculated or directed to overthrow
the government or any authority by force, fear, terrorism and violence; any act calculated
to cause loss or damage in order to further any political gain; any riot, strike or political
disorder, including civil commotion, labour disturbances or lock out; and any act of an
authority in controlling, preventing or suppressing any of the aforementioned
acts.187 Given the application of the Institute Strikes Clauses (Cargo), policies that have
SASRIA cover would usually also include the relevant Institute Clauses, though terrorism

cover is limited to goods in transit188 and the SASRIA cover would extend to goods in
store where provided for.

DURATION OF THE INSURANCE

The Transit Clause


Attachment of risk: ordinary course of transit
14.101 In Fedsure General Insurance Ltd v. Carefree Investments (Pty) Ltd,189 a clothing
manufacturer in Ladysmith insured a containerised consignment of fabric, whilst in transit
from Korea to Durban. The goods were insured under the Institute Cargo Clauses 1/1/82,
which provide that the cover continues during the ordinary course of transit. The cargo
of fabric was left stored in a port warehouse prior to customs clearance and was stolen
from this warehouse before being forwarded on to the assureds warehouse in the city of
Durban. It appeared from the evidence that the assured left the goods in the port
warehouse for his own commercial convenience as he did not then have to pay duty and
tax, it being his wont to wait for a favourable cash flow position before proceeding to
clear imported goods.190 It was held that the goods were not in the ordinary course of
transit at the time of the loss, Howie JA saying191 :
a delay or interruption which, objectively viewed, is not part of the usual and ordinary
means of effecting transit, and which is occasioned by some collateral purpose, will
disturb the ordinary course of transit. Accordingly, loss occurring within the period of such
delay or interruption will not be covered by the policy ... the reason is not that the
insurance has come to an end (for it remains in existence), nor that the transit has come
to an end (for the journey is not yet finally over) but simply that the insurance pertains to
the ordinary course of transit and what is outside the ambit of that course cannot,
logically, be within the cover.
In formulating the test, which we may call the collateral purpose test, the South African
court cited both the English case of Pearson v. The Directors of the Commercial Union
Assurance Co Ltd 192 and the South African case ofTension Overhead Electrical (Pty)
Ltd v. National Employers General Insurance Co Ltd. 193 More recently, a similar
approach was applied in England in Eurodale Manufacturing Ltd v. Ecclesiastical
Insurance Office Plc,194 where goods were delivered to a warehouse for their onward
transportation and it was held that their storage could not properly be said to be for some
collateral object or purpose,195 and, in the circumstances, the storage fell within the
specially agreed cover of the transit insurance applicable in that case.
Termination of risk; election to store
14.102 Clause 8.1.2 of the Institute Cargo Clauses 1/1/2009, so far as material, provides
that the transit terminates: On completion of unloading from the carrying vehicle or other
conveyance in or at any other warehouse or place of storage, whether prior to or at the
destination named in the contract of insurance, which the Assured or their employees
elect to use either for storage other than in the ordinary course of transit or for allocation
or distribution, .

The question of whether a warehouse is used for storage, other than in the ordinary
course of transit, was considered by the South African courts in the Fedsure General
Insurance case,196 the facts of which are given above.197
14.103 The goods were insured under the 1982 clauses, which included the election
under clause 8.1.2 that terminates the insurance on delivery to any warehouse which the
Assured elects to use ... for storage other than in the ordinary course of transit. The
goods were stolen from a bonded warehouse in the port at Durban where the assured
chose to leave the goods rather than clearing them to his own warehouse in the city. It
was his wont to wait for a favourable cash flow position because clearance required
payment of customs duty and VAT. At first instance, it was held that the assured did not
have the necessary control over the goods to make a free election under clause 8.1.2.
On appeal, this was doubted. Howie JA, with whom the other members of the South
African Court of Appeal concurred, indicated that the election could be made before the
assured had full control over the goods, saying198 :
... it seems very much open to question whether, before the election referred to in
[paragraph 8.1.2 of the Transit Clause] can be made, the insured must, as the learned
Judge held, have paid the clearance dues and so have obtained control of the goods.
There would appear to be no logical reason, when all one is doing in order to store goods
is to leave them where they are, for the law to require that one first has to have control
before one can use such venue for storage. There would also seem to be scant reason
why the necessary election cannot precede the end of such storage and indeed precede
the delivery into such storage. On the facts of this case there may well have been
termination of the insurance under paragraph 8.1.2 but I express no final opinion on that
issue.
This analysis, though obiter, as the decision on the case turned on the ordinary course
of transit under clause 8.1 as discussed above, is illuminating and helpful: it is not
necessary, on this view, for the assured to have control199 of the goods, as the essence
of the election is the decision to leave the goods in store rather than to take control and
bring them forward in the ordinary course of transit. The election can take place at any
time; however, if the election precedes the storage, it will only terminate the insurance
under clause 8.1.2 of the Institute Cargo Clauses 1/1/2009 when unloading is completed.

Held covered, termination of carriage and change of


voyage
Held covered and analogous provisions
14.104 Once the contract of insurance has been concluded, Roman-Dutch law did not
recognise any implied term requiring the assured to disclose any circumstances that
might affect the risk or the premium, even where the likelihood of loss occurring by a peril
insured against is caused by the assureds own conduct.200 It follows that there was no
right of an insurer to terminate the agreement or suspend the cover.201

14.105 The insurer will not be liable, however, where the circumstances alter the risk so
that the risk no longer complies with its description in the contract of insurance. Similarly,
where the circumstances change the identity of the subject-matter of the insurance, then
the insurer will not be liable in a case of loss.202
14.106 Changes of voyage and course are examples where Roman-Dutch law developed
detailed principles in order to deal with circumstances that increased the risk beyond that
contemplated in the insurance contract.203
Termination of Contract of Carriage Clause
14.107 In terms of Roman-Dutch law,204 policies, as a rule, provided cover from shore to
shore - although exceptions were made for shipments from port to port. The goods were
covered from the moment they were brought alongside the ship, or onto the quay, for the
purposes of loading onto either the carrying vessel or lighters.
14.108 Cover would terminate when all the goods had been discharged safely and
brought ashore at their destination. Unless there was a justifiable reason for delay,
discharge must take place within a reasonable time after arrival. Cover would terminate if
the goods were not discharged on arrival and the ship was sent to another destination.
Change of Voyage Clause
14.109 In general terms, an insurer will insure goods for a particular voyage. In the event
that a ship prosecutes a different voyage, or does not follow the agreed or customary
voyage, the insurer is normally no longer liable.205Roman-Dutch law drew no distinction
between a change of voyage and a change of course.206 If an assured owner of goods, or
its agents, instructed the master of the carrying ship to change an agreed voyage, or
consented to such a change, the insurance contract would be regarded as void and the
insurer would have no liability under the contract from the time of the change of the
voyage or the actual deviation from a specific or customary route.207 The intention to
change the voyage is not sufficient - the insurer will be liable for all losses prior to the
actual change in voyage.208 The insurer will therefore escape liability if it shows either
that there was a change of voyage, or that the change was due to the assureds
instructions or with his informed consent.209 A justifiable or insignificant change of voyage
will not affect the validity of the insurance contract and the liability of the underwriter.210
14.110 Where there is a change of voyage or route not instructed by or consented to by
the assured, then the validity of the contract of insurance and the liability of the insurer
will remain unaffected.211 Under Roman-Dutch law, the cargo owner would have a right to
claim against the owner under the contract of affreightment and this right could be ceded
to the underwriter who could seek to recover its loss against the owner212 under rights of
subrogation.
14.111 The Roman-Dutch position does not seem to be dissimilar to that contained in
section 44 of the Marine Insurance Act 1906 and the case law that followed.213

CLAIMS AND LOSSES

Claims
Limitation of action
14.112 The basic time limit under South African law is three years from the date of the
loss, in accordance with the Prescription Act.214 Where the contract is governed by a
foreign law, such as, for example, where the Institute Cargo Clauses are incorporated
and provide that English law and practice applies,215 the three-year time limit
nevertheless applies to claims litigated or arbitrated in the South African courts, unless
there is a specific, contrary limitation provision in the contract. As a general principle, the
limitation period begins to run under the Act when the debt is due, which in insurance
cases in respect of property, is taken to be the date of the loss event.216 Most policies
contain time limits shorter than the three-year limit. The period may be interrupted by an
express or tacit acknowledgment of liability by the insurer and, in that case, the threeyear period runs afresh from that date. The parties are free under South African law to
extend the period by agreement and the court will not, of its own accord, raise the
statutory defence that must be relied upon by the party wishing to take the time bar point,
normally the insurer. The time bar position is protected by service on the insurer of the
relevant process commencing court or arbitration proceedings.
Proof of loss
14.113 The assured claiming under a contract of insurance must prove that the risk
insured against has occurred.217 The rules regarding the onus of proof were set down
some time ago in Eagle Star Insurance Co Ltd v. Willey 218and hold good today. These
rules can be summarised as follows:

(1) The assured must prove such facts as bring him prima facie within the terms of
the promise.
(2) If the promise is qualified by exceptions, then it is necessary to first establish
whether the exception qualifies the insurers liability (in which case the assured bears
the onus of proving, on a balance of probabilities, that the qualification did not apply,
that is, that its claim fell within the limited description) or whether it was an exception
to the insurers liability (in which case, and in the event that the assured establishes
a prima facie case, the onus would be on the insurer to prove, on a balance of
probabilities, that the exception applied).219
(3) In determining the nature of the exception or qualification, reference should be
had to the contract as a whole.

Under South African law, to prove a case on the balance of probabilities requires the
party to produce proof such as carries conviction to the reasonable mind.220
14.114 It is not contrary to public policy for the parties to choose to reverse the onus of
proof in the contract of insurance.221
14.115 On occasions, it may be necessary for the assured to prove a negative. In this
regard, see the discussion on the Bethlehem Export 222 case above,223 where the

assured was obliged to prove that the goods, being fresh asparagus, and insured on all
risks terms, had not deteriorated due to inherent vice.
Interest and costs
14.116 This is an interesting and as yet unsettled aspect of South African admiralty law.
Two issues are relevant: the first is the rate of interest and the date from which interest
will run, and the second is the currency in which a plaintiff can claim.
14.117 In terms of section 05(2)(f) of the Admiralty Jurisdiction Regulation Act,224
which applies to maritime claims, including claims for, arising out of or relating to marine
insurance or any policy of marine insurance,225 a court may in the exercise of its
admiralty jurisdiction make such order as to interest, the rate of interest in respect of any
sum awarded by it and the date from which interest is to accrue, whether before or after
the commencement of the action, as to it appears just.
14.118 As Hofmeyer226 comments, there is an apparent conflict between the provisions of
the Admiralty Jurisdiction Regulation Act and another South African statute, the
Prescribed Rate of Interest Act.227 The Prescribed Rate of Interest Act allows interest on
unliquidated damages (this was not the case prior in terms of the common law or the Act
prior to its amendment in 1997) at a current rate of 15.5% per annum running from a date
to be determined in accordance with the provisions of that Act. This apparent conflict
arises out of the judgment of The Sea Joy,228 where the court felt that it was obliged to
apply the interest rate determined by the Prescribed Rate of Interest Act rather than rely
on the wide-ranging discretion provided in section 05(2)(f) of the Admiralty Jurisdiction
Regulation Act.
14.119 It is respectfully submitted that Hofmeyer is correct to state that the court erred the discretion granted to the court exercising its admiralty jurisdiction is sufficient both to
determine the rate of interest and the date from which interest is to run. In exercising its
discretion, the court may wish to have reference to the provisions of the Prescribed Rate
of Interest Act.
14.120 The current rate of interest is particularly high in a global sense - 15.5%
represents a rate of interest almost three times (or more) that available elsewhere. In all
probability, the South African courts will apply interest rates that are appropriate to the
currency of the claims.
14.121 As for the date from which interest will run, the general principle in admiralty is that
the innocent party should receive as complete an indemnification as possible and that
interest should run from the date upon which the loss is suffered.229
14.122 In practice, most policies of marine cargo insurance do not have a term dealing
with the question of interest. Interest is usually regarded as commencing from the date of
demand for payment, or the date of summons and, in practice, insurers do not offer to
pay interest from the date of the loss when indemnifying the assured.

14.123 Section 5(2)(g) of the Admiralty Jurisdiction Regulation Act provides that, subject
to any law relating to exchange control, a court, exercising its admiralty jurisdiction, may
order that payment be made in a foreign currency (i.e., other than South African Rands)
as in the circumstances of the case appears appropriate. The court can also determine
the date upon which any conversion of currency is to take place.
14.124 The general rule seems to be that where the claim is contractual, the creditor
should be paid in the currency of the contract, whilst for claims based on negligence, the
plaintiff should be paid in the currency that the loss was felt.230 Given the sometimes
alarming fluctuation of exchange rates, it is not uncommon to find policies that specifically
provide for the indemnification to be in a particular currency. The practice insofar as
goods carried by sea are concerned is to convert at the rate applicable on the date of the
bill of lading, being the date when, it is assumed, the goods were loaded on board the
ship and the insurer went on risk.
14.125 It is the practice of the South African courts to order that the unsuccessful party
pay the legal fees and expenses of the successful party in accordance with a tariff,
unless the award is to pay attorney and own client costs, which is only done in
exceptional circumstances and as an expression of the courts displeasure at the conduct
of a party or its legal representatives.
Good faith and fraudulent claims
14.126 In most instances, the policy itself will deal with the consequences of the assured
making a fraudulent claim.
14.127 Van Niekerk notes231 that in Roman-Dutch law the position seems to have been
that an assured could derive no benefit from his fraudulent claim. Consequently, the
insurer is not liable for an unfounded claim or for the exaggerated part of a fraudulently
inflated claim, but will, despite the fraud, remain liable for the genuine part of an
exaggerated claim, as well as fully liable for a valid claim merely accompanied by
fraudulent means. It follows that, absent a term of the contract to the contrary, an
insurance fraud does not entitle the insurer either to avoid the contract as a whole or to
avoid all liability for the claim in question, thus penalising the assured for his fraud. In
the KRS Investments CC case,232 the Supreme Court of Appeal appeared to accept the
notion that an assured may have a duty to act in good faith towards the insurer for the
duration of the contract, and that the submission of a fraudulent claim may be in breach
of that duty, entitling the insurer to terminate the contract. In terms of South African law,
the insurer would be relieved of liability only from the time of termination, and the rights
and obligations that had accrued before then would remain extant. In the KRS
Investments case, the assured had lodged a fraudulent claim for the loss of a motor
vehicle. Before that claim was paid, the assured submitted a claim for the loss and
damage by fire to its restaurant. This claim was otherwise valid. The insurer contended
that one of the naturalia of the insurance contract - a term that is implied ex lege - is that
an insurer against whom a fraudulent claim is made has an election to terminate the
contract, and moreover, to do so with effect from the date that the fraudulent claim was
made. In effect, the insurer argued that its right to terminate with retrospective effect from

the date of the attempted fraud should be recognised. In the absence of any RomanDutch law on the point, the insurer argued the English law principles that recognised
forfeiture remedies in the event of fraud. The court was not persuaded to import such a
punitive rule given the anti-penal approach of Roman-Dutch law, the judge stating233 :
[the rule] purports to dispossess the insured of a perfectly valid claim, untainted by the
fraud, that accrued contractually before the policy was terminated.
In the event that the insurer wishes to avoid liability under the policy where fraud is
alleged, the insurer must first prove that the misrepresentations alleged were made and
thereafter that the misrepresentations were fraudulent in the sense of having been made
knowingly and with the intention of obtaining a benefit under the policy.234

Total loss of cargo and abandonment


The categorisation of losses: real and presumed loss
14.128 Roman-Dutch law recognised the following types of total loss: where the subjectmatter of the insurance is completely destroyed, where the subject-matter is destroyed
but the remains thereof retain a value and where the subject-matter insured exists,
possibly undamaged, but the assured has been permanently deprived of it. Essentially,
Roman-Dutch law recognised two types of loss (sometimes known as a real total loss):
total loss and a presumed total loss.235 This is a distinction of convenience and relates
not to the type of loss so much as when the assured is entitled to abandon the subjectmatter by giving notice to the insurer.236
14.129 Examples of real total loss provided by the Roman-Dutch authorities include what
is described in the Marine Insurance Act 1906 as actual total losses, such as: the total
destruction of the goods; irreparable damage to the goods rendering them undeliverable
in their damaged condition; where the assured is certainly and irretrievably deprived of
possession of the goods and no reasonable hope exists of their recovery (such as where
the goods themselves have been captured by Barbary pirates237 ); and where perishable
goods have been detained or their carriage delayed due to loss of or damage to the
carrying vessel.238
14.130 In the case of a real total loss, the assured can give notice of abandonment and
notice of loss simultaneously. The assured need not wait until the goods have been
ransomed (if captured) or recovered by legal process.239
14.131 Examples of a presumed total loss include: where goods have been damaged
rendering them undeliverable in their damaged condition and the costs of restoring them
and forwarding them to their destination would exceed their value on arrival; where the
assured is deprived of possession of the goods but some hope remains of their recovery;
where the cost or expense of recovering the goods will exceed their value when
recovered.240 Where the loss is a presumed total loss, the rule was that the assured
could not abandon the goods to the insurer immediately and claim indemnification, but
had to wait for the expiry of a specified period of time after news of the loss had been
received and the insurer had been notified. The specified time was dependent upon the

length of the voyage, but these periods (6 months within Europe, 1 year beyond the
western part of North Africa - Barbary and its notorious pirates) would probably no longer
apply, and notice of abandonment could be given after the expiry of a reasonable period
of time.241 In recent times, the hijacking of ships and cargo has become fairly common,
and the approach taken by underwriters is that the cargo is not treated as a loss of any
sort given the probability that the ship and cargo will be released in due course following
ransom negotiations. The position would be different if the cargo was of a perishable or
time-sensitive nature. There is, therefore, no separate concept of constructive total loss
as understood in English law.242
Abandonment
14.132 Where the assured has suffered a total loss and has been appropriately
indemnified by the insurer, the assured, following the principle of indemnity, cannot retain
its ownership of the subject-matter insured.243 The assured is entitled, in certain
circumstances, to elect, on notice, to abandon whatever is left of the subject-matter of the
insurance to the insurer and to claim for a total loss. The insurer is then entitled to this
remnant as abandonment - sometimes referred to as salvage - and becomes the owner
thereof.244 It has been said that the Roman-Dutch authorities drew no distinction as such
between an actual and a constructive total loss.245 The assured, before it can claim
payment of a total loss under Roman-Dutch law, must, within the proper time, abandon
the subject-matter of the insurance to the insurer; however, there is only one kind of total
loss, and it is always necessary for the assured to give notice of abandonment, whether
the loss be actual or appear to be constructive. The purpose of the notice of
abandonment is to enable transfer of ownership from the assured to the insurer and it
must therefore be unconditional and can only be made by or on behalf of the owner of
the goods. To be effective, the notice must be accepted by the insurer. Once accepted,
the insurer is bound to pay the full indemnity under the policy.246 The insurer may waive
the obligation to give express notice of abandonment. Notice of abandonment should be
given within a reasonable time, and, if an unreasonable time has elapsed, the assured
may be liable to the insurer for any damages incurred as a consequence.247
14.133 The question as to whether English or Roman-Dutch principles should apply to the
question of abandonment is, according to Hare, unsettled. He is of the view that the
South African courts are at liberty to look at abandonment afresh. He states248 :
For it to return to the undeveloped and uncertain Roman-Dutch law of abandonment
and notice of abandonment would however only serve to fuel the fires of existing law
confusion in the law of abandonment in insurance. The court would take a bold and
positive step if it were to conclude that the Roman-Dutch principles of abandonment and
total loss have been superseded in South African law by the reception of the English law
and its distinction between actual total loss and constructive total loss.

Loss of the adventure


14.134 The long-established principle in English law that, in the case of cargo insurance,
the thing that is insured is not merely the cargo but also the arrival of the goods at the

destination specified in the contract of carriage, has not received any comment from the
principal South African commentators on marine insurance. In effect, the loss of the
adventure entitles the assured to claim a constructive total loss where the cargo is
undamaged and in the assureds possession, but the voyage has been frustrated and the
cargo has not reached its destination. It is not an issue that appears to have come before
the South African courts, but the probability is that our courts would apply the principles
relevant to a presumed total loss to the facts and the contractual terms. It would appear
that there is no South African law dealing specifically with forwarding charges incurred to
save the adventure. It may be noted that where such charges take the form of sue and
labour, the concept of sue and labour was described in one case as completely foreign
to [South African] law and peculiar to English marine insurance law.249

Partial loss: measure of indemnity


Valued and unvalued policies
14.135 Like the majority of Roman-Dutch policies,250 most South African policies are
valued policies in that either they specify the value of the goods expressly, or the policy
contains a Basis of Valuation Clause that provides a formula for calculating the agreed
value, such as CIF plus a percentage to be agreed by the parties.
14.136 Roman-Dutch authors, applying the principle of indemnity, generally accepted
that, despite a valuation in the policy, the insurer was not liable for more than an
indemnity calculated with reference to the true value of the subject-matter insured. The
true value was to be stated in the policy and the insurer was not liable in excess of that
value. The insurer had the right to challenge any over-valuation and would be obliged to
prove the true value.251
Cargo delivered damaged at destination: salvage losses
14.137 Roman-Dutch law and English law appear to be ad idem on the question of
measuring the indemnity in the case of a partial loss, save that the Roman-Dutch
authorities252 state that the net sound and damaged values (i.e., the price without the
addition of freight and other expenses incurred and charges payable at the destination)
are relevant in this regard, while under English law, subject to the policy conditions, the
gross and damaged values are used as the basis for adjusting the loss. The same
principle applies where only part of the goods are damaged and where only part of the
goods are totally lost and such loss is a partial loss.
Underinsurance
14.138 At one stage, Roman-Dutch law applied compulsory underinsurance in order to
compel the assured to take care of the object at risk. These requirements were mostly
ignored, and the current view is that, under Roman-Dutch law, the parties are free to
under-insure.253 In such a case, the insurer is only liable for a rateable proportion of its
loss.254

Recoverable expenses

Sue and labour


14.139 The concept of sue and labour was completely foreign to [South African] law and
peculiar to English marine insurance law.255 However, it has been said256 that under
Roman-Dutch law the assured has a duty to take reasonable measures to avert or minimise a loss to the subject-matter insured and the insurer has an obligation to
compensate the assured accordingly. The insurers liability arises ex lege,257 but may be
extended by express agreement.
Salvage
14.139.1 It would appear258 that salvage charges incurred by an insured would be
recoverable from an insurer under Roman-Dutch law. Such charges must arise
independent of any contract. It is not clear whether it made any difference whether the
salvage charges were incurred in avoiding a peril or simply from any cause except those
excluded in the contract of insurance.259 Contractually incurred salvage costs, for
example, under Lloyds Open Form (LOF), would be recoverable if they were incurred
as sue and labour in the assureds discharge of his customary duty to avert or minimise
any loss or damage.260
General average
14.140 Professor Van Niekerk provides a succinct definition of the Roman-Dutch concept
of general average, stating that it was261 :
an extraordinary loss, damage or expense deliberately caused or incurred for the
common safety and to save the interests involved in a common maritime adventure. A
general average loss did not lie where it fell but was borne and contributed to by the
owners of all the interests involved in proportion to the value of their interests; a general
average loss was shared.
14.141 It is beyond the scope of this chapter to discuss the development of general
average in Roman-Dutch law - save to note, given the attention currently being given to
piracy, that the deliberate sacrifice of cargo as a ransom to pirates, or the payment of a
ransom, for the release of the ship or her cargo was recognised as a general average
expenditure or loss. The obligation to contribute to the general average loss, damage or
expense could be insured, even though, on the face of it, such loss etc arose from a
deliberate act and not a fortuity. But the Roman-Dutch law was clear that an insurer was
liable if the general average act was necessitated by, and the adventure saved from, loss
or damage by such a peril.262 It was clear that the insurer of an interest was liable to
reimburse the assured owner for any contribution that the assured had to pay for a
general average loss.263 The insurers liability was reduced by the contributions that the
assured received from other interests.264
14.142 As regards both the general average loss and the obligation to contribute, the
insurers obligations flowed from the operation of general principles of causation.265 The
insurers liability was assumed without being expressly prescribed by Roman-Dutch law
or provided for in Dutch policies.266

SUBROGATION, DOUBLE INSURANCE AND RIGHTS OF


CONTRIBUTION

Subrogation
Reception of doctrine into South African law
14.143 In general terms, once an assured has been indemnified in full in accordance with
the terms of the policy, the insurer is entitled to proceed, under rights of subrogation, to
recover the loss against liable third parties in the name of the assured. The doctrine of
subrogation has been defined as follows:
Subrogation as a doctrine of the insurance law embraces a set of rules providing for the
reimbursement of an insurer which has indemnified its insured under a contract of
indemnity insurance. The gist of the doctrine is that insurers personal right of recourse
against its insured, in terms of which it is entitled to reimburse itself out of the proceeds of
any claims that the insured may have against third parties in respect of the loss.267
In Rand Mutual Assurance Co Ltd v RAF,268 the court reviewed the history of insurance
law in South Africa. English insurance law had been introduced in the Cape Colony by
the General Law Amendment Act 8 of 1879 and in the Orange Free State by Amendment
Ordinance 5 of 1902.269 The Transvaal and Natal followed Roman-Dutch law, although
the doctrine had been adopted by Transvaal courts.270 Subsequently, the Cape and
Orange Free State laws were repealed by the Pre-Union Statute Revision Act 43 of 1977.
The effect of this repeal was that, subject to statutory law, the court is not bound to follow
English law and precedent.271
14.144 The general view is that the doctrine of subrogation was received into South
African law from English law through the judgment in Ackerman v. Loubser.272 Despite
this development, the Appeal Court had, in the earlier decision of Commercial Union
Insurance Co of SA Ltd v. Lotter,273 held that:
an insurer under a contract of indemnity insurance who has satisfied the claim of the
insured is entitled to be placed in the insureds position in respect of all rights and
remedies against other parties which are vested in the insured in relation to the subject
matter of the insurance. This is by virtue of the doctrine of subrogation which is part of
our common law.
Harms ADP in the Rand Mutual case, explained that the court was giving effect to the
three rules of the lex mercatoria, which are not limited to the English law of insurance.
The rules are: that the wrongdoer is not entitled to benefit from the fact that a person
wronged was insured; that the assured may not be enriched at the expense of the insurer
by receiving both the insurance indemnity and damages from the wrongdoer; and that the
insurer replaces the assured, for example, the assured is subrogated by the insurer,
which entitles the insurer to claim the loss from the wrongdoer.274
14.145 In insurance matters, subrogation follows on indemnification without any further
formal requirements. In marine insurance, notwithstanding the subrogation of rights by

operation of law following indemnification, most underwriters will require the assured to
complete a subrogation form that not only confirms the subrogation, but will also
evidence an undertaking by the assured to provide every assistance to the underwriter
both by way of providing whatever documents are needed, as well as by providing
witnesses, in order to pursue any recovery against the third party. There is no standard
subrogation form in circulation in the South African marine insurance market and some
documents that purport to be subrogation forms either do not accurately reflect a
subrogation (indeed they may reflect a cession or assignment of rights to the underwriter)
alternatively they do not accurately reflect a proper indemnification in that they are no
more than agreements of loss, or record an ex gratia settlement and, as such, do not
evidence a subrogation. Furthermore, the requirements set out in some subrogation
forms relevant to the ongoing obligations of the assured, often contain obligations that
are nowhere to be found in the actual agreement of insurance or in common law.
Generally speaking, a subrogation form should do no more than: (a) identify the
underwriter; (b) identify the assured; (c) identify the policy and possibly claim number; (d)
identify the goods insured; (e) identify, with a reasonable degree of accuracy, the date of
the loss; (f) identify the amount in terms of which the assured has been indemnified; (g)
accurately identify with sufficient detail the assured; and (h) confirm the subrogation of
rights. Given the detail often found in these subrogation forms, it can be argued that they
form a separate undertaking that stands apart from the insurance policy, unless, of
course, the insurance policy requires that the assured, on indemnification, signs a
subrogation form either in the underwriters usual form or in the form that may be
attached to the policy.
14.146 Care must be taken to ensure that the subrogation form is completed by the
correct party. In the event that the assured had an insurable interest in the goods, but
held no rights of recovery, then any subrogation of rights and indemnification to the
insurer would be meaningless. In certain circumstances, therefore, the rights that the
underwriter requires to effect any recovery from a liable third party may need to be
sourced from the party who has those rights. In those circumstances, the rights can
either be transferred to the underwriter by way of a cession, or the underwriter can obtain
an appropriate authority (against an indemnification for costs incurred) from the party
who does possess the necessary rights for the underwriter to affect a recovery. In each
instance, the underwriter will have to consider whether or not the party in whose name
the underwriter wishes to proceed in order to effect a recovery has the necessary title to
sue.
14.147 For some time in Natal it was thought that it would be necessary for an assured to
specifically plead the point that the assured had been indemnified by the underwriter. A
full bench of the Natal court has recently held that this would not be necessary.275
Exercise of subrogation rights in practice
14.148 Under English common law, the insurer is required to sue in the name of the
assured. In deciding upon the issue, Harms ADP in the Rand Mutual case held that there
had been no previous instance in which the court had required the insurer to sue in the

name of the assured. He concurred with leading authors who viewed the doctrine as a
procedural device in the service of the indemnity principle. In finding that the rule is not
consistent with South Africas constitutional values or law of procedure, he commented
as follows276 :
To require a party to litigate in the name of another appears to me to fly in the face of the
requirement of transparency that underlines all litigation. The rule serves no public
interest in modern times It is formalistic and creates anomalies. It enables the insurer
to litigate in the name of the insured without taking any risk as far as litigation costs are
concerned. The supposed advantages, namely the insurance company may be able to
retain its anonymity, is clearly not to the advantage of the wrongdoer and also probably
not to that of the insured.
Despite having adopted this view point, Harms ADP acknowledged that there was a
prevailing practice amongst insurance companies to act on the basis that they have to
litigate in the name of the assured and the court was reluctant to interfere with settled
legal principles - communis error facit ius. Consequently, the court did not hold that the
insurer must litigate in its own name and may not litigate in the name of the assured.
What it ruled was that it was in order if the insurer elected to litigate in its own name in
terms of the subrogation doctrine.277
14.149 Following this Supreme Court of Appeal judgment, the lower courts have been
surprisingly distracted by a misunderstanding of the doctrine. The first of these decisions
was the judgment of the Kwazulu-Natal High Court inNkosi v. Mbatha,278 which held that
a subrogated claim must be proven and specifically pleaded. This contradicted an earlier
decision of the same court, Ntlhabyane v. Black Panther Trucking (Pty) Ltd and
Another,279 which held that there was neither a duty on the plaintiff to prove subrogation,
nor to produce the policy of insurance.
14.150 In a separate matter and in an unreported case in a magistrates court, it was held
that the assured must plead the involvement of the insurer in a lawsuit and dismissed the
plaintiffs action with costs for failing to do so. The facts of that matter were novel in that
the plaintiff was the owner of the car but not the assured, which was a family trust.
Usually, the plaintiff is both the owner of the insured car and the assured. On appeal,
while acknowledging that the matter before him did not expressly concern the doctrine,
Patel DJP in Smith v. Banjo 280 commented as follows:
[s]ubrogation is at best a collateral fact which is not capable of affording any reasonable
presumption or inference as to the principal matter in dispute. The question of
subrogation is res inter alios acta.281
In following the judgment of the Ntlhabyane case,282 he found that the involvement of the
assured was irrelevant and not necessary to be pleaded.
Excess or first loss clauses
14.151 The right of an assured to recover against a third party can be complex, and it is
often the case that the assured incurs losses that are not indemnified by the insurer.

Substantial excess terms may have been imposed under the contract, and the assured
may have incurred damages (such as the loss of profit or other consequential damages)
that the underwriter is not obliged to indemnify. On subrogation, however, the underwriter
retains the contractual obligation283 to enforce the assureds rights of recovery in full,
subject to any agreement as to the costs of recovering the unindemnified portion.
14.152 In general terms, the underwriter is not entitled to recover more than it paid to the
assured, including the costs of effecting any recovery.284 The position under South
African law regarding indemnification and the application of any proceeds of recovery are
complicated, but the principle to be applied is that the insurer should only be able to lay
claim to any amount recovered from a third party once the assured has been indemnified
in full.285
14.153 At all times, the rights of recovery remain completely vested in the assured; the
right of subrogation gives the insurer a contractual right to enforce the assureds rights on
behalf of the insurer. Any settlement or judgment debt must be paid to the assured, who
must then account to the insurer. This position can be, and almost always is, amended
by agreement so that payment is made to the insurer, less any amounts due to the
assured for claims - such as loss of profit - not covered by the terms of the insurance.
14.154 Only upon the cession, that is assignment, of the assureds rights to the insurer,
by agreement, can the insurer claim for its own benefit.286

Double insurance and contribution


Double insurance: when does it occur?
14.155 Double insurance exists where the same interest is insured by or on behalf of the
same insured against the same risk with two or more independent insurers.287
Double insurance may result in over-insurance if the sums insured exceed what is
required to secure a full indemnity.288 There is nothing to prevent an assured from
insuring an interest more than once, unless this is prohibited by a term of the contract of
insurance.289
14.156 In practice, most proposal forms will require the prospective assured to disclose
whether or not other insurances exist. In the absence of such a request, the existence of
any other insurance is not a material fact that the assured needs to disclose in the
proposal.290 Insurers include such a clause in order to enable them to recover, in certain
circumstances, a contribution from other insurers, and to prevent fraud.291
14.157 The assured may insure its risk with as many insurers as it chooses, but the
assured may only recover from the insurers to the extent of its loss. Once the assured
has been compensated in full, it has no further claim on the insurers. The assured may
elect to recover from any one or more of the insurers up to the full amount of its loss, or it
may claim a proportionate amount from each insurer - and if it does not succeed in full
against any one insurer, it may recover the shortfall from the others.292

14.158 Insurance policies may well contain a term that, in the event of double insurance,
the insurer will only be liable for its proportionate share of the loss or the insurer will not
be liable at all.293 These clauses are regarded as valid, but if liability is excluded on
account of double insurance and it appears that the other policy contains a similar
clause, then the two clauses are considered to cancel each other.294 In each case, the
wording of the particular clause will need to be considered in order to determine what
effect it has.
14.159 As these clauses benefit the insurer, they will be construed contra
proferentum and may, if unintelligible, be discarded.295
Contribution between insurers
14.160 In the event that an insurer has paid more than its rateable proportion of the loss,
it is entitled to claim in its own name from the other insurers that they each contribute
proportionally.296
1 . Director and Head of Transport, Norton Rose, South Africa.
2 . As discussed in Chapter 2 at para. 2.41, following the introduction of in 1983 of the
Admiralty Jurisdiction Regulation Act 105 of 1983, marine insurance was regarded as
one of the new admiralty jurisdictions and, as such, in terms of s. 6(1) of that Act,
Roman-Dutch law would apply to marine insurance claims.
3 . In terms of Roman-Dutch law, cargo of almost any description could be insured,
although certain cargoes had to be specified, such as weapons of war, gold and silver,
precious stones and jewels. Initially, perishable goods had to be specified; however, as
the law developed, the general reference to goods and merchandise would cover
perishable goods. See Reinecke et al., General Principles of Insurance Law at para. 540.
4 . W. A. Joubert (ed.), The Law of South Africa, 2002, LexisNexis Butterworths, Durban,
First Reissue.
5 . M. F. B. Reinecke, Schalk van der Merwe, J. P. van Niekerk and Peter
Havenga, General Principles of Insurance Law, 2002, LexisNexis Butterworths, Durban.
6 . D. M. Davis (ed.), Gordon & Getz: The South African Law of Insurance, 4th edn, 1993,
Juta Law, Cape Town. This work is not very current and is in desperate need of an
update. Apart from the LAWSA volume and Reinecke et al.s textbook, this is probably
the most referred to textbook on insurance law generally.
7 . J. Hare, Shipping Law and Admiralty Jurisdiction in South Africa, 2nd edn, 2009, Juta
Law, Cape Town, Chapters 18 and 19.
8 . J. P. Van Niekerk, The Development and Principles of Insurance Law in the
Netherlands from 1500 to 1800, 1999, Hart, Oxford.
9 . See further, J. P. van Niekerk, The reform of South African insurance law: A
preliminary enquiry (an inaugural address published in MBL, 1983, 88); C. Marnewick
The codification of marine insurance in South Africa (an unpublished LLM thesis). See

further J. P. Van Niekerk, Choice of English law and practice in a South African shortterm policy of marine insurance: Jurisdiction and applicable law, TSAR, 2010, 590. He
comments in his critique of the a quodecision in Classic Sailing Adventures (Pty)
Ltd v. Representative of Lloyds, 2010 (5) SA 90 (SCA), hereinafter referred to as The
Mieke, that where the common law is to be developed, a broad comparative approach
should be followed rather than a[n] exclusive reliance on an English insurance law itself
in the process of radical reform. The South African Maritime Law Association in
conjunction with the Association of Marine Underwriters of South Africa has recently
taken up the issue again.
10 . Act 105 of 1983, as amended. Douglas Shaw QC is regarded as the Father of the
Admiralty Act.
11 . That is, the Republic of South Africa.
12 . D. J. Shaw QC, Admiralty Jurisdiction and Practice in South Africa , 1987, Juta,
Cape Town.
13 . Per Lord Diplock in Amin Rasheed Corp v. Kuwait Insurance [1984] AC 50 at 63C-D.
14 . Per Viljoen JA in Incorporated General Insurances Ltd v.Shooter t/a Shooters
Fisheries , 1987 (1) SA 842 (A).
15 . South African law has many sources: the Constitution (from which all law derives its
force), legislation, customary law and the common law. The common law is often referred
to as the non-enacted law made up of Roman-Dutch, English and South African
precedents.
16 . By Roman-Dutch law is meant the laws of the Province of Holland in the seventeenth
and eighteenth centuries. Professor Hare, probably echoing the views of most
practitioners, states that The South African law of marine insurance today should be
tied neither to the purist Roman-Dutch ordinances and writings, nor to the English law. As
a truly South African common law it should be broad enough to draw upon the general
principles of marine insurance, including but not limiting to those crystallized in the 1906
Marine Insurance Act, which was largely a restatement of the then common law of
marine insurance in England and (although to a lesser extent) on the continent.Hare, op.
cit. p. 829
17 . J. Hare, Shipping Law and Admiralty Jurisdiction in South Africa, at p. 827.
18 . Gordon & Getz at p. 393 fn. 140.
19 . The Insurance Act No. 27 of 1943 makes specific provision allowing Lloyds to
operate in the South African market. Although repealed with effect from 1 January 1999,
ss. 56 and 63 of the Short-term Insurance Act 53 of 1998 continues to recognise the
importance of this market to South African insurance, with many marine underwriting
agencies specifically writing risks in the Lloyds market.
20 . This was the view of the Supreme Court of Appeal in The Mieke, 2010 (5) SA 90
(SCA).

21 . See further, J. P. Van Niekerk, The Development of the Principles of Insurance Law
in the Netherlands from 1500 to 1800, op. cit.
22 . F. Du Bois (ed.), Willes Principles of South African Law, 9th edn, 2007, Juta Law,
Cape Town, at p. 76 and authorities quoted at fn. 66.
23 . Wille, op. cit. at p. 78 and authorities quoted at fns 74 to 77.
24 . No. 53 of 1998, as amended.
25 . No. 105 of 1983, as amended.
26 . ICC, cl. 19 reads, This insurance is subject to English law and practice.
27 . The Supreme Court of Appeal in The Mieke, 2010 (5) SA 90 (SCA) when
considering a hull policy that incorporated an English law term, applied provisions of the
South African Short-term Insurance Act relating to issues of non-disclosure and
misrepresentation rather than relying upon the 1906 Marine Insurance Act.
28 . The draft is available at www.web.uct.ac.za/depts/shiplaw/marins.htm.
29 . Sections 6(1)-(5).
30 . 1987 (1) SA 842 (A).
31 . 2010 (5) SA 90 (SCA).
32 . No. 58 of 1998. The Act defines a short-term policy as including a transport policy.
33 . Section 51 refers to the voidness of certain provisions relating to short-term policies;
s. 53 relates to misrepresentation and the failure to disclose material information; s. 54
relates to the validity of certain contracts; and s. 55 relates to the protection of individual
policyholders.
34 . Section 1(1) transport policy.
35 . See Dunt, Marine Cargo Insurance, at paras 1.30 to 1.32.
36 . No. 68 of 2008.
37 . P. Bracher, Insurance and the Consumer Protection Act, an article that appeared
in Cover magazine, June 2011 at p. 35.
38 . A policyholder is defined in rule 1 of the rules. The object of the rules is to ensure
that policies [where the policyholder is a natural person] are entered into and enforced in
accordance with sound insurance principles and practice in the interests of the parties
and the public interest. The effective date of the current rules is 1 January 2011.
39 . Representative of Lloyds and Others v.Classic Sailing Adventures (Pty) Ltd (The
Mieke) 2010 (5) SA 90 (SCA).
40 . Section 55(1) of the Short-Term Insurance Act No. 53 of 1998.

41 . Section 56(1) of the Short-Term Insurance Act. For the position under the Insurance
Act 27 of 1943 (now repealed), see J. P. van Niekerk, Marine insurance: All risks
policies on goods, MBL, 1982, 78 at p.79 fn. 11.
42 . Section 57(2) of the Short-term Insurance Act.
43 . Section 57(5) and (6).
44 . Section 57(7)(a).
45 . Section 59(1).
46 . Section 01(1)(u) of the Admiralty Jurisdiction Regulation Act No. 105 of 1983.
47 . Section 01(1) of the Short-term Insurance Act.
48 . Section 59(2) of the Short-term Insurance Act, see para. 2.40 et seq. above.
49 . Section 59(4).
50 . Section 61(a) of the Short-term Insurance Act. For more on the role of Lloyds in
South Africa, see Reinecke et al., op. cit. at paras 322, 512 to 515 and 654 to 658.
51 . 1967 (3) SA 124 (W), LAWSA at para. 99 fn. 1.
52 . In the absence of a requirement that the assured have insurable interest, the
contract will be regarded as a wager, and considered void.
53 . Acceptance may be express or tacit. Usually, acceptance is confirmed in writing and
the insurer will provide the assured with a policy.
54 . Willes Principles of South African Law at p. 737 and authorities in fns 10 and 11.
55 . 1988 (3) SA 580 (A).
56 . Videtsky v. Liberty Life Insurance Association 1990 (1) SA 386 (W).
57 . Schoeman v. Constantia Insurance Co Ltd, SCA Case 01/2002, unreported.
58 . J. Hare at p. 870.
59 . 1985 (1) SA 419 (A).
60 . J. Hare, Good faith, disclosure, misrepresentation and the omnipotent warranty:
South African perspective - a paper presented to the British Maritime Law Association,
2000 at www.web.uct.ac.za/depts/shiplaw/tulantxt.htm.
61 . LAWSA at para. 175.
62 . 2005 (2) SA 502 (SCA) at para. 8.
63 . Act 53 of 1998.
64 . Section 54.

65 . J. P. van Niekerk, The insureds duties of disclosure: Delictual and contractual;


before the conclusion and during the currency of the insurance contract: Bruwer v. Nova
Risk Partners Ltd [2011] SA Merc LJ 135 at 135.
66 . 1985 (1) SA 419 (A).
67 . J. P. van Niekerk, op. cit. at 135.
68 . 2011 (1) SA 234 (GSJ).
69 . For the circumstances in which this Act applies to marine cargo insurance, see para.
14.14 above.
70 . J. P. Van Niekerk, op. cit. at 143.
71 . Representative of Lloyds and Others v. Classic Sailing Adventure (Pty) Ltd (The
Mieke) 2010 (5) SA 90 (SCA).
72 . For the circumstances in which this Act applies to marine cargo insurance, see para.
14.14 above.
73 . In Bruwer v. Nova Risk Partners Ltd [2010] ZAGPJHC 96, the court confirmed that
the aim behind s. 53 is to protect policyholders against claims rejection by insurers based
on negligible or trivial non-disclosure. It confirmed that the test for materiality is of a
reasonable, prudent person, i.e., would such a person consider that the information
constituting the non-disclosure should have been disclosed so as to enable the insurer to
form its own view concerning the effect of the information on the assessment of the risk
or the premium charged.
74 . Clifford v. Commercial Union Insurance Co of South Africa Ltd, 1998 (4) SA 150
(SCA).
75 . For the circumstances in which this Act applies to marine insurance, see paras
14.14, 14.35 and 14.36 above.
76 . See para. 14.14 above, for the circumstances in which this Act applies to marine
cargo insurance.
77 . Reinecke et al., op. cit. at para. 103.
78 . Gordon & Getz, op. cit. at p. 92.
79 . Gordon & Getz, op. cit. at p. 94.
80 . Hare, op. cit. at p. 862.
81 . Hare op. cit. at p. 861. Hare is of the view that the entire concept of insurable interest
may well have outlived its usefulness - see his comments at p. 864.
82 . 2000 4 All SA 379 (SCA).
83 . [2002] 3 All SA 27 (C).
84 . [1883] 11 QBD 380 (CA).

85 . [1905] TH 374.
86 . [1808] 1 Taunt 325 (HL).
87 . [1925] AC 619.
88 . [1983] (4) SA 625 (W).
89 . 1985 (4) SA 7 (T).
90 . Supra.
91 . 1996 (3) SA 434 (D).
92 . 1996 (2) SA 361 (T).
93 . 2002 (5) SA 85 (T).
94 . 2003 (1) SA 318 (ZHC).
95 . [1905] TH 374.
96 . See, generally, Reinecke et al., at para. 37.
97 . For the position in Australia under the Insurance Contracts Act 1984, see para.
7.35 above.
98 . Roman-Dutch insurance referred to on good or bad tidings - Reinecke et al., op. cit.
at para. 126 fn. 156.
99 . See para. 3.15 above.
100 . See para. 7.31 above.
101 . 1955 (3) SA 240.
102 . At p. 247.
103 . See para. 3.15 above.
104 . LAWSA, op. cit. at para. 149.
105 . LAWSA, op. cit. at para. 149; Nuclear Fuels Corporation of SA (Pty) Ltd v. Orda
AG [1997] (1) All SA 11 (A).
106 . LAWSA op. cit. at para. 149; Sasfin (Pty) Ltd v. Beukus, 1989 (1) SA 1 (A).
107 . See, in particular, Masefield AG v. Amlin Corporate Member Ltd [2010] 1 Lloyds
Rep. 509, [2011] 1 Lloyds Rep. 630 (CA) considered at paras. 3.94 and 3.98 above.
108 . 2003 (2) SA 440 (SCA).
109 . 1998 (3) SA 1063 (C) C at p. 1068 B-C.
110 . At p. 1068 D.
111 . Gordon & Getz, at p. 202.

112 . [1916] AD 509.


113 . Hare, op. cit. at p. 888 fn. 202.
114 . Ibid. The cases are Colonial Mutual Life Assurance Society Ltd v. de Bruyn [1911]
CPD 103 at p. 126 and Morris v. Northern Assurance Co Ltd [1911] CPD 293 at 304.
115 . Hare, op. cit. at p. 889.
116 . Hare, op. cit. at p. 890.
117 . See para. 14.35 above.
118 . Hare, op. cit. at p. 890.
119 . For a summary of this debate, see Hare, op. cit. at p. 890 and the relevant
footnotes; Gordon & Getz, op. cit. at p. 230 and p. 231, and the authorities referred to in
the relevant footnotes; and Reinecke et al., op. cit. at para. 359.
120 . Hare, op. cit. at p. 891.
121 . Reinecke et al., op. cit. at para. 548.
122 . Reinecke et al., op. cit. at para. 551.
123 . The Wave Dancer, 1996 (4) SA 1167 (A).
124 . Blackshaws (Pty) Ltd v. Constantia Insurance Co Ltd, 1983 (1) SA 120 (A) at 128 to
129.
125 . Per Chetty J, Mutual and Federal Insurance Co Ltd v. Ingram and Others, 2009 (6)
SA 53 (E).
126 . Walker v. Santam Ltd and Others, 2009 (6) SA 224 (SCA) at para. 16.
127 . Hare, op. cit. at p. 897.
128 . Hare, op. cit. at p. 898.
129 . Reinecke et al., op. cit. at para. 277; Hare, op. cit. at p. 898 to p. 899.
130 . Reinecke et al., op. cit. at para. 277.
131 . Gordon & Getz, op. cit. at 400. Hare, op. cit. at 899 quotes the case
of Sikweyiya v. Aegis Insurance, 1995 (4) SA 143 (E) as being a case where the court
applied a common sense approach to causation.
132 . Hare, op. cit. at p. 898.
133 . 1987 (1) SA 842 (SCA).
134 . 1983 (1) SA 120 (A) at 126F.
135 . Per Galgut AJA at p. 857.

136 . No. 27 of 1943. This Act has been repealed. The Short-Term Insurance Act
provides that any claim against a Lloyds underwriter under a South African short-term
insurance policy will be recognised by a South African court.
137 . No. 105 of 1983.
138 . The court a quo had also found that there was no obligation upon the assured to
sue and labour (i.e., pay the fine) and this obligation could not be reimposed indirectly in
the guise of a contention that the failure to pay the fine was the proximate cause of the
loss.
139 . Galgut AJA at 863. The judge referred, with approval, to the comments made by
Ivamy at 255 ( Marine Insurance 3rd edn); Arnoulds Law of Marine Insurance and
Average, 16th edn, volume 2, at 773; and Gordon & Getz, op. cit. at 383.
140 . Galgut AJA at p. 862 to p. 863.
141 . Hare, op. cit. at p. 899.
142 . Galgut AJA at p. 862.
143 . Mutual and Federal Insurance Co Ltd v. Ingram and Others, 2009 (6) SA 53 (E) at
para. 13. In this non-marine case, heard on appeal, the court preferred to rely on English
precedent ( Wayne Tank and Pump Co Ltd v. The Employers Liability Assurance
Corporation Ltd [1974] QB 57 (CA)) rather than Roman-Dutch law. See
also Walker v. Santam Ltd and Others, 2009 (6) SA 224 (SCA) at para. 16.
144 . See generally, Reinecke et al., op. cit. at paras 254 to 260: Gordon & Getz at p.
202 to p. 204.
145 . 1963 (1) SA 632 (A).
146 . See also the authorities referred to by Gordon & Getz, p. 203 fn. 5 and the
authorities referred to by Reinecke et al., op. cit. at para. 256, fns 84 and 85.
147 . British and Foreign Marine Insurance Co v. Gaunt [1921] 2 AC 41 (HL) and Soya
GmbH Kommanditgesellschaft v. White [1982] 1 Lloyds Rep. 136 (CA).
148 . Reinecke et al., op. cit. at para. 551.
149 . See J. P. van Niekerk, Marine insurance: All risks policies on goods, MBL, 1982,
78.
150 . [1921] 2 AC 41 (HL) at p. 57.
151 . See para. 3.35 above.
152 . 1984 (3) SA 449 (W).
153 . At p. 453.
154 . Reinecke et al., op. cit. at para. 289.

155 . J. P. Van Niekerk, Marine insurance: All risks policies on goods, MBL 1982, 78 at
p. 85, states that wilful misconduct includes both intentional and reckless conduct.
156 . ICC, cl. 4.1.
157 . 1977 (3) SA 941 (C).
158 . At p. 946 to p. 947.
159 . Gordon & Getz, op. cit. at 197.
160 . Reinecke et al., op. cit. at para. 284.
161 . 1984 (4) SA 269 (D). The matter went on appeal - 1987 (1) SA 842 (SCA) and the
decision of the court a quo was overturned, but the comments made by Friedman J
remain relevant.
162 . At p. 284.
163 . At p. 284.
164 . Reinecke et al., op. cit. at para. 551 and the references referred to in fn. 242.
165 . 1996 (4) SA 1167 (A).
166 . Or marine cargo, for that matter.
167 . At p. 1179.
168 . Not that this would affect the ordinary wear and tear exception as it appears in all
three of the Institute Cargo Clauses.
169 . 1981 (4) SA 659 (C).
170 . Arnoulds Law of Marine Insurance and Average, 16th edn at para. 782, the current
edition at that time, see now first supplement to the 17th edn at p. 141, where the editors
consider this an open question.
171 . No explanation was offered, or evidence lead, as to the possible cause of the
damage, i.e., heavy weather, as this was a hearing on the papers rather than a trial
where evidence would be lead.
172 . At p. 661H.
173 . Blackshaws (Pty) Ltd v Constantia Insurance Company Ltd 1983 (1) SA 120 (A).
174 . Scrutton on Charterparties and Bills of Lading, 18th edn, 1974, Sweet & Maxwell,
London, at p. 224.
175 . 1983 (1) SA 120 (A) at p. 129 to p. 130.
176 . [2011] 1 Lloyds Rep. 560.
177 . For a full discussion of the implications of the decision in this important English
case, see para. 3.45 et seq. above.

178 . Reinecke et al., op. cit. at para. 548.


179 . Reinecke et al., op. cit. at para. 560.
180 . Gordon & Getz, at p. 391.
181 . Ibid.
182 . See para. 3.55 et seq. above.
183 . See the references cited by Reinecke et al., op. cit. at para. 273.
184 . [1914] AD 574 at p. 591.
185 . [1913] 3 KB 411 (CA).
186 . The Conversion of Sasria Act 134 of 1998. More information can be found
at www.sasria.co.za.
187 . Section 01.
188 . See JCC 56, discussed at para. 3.68 above.
189 . [2001] 2 ZASCA 88.
190 . At para. 7.
191 . At para. 12.
192 . [1876] 1 AC 498 (HL).
193 . 1990 (4) SA 190 (W) at p. 196A-B.
194 . [2003] Lloyd's Rep IR 444. IR 444.
195 . At para. 27 also citing Pearson v. The Directors of the Commercial Union
Assurance Co Ltd, above .
196 . [2001] 2 ZASCA 88.
197 . See para. 14.101 above.
198 . At para. 11.
199 . Compare the view of Ormiston J in Verna Trading Pty Ltd v. New India Assurance
Co Ltd [1991] 1 VR 129 at p. 162 discussed in the Comparative Law chapter at paras
15.45 to 15.50 below.
200 . Gordon & Getz, op. cit. at p. 178.
201 . Reinecke et al., op. cit. at para. 556.
202 . Gordon & Getz, op. cit. at 178 and Reineke et al., at para. 276.
203 . See para. 14.109 below, Change of Voyage Clause.
204 . See Reinecke et al., op. cit. at para. 554.

205 . Reinecke et al., op. cit. at para. 557.


206 . Ibid.
207 . Ibid.
208 . Ibid.
209 . Ibid.
210 . Ibid.
211 . Ibid.
212 . Ibid.
213 . Dunt, Marine Cargo Insurance, at para. 12.12 et seq.
214 . No. 68 of 1969. See P. Bugden (ed.), Time Bar in Insurance and Reinsurance : An
International Comparison, 2011, Clyde & Co, London (South African section by Patrick
Bracher).
215 . ICC, cl. 19.
216 . This accords with English law, see para. 3.89 above.
217 . Griesel NO v. SA Myn en Algemene Assuransie Edms Bpk , 1952 (4) SA 473 (T).
218 . [1956] (1) SA 330 (A) following Munro, Brice & Co v. War Risks Association [1918]
2 KB 78.
219 . Gordon & Getz, at p. 178.
220 . Reinecke et al., op. cit. at para. 289 fn. 292.
221 . Reinecke et al., op. cit. at para. 289.
222 . 1984 (3) SA 449 (W).
223 . See para. 14.88 above.
224 . No. 105 of 1983 as amended.
225 . Section 01(1)(u).
226 . Hofmeyer, Admiralty Jurisdiction Law and Practice in South Africa 1st ed, at p. 135
and p. 136 and the various authorities cited.
227 . Act 55 of 1975, as amended.
228 . 1998 (1) SA 487 (C).
229 . Hofmeyer, op. cit. at 137.
230 . Hofmeyer, Admiralty Jurisdiction Law and Practice in South Africa at 135 and the
authorities cited in fns 95 and 96.

231 . LAWSA, at para. 176.


232 . [2007] (1) All SA 566 (SCA).
233 . At para. 11. See also Springold Investments (Pty) Ltd v. Guardian National
Insurance Co Ltd, 2009 (3) SA 235 (D), where the court considered whether palm oil had
become contaminated by sabotage and whether there had been fraud on the part of the
assured. Patel J reviewed the law relevant to fraud in para. 20 of the judgment. The
decision was taken on appeal. In an as yet unreported decision, the court only
considered the question of sabotage and the Supreme Court of Appeal found that the
assured had not satisfied the court that there was any evidence of sabotage. No other
issues were considered.
234 . Springold Investments (Pty) Ltd v. Guardian National Insurance Co Ltd, 2009 (3)
SA 235 (D) at p. 26.
235 . Reinecke et al., op. cit. at para. 566.
236 . Ibid.
237 . Contrast the position regarding Somali pirates, see Masefield AG v. Amlin
Corporate Member Ltd [2010] 1 Lloyds Rep. 509, [2011] 1 Lloyds Rep. 630 (CA).
238 . Ibid. and especially the authorities referred to in fns 424 to 431.
239 . Reinecke et al., op. cit. at para. 566 and fns 432 to 434.
240 . Reinecke et al., op. cit. at para. 566 and fns 435 to 439.
241 . Reinecke op. cit. at para. 566 and fns 441 and 442.
242 . Reinecke et al., op. cit. at para. 564.
243 . Reinecke et al., op. cit. at para. 563.
244 . See J. P. van Niekerk, The insurers right to salvage, related issues of ownership,
and unrelated issues of salvage liens: Hollard Insurance Co Ltd v Wagenaar t/a Race
Designs, SA Merc LJ, 2011, 300 at p. 311.
245 . Gordon & Getz, at p. 406.
246 . Hare, op. cit. at para. 19-10.2.
247 . Reinecke et al., op. cit. at para. 565.
248 . Hare, op. cit. at para. 19-10.2 .
249 . Viljoen JA in his dissenting judgment in Incorporated General Insurances
Ltd v. Shooter t/a Shooters Fisheries, 1987 (1) SA 842 (SCA) at p. 864.
250 . Reinecke, op. cit. at para. 570.
251 . Reinecke, op. cit. at para. 571.

252 . See the discussion on this topic in Reinecke et al., op. cit. at para. 572 and the
various Roman-Dutch and English authorities cited in the relevant footnotes.
253 . Reinecke et al., op. cit. at para. 574.
254 . Ibid.
255 . Viljoen JA in his dissenting judgment in Incorporated General Insurances
Ltd v. Shooter t/a Shooters Fisheries , 1987 (1) SA 842 (SCA) at p. 864.
256 . See the discussion in Reinecke et al., op. cit. at para. 575 and the various
authorities referred to in the footnotes.
257 . Reinecke et al., op. cit. at para. 575 states that under English law the insurers
liability only arises ex contractu.
258 . There is no easily accessible reference material on the issue of an insurers
obligation to indemnify an assured for any amounts paid to salvors following the salvage
of the insurers goods.
259 . See J. Dunt, op. cit. at para. 14.28.
260 . Reinecke et al., op. cit. at para. 575; J. P. van Niekerk, The Development of the
Principles of Insurance Law in the Netherlands from 1500 to 1800, volume 2, 1997 p.
1055-1077.
261 . J. P. van Niekerk, The Development of the Principles of Insurance Law in the
Netherlands from 1500 to 1800, volume 1, p. 63. See J. P. Van Niekerk, op. cit. at p. 67.
262 . J. P. van Niekerk, op. cit. at p. 78. Van Niekerk notes, at fn. 314, that the position
was analogous to the principle that loss or damage caused, or expenses incurred, in
averting or minimising loss or damage to the subject-matter insured was recoverable
from the insurer as a loss or damage caused by that peril.
263 . J. P. Van Niekerk, op. cit. at p. 79.
264 . J. P. Van Niekerk, op. cit. at p. 78.
265 . J. P. Van Niekerk, op. cit. at p. 79.
266 . Ibid.
267 . 12 LAWSA (first reissue) para. 373 as referred to with approval by Patel JPD
in Smith v. Banjo, 2011 (2) SA 518 (KZP) at 521 para. 11. LAWSA refer
to Castellain v. Preston [1883] 11 QBD 380 (CA).
268 . For an overview of the subject of subrogation, see the judgment of Harms ADP
in Rand Mutual Assurance Co Ltd v. Road Accident Fund [2008] ZASCA 114. Not only
does this judgment succinctly trace the history of the reception (or otherwise) of the
importation of the principles of subrogation into South African law, it also deals with the
practical issue of whether the underwriter may proceed to recover any amount by which it
has indemnified an assured in its own name, or not.

269 . The court in Ackerman v. Loubser [1918] OPD 31 undertook, unnecessarily in view
of the presiding legislation at the time, to import the doctrine as part of insurance law into
South Africa.
270 . Schoonwinkel v. Galatides, 1974 (4) SA 388 (T).
271 . Rand Mutual Assurance Co Ltd v. Road Accident Fund, 2008 (6) SA 511 (SCA) at
p. 518 paras 12 to 17.
272 . [1918] OPD 31.
273 . 1999 (2) SA 147 (SCA) and with reference to Ackerman v. Loubser [1918] OPD 31.
274 . Rand Mutual,op. cit. at p. 519 at para. 17 with reference to and approval of the
Supreme Court of Canada decision in Somersall v. Friedman [2002] (3) SCR 109, where
the Court at para. 50 stated: First, it is important to keep in mind the underlying
objectives of the doctrine of subrogation, which are to ensure (i) that the assured
receives no more and no less than a full indemnity, and (ii) that the loss falls on the
person who is legally responsible for causing it. The doctrine of subrogation operates to
ensure that the assured receives only a just indemnity and does not profit from the
insurance. Consequently, if there is no danger of the assured being overcompensated
and the tortfeasor has exhausted his or her capacity to compensate the assured, there is
no reason to invoke subrogation. Similarly, if the assured enters into a limits agreement
or otherwise abandons his or her claim against an impecunious tortfeasor, the assured
has lost nothing by the inability to be subrogated.
275 . Smith v. Banjo, 2011 (2) SA 518 (KZP).
276 . Harms DJP in Rand Mutual Assurance Co Ltd v. Road Accident Fund op. cit. at p.
521 para. 23. With respect, the comment regarding costs is not correct as, in practice,
the insurer undertakes to indemnify the assured plaintiff against all costs incurred.
277 . Rand Mutual Insurance, op. cit. at p. 521 at para. 24.
278 . [2010] ZAKZPHC 197.
279 . [2009] ZAGPJHC 46.
280 . 2011 (2) SA 518 (KZP).
281 . At p. 521 para. 11.
282 . [2009] ZAGPJHC 46.
283 . See Reinecke et al., op. cit. para. 389.
284 . Yorkshire Insurance Co Ltd v. Nisbet Shipping Co Ltd [1961] 2 All ER 487.
285 . See, generally, Reinecke et al., op. cit. at paras 387 and 389.
286 . Reinecke et al., at para. 390.
287 . Reinecke et al., op. cit. at para. 516.

288 . Gordon & Getz, op. cit. at p. 287.


289 . Gordon & Getz, ibid. ; Reinecke et al., op. cit. at para. 516.
290 . Gordon & Getz, op. cit. at p. 287.
291 . Gordon & Getz, op. cit. at p. 288; Reinecke et al., op. cit. at para. 516.
292 . Reinecke et al., op. cit. at para. 516; Gordon & Getz, op. cit. at p. 289.
293 . Examples of such can be found in Reinecke et al., op. cit. at para. 516, fns 16 and
17.
294 . Reinecke et al., op. cit. at para. 519 and authorities cited in fn. 18 and Refrigerated
Trucking v. Zive, 1996 (2) SA 361 (T) at 367.
295 . Reinecke et al., op. cit. at para. 519 and the authorities quoted at fn. 21.
296 . Reinecke et al., op. cit. at para. 519 and the authorities quoted at fn. 21. It is to be
noted that these authorities come from English law. For South African authority,
see Refrigerated Trucking v. Zive, 1996 (2) SA 361 (T). The judge in this case stated:
the authorities referred to are persuasive and the result to which they come is fair.

Table of Contents

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SOUTH AFRICAN LAW OF CARGO INSURANCE


INTRODUCTION
Scope and structure of the chapter
Sources of South African law
Roman-Dutch law
Judicial precedent
Statutory sources of law
The application of English law
The practice: incorporation of English law
Will the South African courts uphold a choice of English law?
Consumer protection
The position of Lloyds underwriters
FORMATION OF A CONTRACT OF MARINE CARGO INSURANCE
Utmost good faith and good faith
The good faith requirement
Non-disclosure and section 53 of the Short-term Insurance Act 1998
The remedy of avoidance
Formalities, insurable interest and illegality
Formalities
Insurable interest
Problem issues of insurable interest
Insurance lost or not lost
Illegality and public polic y

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OPEN COVERS, POLICIES AND CERTIFICATES


Open covers, policies and certificates of insurance
Policies and clauses in use
Interpretation and construction of policies generally
WARRANTIES, EXCLUSIONS CONDITIONS AND OTHER TERMS
Warranties
Warranties defined
Exclusions
The nature of exclusions
Causation
Conditions
ALL RISKS
All risks defined
Burden of proof
Limitations and exclusions on all risks
Wilful misconduct
Ordinary wear and tear
Inherent vice: insufficiency of packing
Delay and insolvency
Unseaworthiness and unfitness
WAR, STRIKES AND TERRORISM
The limitations on cover for war and strikes risks
War, civil war, revolution, rebellion, insurrection and civil commotion
Terrorism
The cover for terrorism
DURATION OF THE INSURANCE
The Transit Clause
Attachment of risk: ordinary course of transit
Termination of risk; election to store
Held covered, termination of carriage and change of voyage
Held covered and analogous provisions
Termination of Contract of Carriage Clause
Change of Voyage Clause
CLAIMS AND LOSSES
Claims
Limitation of action
Proof of loss
Interest and costs
Good faith and fraudulent claims
Total loss of cargo and abandonment
The categorisation of losses: real and presumed loss
Abandonment
Loss of the adventure
Partial loss: measure of indemnity
Valued and unvalued policies
Cargo delivered damaged at destination: salvage losses

Underinsurance
Recoverable expenses
Sue and labour
Salvage
General average
SUBROGATION, DOUBLE INSURANCE AND RIGHTS OF CONTRIBUTION
Subrogation
Reception of doctrine into South African law
Exercise of subrogation rights in practice
Excess or first loss clauses
Double insurance and contribution
Double insurance: when does it occur?
Contribution between insurers

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