In the case of Hypercheck (Pty) Ltd v Mutual And Federal Insurance Company Ltd the Court assessed the liability of an insurer under a property protection policy to indemnify against accidental, physical loss resulting from “any cause” but not for loss resulting from settlement, bedding down, or cracking.
It was specifically provided that the policy covered:
“the buildings (constructed of brick, stone, concrete or metal on metal framework …) including landlords’ fixtures and fittings therein and thereon, plant equipment, structures and other improvements of a permanent nature, walls (except dam walls) … all the property of the insured, and if so stated in the schedule, tenants’ fixtures and fittings.”
The insured property expressly included “structures and other improvements of a permanent nature“.
The policy further that specified perils covered by the policy extended to:
“Accidental physical loss or damage to the property insured by any cause not excluded by exceptions 1 to 9 appearing below…”
The accidental damage extension in terms of the policy therefore excluded indemnification for damages arising from contingencies specified in 9 clauses. One such clause (clause 6), excluded protection in terms of the policy for loss or damage to property arising from:
“Settlement or bedding down, ground heave, collapse or cracking of structures or the removal or weakening of support to any property insured”
The experts agreed that cutting away metal fins or hangers by tenants to attach signage to the property resulted in the removal and weakening of the support structure of the awning. In these circumstances, the experts also agreed that cutting away the steel plates increased the risk of the awning collapsing, which in turn caused the collapse of the awning.
M&F repudiated liability for Hypercheck’s claim in this respect on the basis of the provisions of exception 6 of the policy.
The Court was required to assess and determine whether, in these particular circumstances the loss fell under exclusion and therefore not covered. The Court interpreted exclusion clause as follows:
The general principles and rules relating to the interpretation of contracts can be summarised as follows:
- 1. If the language is clear, the court must give effect to the language which the parties have themselves used in the insurance contract. The words must be given their plain, ordinary, popular and grammatical meaning, unless this would result in absurdity, or it is evident from the context that the parties intended the words in question to bear a different meaning. There is no room for a more reasonable interpretation than the plain meaning of the words themselves convey, particularly so if there is no ambiguity.
- 2. In order to establish the intention of the parties, the court must look at the insurance contract as a whole rather than at isolated expressions, bearing in mind the language of the policy.
- 3. If the meaning of a word or clause in an insurance contract is not clear, or the word or clause is ambiguous, the contra proferentem rule is applicable. This rule requires a written document to be construed against the person who drafted it. This approach was also followed in the case of Allianz Insurance Ltd v RHI Refractories Africa (Pty) Ltd where the court stated that “…an exception clause is restrictively interpreted against the insurer, because it purports to limit what would otherwise be a clear obligation to indemnify”.
- 4. In addition to the contra proferentem rule, Schreiner JA pointed out in the case of Kliptown Clothing that there is also the further related rule that if a warranty is ambiguous in an insurance contract, a court should incline towards upholding a policy against forfeiture on the part of the insured.
- 5. Insurance policies should also be construed in such a way as to allow for business efficacy, and in accordance with sound commercial principles.
- 6. Another rule of restrictive interpretation is premised upon the principle of eiusdem generis, which holds that where it appears that the language indicates a species, words or phrases should be restrictively interpreted to mean the same species as the associated words or phrases.
The policy provided that M&F was not obliged to indemnify Hypercheck against any accidental loss or damage caused by settlement or bedding down, ground heave, the collapse or cracking of structures or the removal or weakening of support to any property insured.
On the basis of a literal interpretation of the stated contingencies in exception 6, the Court was of the view that the plain and ordinary meaning of unambiguous words and phrases such as “collapse“, or “cracking of structures“, or the “removal of support“, or the “weakening of support” in relation to the awning leaves no room for a more reasonable interpretation than the words themselves convey.
The Court found that, in the absence of a distinct species or class of causes or an identifiable link of general application between the stated causes, the eiusdem generis principle cannot apply. Even though the eiusdem generis principle is a useful instrument in certain cases where a clear class or species is identified, this principle must not be utilised as a means to substitute an artificial intention for the real intention of the parties, as evidenced by the plain language used.
In these circumstances, the accidental loss and damages sustained by Hypercheck fall within the provisions of exception 6 and was therefore not indemnified.