South African Insurance Law - Wikipedia Insurance south Africa

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Insurance inside South Africa describes a workings inside that country intended the reduction or minimisation of loss, owing to the constant exposure of people also assets to risks (be they natural or economic or personal). The kinds of mislaying which arise provided such risks eventuate may be present either patrimonial or non-patrimonial.

A accepted description of insurance is supplied inside the case of Lake v Reinsurance Corporation Ltd,^[1] which describes it while a agreement amidst an insurance company also an insured, inside terminology of which the insurance company undertakes to render to the insured a amount of money, or its equivalent, on top of the occurrence of a specified undecided event inside which the insured has some interest, inside return intended the payment of a premium.

According to LAWSA,

Insurance is the consequence of man’s efforts to create economic safety inside the countenance of dangers to his life, individual also estate. A typical long for of a man is to sort also develop his estate [....] The article of forming also developing an estate may, however, be present thwarted by dangers to which his existing also time to come location is exposed: provided these materialise they may bring about undesirable consequences which may affect his estate now or inside the future. Even while a danger is still remote it creates an part of uncertainty, whether inside relation to its genuine occurrence, the exact period of its occurrence, or the extent of its undesirable consequences. This part of uncertainty creates insecurity. Accordingly, it may be present said that man’s miss intended safety arises from the tension amidst his long for to sort also develop his estate, on top of the one hand, also the dangers threatening to thwart that desire, on top of the other. The nearly all effective also obvious method of achieving safety is to grip direct precautionary measures against coming or potential harm [....] One of the nearly all satisfactory accepted methods of creating financial security against risks therefore seems to be present that of spreading the chance among a number of persons all exposed to the same chance also all prepared to cause a relatively negligible contribution towards neutralising the destructive effects of this chance which may materialise intended a scrap of one or additional of their number. This is well-known while insurance.

The law of insurance inside South Africa consists of

• rules peculiar to insurance (like the rules on top of insurable interest, subrogation also double insurance);
• rules applicable to all contracts (like the rules on top of offer also acceptance, also contracts inside favour of third parties); and
• general contractual rules that keep undergone changes inside the insurance context (like the rules on top of insurance warranties).

Broadly speaking, the code of insurance inside South Africa is involved with

• the decision also consequences of insurance contracts;
• general aspects of law of damages;
• the rules on top of insurance intermediaries;
• insurance tax law; and
• insurance company or supervision law.

History[edit]

Early Roman-Dutch law dealt mainly accompanied by marine insurance.

In 1879, the Cape Colony passed the General Law Amendment Act, introducing English law to lead “every suit, move also cause having reference to fire, existence also nautical insurance” inside the Cape. In the Transvaal also Natal, English code was not incorporated by legislation; Roman-Dutch code remained applicable inside principle, also was not once officially displaced, however the influence of English code was felt and inside these regions.

In 1977, the Pre-Union Statute Law Revision Act repealed the Cape General Law Amendment Act. This abolish was interpreted by the Appellate Division, inside the leading case on top of the sources of South African insurance law, Mutual & Federal v Oudtshoorn Municipality, to mean that the Roman-Dutch code of insurance was restored.

South African insurance code is governed mainly by Roman-Dutch code while its common law. Nevertheless, the courts keep consistently regarded English code while having strong persuasive authority whenever Roman-Dutch authority is lacking or insufficient. In value of contracts concluded after the Pre-Union Statute Law Revision Act took effect, English code certainly not longer has a scrap of binding authority inside a scrap of piece of South Africa, however it has been argued that, "judging from trade usages prevailing inside the South African insurance industry, it may be present assumed that the principles of English insurance code are still being adhered to."^[2]

Legislative Framework[edit]

The next legislation is of especial importance to South African insurance law:

• the Long-term Insurance Act;^[3]
• the Short-term Insurance Act;^[4]
• the Insurance Laws Amendment Act;^[5]
• the Financial Services Board Act;^[6] and
• the Financial Advisory also Intermediary Services Act.^[7]

Classification of insurance[edit]

Classification is frequently merely a matter of convenience, however there may be present compelling reasons intended it; it may regular reflect a dissimilarity inside underlying legal principles. Various criteria may be present applied inside classifying contracts of insurance. The nearly all important are

• the nature of the importance insured;
• the nature of the event insured against;
• the method inside which the quantity recoverable under the agreement is determined; and
• the method inside which a scrap of profits of the insurance company are dealt with.

It is possible, also frequently desirable, intended one also the same insurance agreement to combine different classes of insurance.

Indemnity versus funds insurance[edit]

The nearly all fundamental distinction amidst various insurance contracts is that amidst indemnity insurance also what is usually called non-indemnity insurance, however which is in or at this place referred to while "capital insurance."

Indemnity insurance[edit]

In the case of insurance insurance, the agreement amidst the parties provides that the insurance company must protect the insured intended patrimonial loss suffered while the proximate consequence of the occurrence of the event insured against. It is undecided whether the event insured against (like fire or theft, intended example) determination in fact occur, however it obviously must earlier than mislaying can be present quantified.

In the context of insurance insurance, examples of insurable interests include

• real rights;
• personal rights;
• legal liability; and
• the factual expectation of damage.

The reason of the agreement of insurance insurance is to restore the insured to his location quo ante. Nothing additional than patrimonial insurance may be present recovered, while is illustrated by the rules on top of over-insurance also matching insurance. The insured is not entitled to cause a profit not in of his loss. It is accordingly said that the principle of indemnity governs insurance insurance.

Capital insurance[edit]

In the case of funds or non-indemnity insurance, the insurance company undertakes to pay to the insured a specified amount, or periodical amounts, upon the incident of the event insured against: intended example, R5,000 provided the insured dies or loses a limb. This is mainly non-patrimonial loss. On the countenance of it, the agreement does not purport to protect the insured against patrimonial loss.

According to traditional perceptions, the interests amenable to funds insurance are limited inside number. The best examples of insurable interests are the endless importance a individual has

• in his special life;
• in his health of mind; and
• in his health of body also limbs.

A individual may and keep a moral or emotional importance inside the life, health also body of his spouse.

Capital insurance, then, depends on top of an event that always relates to the individual of the insured or a third party.

The types of events which are unclosed to funds insurance are likewise limited inside number. Typical events are

• death, containing the death of an unborn child;
• the continuation of life;
• birth; and
• accidents causing bodily injury.

Insurance against additional events must therefore grip the sort of insurance insurance. A agreement operating on top of the individual of the insured or third party is not naturally a agreement of funds insurance, however, because it could keep been the aim of the parties to judge a pure agreement of insurance insurance.

In the case of funds insurance, there is certainty that event insured against determination occur (whereas inside the case of insurance insurance there is certainly not such certainty), however the timing is uncertain. The quantity is determined at period of the issuing of the policy, also is not associated to mislaying suffered.

Differences also similarities[edit]

The dissimilarity amidst insurance also funds insurance must be present pleased to lie inside the nature of the importance that is the article of the insurance:

• In insurance insurance, the importance must of necessity be present of a patrimonial nature; otherwise certainly not economic mislaying or damage can be present caused through its impairment.
• By contrast, the importance that serves while the article of a capital-insurance agreement must be present regarded while non-patrimonial inside substance.

The code determines which interests may be present insured inside terminology of an indemnity-insurance contract. The same holds excellent intended funds insurance.

Important consequences are attached to the distinction amidst insurance also funds insurance. Capital insurers, intended example, are not entitled to claim a proportionate contribution by additional insurers, or to demand subrogation of the insured's rights inside value of the loss. By the same token, the doctrine of imputation of benefits does not apply to funds insurance.

Short- also long-term insurance[edit]

A distinction amidst short-term also long-term insurance is embodied inside the definitions under the Insurance Acts.

Long-term insurance business means the business of providing plan benefits under defined long-term policies. In terminology of part 1 of the Long-term Insurance Act, “long-term policy” means an assistance policy, a disability policy, a fund policy, a health policy, a life policy or a sinking trust policy, or a agreement comprising a combination of a scrap of of those policies. It and includes a agreement whereby a scrap of such agreement is varied. (See and the description of “Health Policy” to distinguish from short-term insurance.)

Short-term insurance business refers to the business of providing plan benefits under defined short-term policies. Under the terminology of part 1 of the Short-term Insurance Act,^[8] “short-term policy” means an engineering policy, a guarantee policy, a liability policy, a miscellaneous policy, a motor policy, an accident also health policy, a property policy or a transportation policy, or a agreement comprising a combination of a scrap of of those policies. The description and includes a agreement whereby a scrap of such agreement is renewed or varied.

The division of insurance business into short- also long-term insurance business is intended executive purposes. Most short-term insurance is insurance insurance, however short-term insurance is not controlled to insurance insurance, since an "accident also health policy" belongs to the grade of funds insurance. Long-term insurance, by the same token, is not confined to funds insurance, because "fund insurance" appears to be present a case of insurance insurance.

"In the latest analysis," writes Reinecke, "the actual dissimilarity amidst long-term also short-term insurance is not clear."^[9]

Formation of the insurance contract[edit]

The arrangement of contractual liability, where the parties to a agreement perform not misread every single other, is consensus ad idem animo contrahendi. In those exceptional cases inside which the parties misread every single additional also sole apparent agreement exists, burden appears to relax on top of the sensible dependence by the contracting party on top of the reality of consensus. This is well-known inside agreement code while the dependence theory. Such agreement may be present termed “constructive consent.” Of course, there is always office and intended the application of the doctrine of estoppel, provided a litigant can satisfy its additional tough requirements, also provided he wishes to use himself of this remedy inside command to hold a party compelled to the appearance of agreement he has created. For a agreement while such to exist, however, genuine or helpful agreement must be present achieved. This is brought about by present with also acceptance.

These accepted principles of the law of agreement inside South Africa and hold excellent intended contracts of insurance, also must be present applied to such contracts.

It is sometimes maintained that a agreement of insurance comes into reality while soon while the parties keep agreed upon each body term of the agreement they wish to make, such as

• the individual or goods to be present insured;
• the event insured against;
• the term of insurance; and
• the quantity of the premium.

This suggests that the parties miss not agree on top of terminology additional than body terms. For their agreement to qualify while one of insurance, the parties must agree on top of the essentials of insurance. If they perform not reach specific agreement, there can be present certainly not agreement of insurance (although another type of agreement may come into existence).

For the agreement to be present valid, however, the parties must inside truth agree on top of each term every single of them regards while being a non-severable piece of the proposed contract. This demand is question sole to the ordinary rules creating contractual burden in spite of the absence of consensus. As a rule, the parties to a agreement of insurance perform not apply their minds to every single specific term; they agreement on top of the arrangement of the insurer's usual terminology intended the particular type of chance to be present insured against.

The agreement of insurance comes into being sole when agreement is reached. Until then, the anticipated agreement does not provide cover, though the later agreement may operate retrospectively. Pending the decision of their negotiations, the parties frequently judge provisional insurance to conceal the proposer throughout the term previous to the latest decision on top of the leading contract. Interim-insurance conceal is provided by means of a contract, also therefore and rests on top of consensus.

Many facets of insurance business, containing the decision of contracts, are transacted through insurance agents representing the respective parties. If, throughout the decision of the contract, a party is represented by an agent accompanied by authority to come or go in or into into the agreement on top of behalf of his principal, the aim also acts of the agent must be present pleased into consideration inside deciding whether a agreement has come into existence.

Essential elements of an insurance contract[edit]

In British Oak Insurance v Atmore,^[10] the locus classicus, the essentialia of a agreement of insurance were enumerated while follows:

• the individual or goods insured;
• the chance insured against;
• the quantity payable by the insurance company on top of the occurrence of the event insured against;
• the premium; and
• the term of the insurance cover.

No specific formalities are required, however the regulations to the Short Term Insurance Act contain certain requirements intended the purposes of issuing a policy.

The plan document normally contains the contract.

Concepts inside insurance law[edit]

Proposal[edit]

In general, insurers perform not cause binding offers to insure; rather, they invite the public (by invoking the aid of intermediaries or otherwise) to apply intended insurance. The genuine present with to agreement is accordingly made by the proposed insured, almost always on top of a printed sort issued by the insurance company also completed or signed by the proposer.

As formulated by insurers, this plan sort does not usually depart from much office intended bargaining amidst the parties. What bargaining there is usually is confined to matters which cannot be present settled inside advance, such while the quantity of the insurance, the term of insurance also special circumstances relating to the risk. Occasionally the proposed insured may ask for a deletion or addition: intended example, by method of endorsements, to be present effected inside value of the insurer's grade sort of contract.

The charge is not normally recorded inside the plan form. Most additional terminology of the proposed agreement are and not expressly stated, the aim being to agreement on top of the usual terminology of the insurer. In determining the usual terminology of the insurer, evidence of additional policies issued by the insurance company is admissible. Once a reference to the usual terminology is included inside the contract, the insured in fact agrees to them; he cannot after be present heard to declare that he did not keep the opportunity to ascertain the exact subject matter of the terms.

The plan sort always contains a series of questions leave by the insurance company which must be present answered to obtain details needed intended calculating the risk. Apart from being a formal offer, the plan sort is therefore and a written record of representations made by the proposer. Generally, the proposer is required

• to warrant the truth of his answers; and
• to accept them while the arrangement of the proposed contract.

There is a duty of disclosure, inside additional words.

The plan is normally incorporated into the formal insurance agreement by reference.

Although the above procedure represents the accepted position, agreement may be present achieved inside a scrap of method the parties choose. For example,

• an present with to grip not in insurance may be present made by tendering a premium; or
• an insured may present with to recommence an existing agreement by paying a charge wanting completing a fresh plan form.

If a plan sort submitted to the insurance company has not been authorised by the possible insured, it may not serve while an present with by him. A plan issued by the insurance company inside response to such an unauthorised present with may, however, itself represent an present with to be present accepted by the proposed insured.

It is and possible that the plan by the possible insured is not acceptable to the insurance company while it stands, however that the insurance company is willing to agreement on top of additional terms. In such a case, a counteroffer may be present made by the insurer. It may and happen that the insurance company makes the present with from the outset, while inside the case of coupon insurance or provisional insurance.

Acceptance[edit]

Acceptance of an present with is an express or tacit announcement of aim inside which the offeree signifies his unconditional assent to the offer. In principle, the offeror must be present notified of the offeree's decision to accept the offer. The insurer, while offeree, usually accepts the present with by sending to the proposer a plan accompanied by a covering line which explains that the plan has been accepted.

Dispatching the plan is inside itself sufficient to communicate acceptance. A demand intended the charge by the insurer, and, inside exceptional circumstances, receipt of the premium, may and operate while an acceptance. A firm taking of a plan may regular be present contained inside an provisional conceal note, though such a message is mainly an taking of a plan intended temporary conceal only.

Policy[edit]

Contracts of insurance miss not be present inside writing to be present valid, however the grade use is to reduce them to writing. A document expressing the terminology of a agreement of insurance is called a "policy."

Premium[edit]

A “premium” is primarily a amount of money. According to one Roman-Dutch authority, a charge may and consist inside something additional than money. If this were certainly the position, "it is instead of unusual that there was certainly not discussion of the contingency that the charge may be present defective."^[11]

It has and been suggested, intended modern law, that the description of "premium" should be present widened thus while to encompass something additional than money: "Although there is certainly not objection inside principle to the enforceability of such contracts, it is doubtful whether there is a scrap of miss to bring a agreement involving a non-monetary 'premium' under the umbrella of insurance."^[12] No judicial preference has while until now been expressed. The term “premium” is defined inside insurance legislation, however the description there does not shed a scrap of light on top of the nature of a premium.

Interim insurance[edit]

It sometimes takes a considerable period to finalise the preliminaries intended the decision of a agreement of insurance. In command to protect the proposed insured throughout the time earlier than the issue of a latest policy, the parties frequently resort to temporary or interim insurance to conceal the proposer now however intended a limited term of time. This is usual use inside the case of short-term insurance contracts, however it may be present invoked inside all additional forms of insurance.

Although limited inside duration, provisional insurance is nought less than a fully-fledged agreement of insurance. This being so, the proposed insured must observe the usual duty of good faith towards his insurer. Similarly, the agreement must comply accompanied by all the requirements intended the validity of insurance contracts inside general.

The agreement of provisional insurance is separate from also independent of the latest agreement of insurance next on top of the decision of an provisional contract, though it may part some or nearly all of the terminology of the latest contract. If a claim arises throughout the currency of the provisional contract, it must be present considered inside terminology of the provisional agreement itself, not inside terminology of the latest contract. This may be present of importance where sole the latest contract, not the provisional contract, is voidable because of a misrepresentation or additional unlawful conduct, also and where the terminology of the two contracts differ.

Granting insurance conceal by method of provisional insurance does not oblige the insurance company to provide permanent cover. By the same token, the individual enjoying provisional conceal is not compelled to accept permanent conceal from the insurance company merely because he has accepted provisional cover.

Cover notes[edit]

The provisional insurance agreement is usually embodied inside a document which is commonly well-known while a “cover note,” however additional expressions--“protection note,” “interim policy,” “temporary policy” and, inappropriately, “interim receipt”—occur while well.

Temporary insurance is sometimes granted inside terminology of a reminder to recommence an existing insurance contract, also can be present encountered inside various additional types of documents. Whether a document recording the terminology of an provisional agreement of insurance may be present regarded while the exclusive memorial of such a agreement depends on top of the aim of the parties.

A conceal message may not normally be present regarded while a “policy” inside the ordinary sense of the word. Nonetheless, the definitions of the various “policies” inside the Long-term Insurance Act, also inside the Short-term Insurance Act, are wide sufficient to include conceal notes also all additional similar to documents recording insurance cover.

Insurable interest[edit]

The insured must turn out that an insurable interest existed inside command to turn out loss. The check is whether the insured determination incur economic loss, or determination fail to derive an anticipated economic benefit, provided the event insured against occurs. In principle, the article of insurance must be present inside reality at the period of the occurrence of the risk insured against. If the insured has certainly not importance at the period of the occurrence of the event insured against, he cannot hurt a scrap of mislaying or damage. Since the function of insurable importance is to determine whether the insured has suffered a loss, the insured's interest, by virtue of the terminology of the contract, must live at the period of the materialisation of the risk insured against. If the insured does not have an importance at that crucial time, there is certainly not article secured by the insurance. Consequently, the insured can bring certainly not claim under the agreement intended mislaying suffered.

If the insured does not keep an insurable importance inside the object, the agreement determination be present void also unenforceable, also regarded essentially while a gamble or wager. The reason of the demand of insurable importance is to distinguish insurance from wagering. The basic principle of insurance is to protect against loss; it is not involved accompanied by the universe of opportunities intended hypothetical gain. In the developmental days of insurance law, things were quite different; insurance was inside truth frequently indistinguishable from gambling. Excesses led inside the Sixteenth also Seventeenth Centuries to the outright banning of existence insurance, intended example, inside France, the Dutch Republic also Sweden. The additional sensible course, requiring an insurable importance while a prerequisite intended the purchase of insurance, was pioneered inside England, making insurance additional than a mere game of chance, improving the repute of the insurance industry (formerly frowned upon while an aleatory contract), also gaining wider taking intended it. As we keep seen, South Africa formally imported the doctrine of insurable importance from England, however inside 1977 the legislature repealed the colonial ordinances which had achieved this. The Appellate Division, inside Mutual also Federal v Oudtshoorn Municipality, took their abolish to mean that the Roman-Dutch code of insurance is now the usual code intended insurance.

It should be present noted that “there is certainly not South African law which lays down the miss intended a so-called insurable interest,” also that Roman-Dutch code had certainly not discrete doctrine of insurable interest. It could be present said to be present implied, however, by the truth that Roman-Dutch code defined a agreement of insurance while one which transfers a chance threatening the patrimony of the insured. Roman code and banned wagers.

Whether or not an indirect business importance is sufficient to represent an insurable interest, while against to a mere wager, determination depend on top of the facts of every single case.

In Littlejohn v Norwich Union Fire Insurance Society, a husband had pleased not in fire insurance inside his special name over the contents of a shop owned by his wife. (They were married not in of community of property.) The law court found that he had an insurable interest, because he would obviously be present inside a worse position, inside patrimonial terms, after his wife's goods was burnt.

In Phillips v General Accident Insurance, the law court held that a husband had an insurable importance inside his wife's jewellery, regular though he was under certainly not duty to take the place of it.

In Refrigerated Trucking v Zive NO, the owner of a vehicle was found to keep an insurable importance inside sustaining insurance intended burden incurred by persons who drove his vehicles accompanied by his consent.

In Lorcom Thirteen v Zurich Insurance, the bases intended Lorcom's insurable importance inside the “Buccaneer” trawling vessel were while follows:

• Lorcom was the sole shareholder of the owner of the vessel.
• In terminology of a purchase agreement, Lorcom would become the owner on top of “effective date:” that is, upon filled payment.
• Lorcom had the true of use of the vessel.
• Lorcom held the fishing permit.

Below are some further examples of insurable interest:

1. An owner of property has an insurable importance to the filled importance of that property.
2. A individual who has a true to performance has an insurable importance inside that claim (to insure against the chance of non-performance).
3. A individual who does not special property, however who possesses it inside excellent confidence (believing that he is the owner of that property), has an insurable importance to the filled importance of that property.
4. A individual has an insurable importance inside restricting increases inside liabilities. For example, directors of a company may grip not in insurance insurance inside value of the negligent decisions they may make.
5. A individual has an endless importance inside his special existence also bodily integrity.
6. An insurance company may grip not in insurance on top of the existence of a spouse intended an endless amount.
7. Parents also children are allowed to grip not in insurance on top of every single other's lives, question to some limitations: certainly not additional than R10,000 provided the child is under six years old, also certainly not additional than R30,000 intended children under fourteen.
8. Shareholders, directors also partners are allowed to grip not in “key-man” insurance on top of the lives of their co-shareholders or partners, while the case may be.

Duration of insurance contracts[edit]

Insurance contracts may endure intended a definite or indefinite period. Usually the length is stipulated inside the insurance agreement or plan document. The agreement may stop or be present cancelled, while the case may be,

• by giving the requisite notice intended cancellation;
• upon payment (as inside the case of an endowment plan or existence insurance);
• in the event of sum destruction of property, intended which the insurance company has paid;
• if the insured exercises an vote to recommence a contract, thus giving rise to a new contract; and
• if premiums are not waged timeously, inside which case the plan determination lapse.

Duty to tell body facts[edit]

The doctrine of revelation is based on top of the accepted doctrine of excellent faith. Usually there is a “declaration” at the end of the plan sort that the answers to the questions inside the plan sort are the arrangement of the policy. The proposer is usually obligatory to warrant the truth of the answers. The plan is incorporated by reference into the formal policy.

The insurance company has a true to prevent burden on top of the agreement provided the proposer misrepresents a body fact, or provided he fails to tell a body fact. In additional words, a violate of the duty of excellent confidence renders the agreement voidable at the case of the insurer, after he has been notified of the non-disclosure.

Both positive also negative misrepresentation are recognised while grounds intended avoiding the insurance contract.

Positive misrepresentation[edit]

To be present unlawful or wrongful, the announcement which constitutes a positive misrepresentation must be present wholly false, or at least inaccurate. Whether a announcement is false or inaccurate will, inside the latest analysis, keep to be present judged according to the convictions of the community. This is the accepted criterion intended establishing wrongfulness.

If the announcement is wholly false also thus completely untrue, the issue is relatively simple. If, intended example, a proposer intended motor-vehicle insurance states inside answer to a inquiry inside a plan sort that he has not been complex inside an smash throughout the former times three years, whereas inside truth he has, the announcement is obviously wholly false. The same may be present said of a announcement inside a plan intended fire insurance that the place to be present insured are in use by a particular person, whereas they are not; or that certainly not plan intended similar insurance has been declined inside the past, whereas inside truth it has.

The location is not always thus straightforward. A announcement may, intended instance, be present inaccurate because it is incomplete also thus mislead the additional party to the agreement by the suppression of a piece of the right facts. Thus, inside answer to the inquiry of whether or not a plan or insurance has ever been declined or cancelled, a proposer may state that certainly not plan has ever been declined, thereby significant the truth, however omitting to declare that a agreement has been cancelled. This is a substantially inaccurate statement, inside malevolence of the truth that it is really also completely right while far while the declining of a plan is concerned.

If, inside answer to the inquiry of whether or not proposals keep been made to additional insurers, a proposer answers, “Yes, to the XYZ Company,” while he has and submitted proposals to a number of additional insurance companies, the answer may be present said to be present partially right however substantially inaccurate. Likewise, a simple also unqualified ask for intended particulars of previous losses, claims or insurance contracts means inside principle that all such particulars are to be present furnished. A proposer is expected to answer questions not sole accurately, however while completely while is sensible according to the convictions of the community.

Negative misrepresentation[edit]

A negative misrepresentation, or a misrepresentation per omissionem, is a improper failure by one of the parties to a agreement of insurance to disclose, throughout the course of the negotiations earlier the contract, certain facts inside his knowledge. As a result, the additional party is induced to come or go in or into into the contract, or to agree to specific terminology thereof, whereas he would not keep you're on thus had those facts been disclosed. The failure may be present accompanied by fault; it may regular be present completely innocent.

It is the nature of the perform or carry out complex which distinguishes this type of misrepresentation from positive misrepresentation. Although it may and by typified while a announcement of fact, the perform creating the wrong impression is not a positive one; it is negative, inside that it fails to remove an existing wrong impression by not disclosing facts which would remove that impression. The failure or omission may grip the sort of active concealment—that is, it may be present intention—or accidental non-disclosure, which means that it may be present negligent or regular innocent.

Difference[edit]

The distinction amidst a positive misstatement also a negative non-disclosure is not always clearcut. In various instances, the same carry out may qualify while both. A failure to state all the body facts inside answer to a inquiry may quantity to both a negative also a positive misrepresentation, inasmuch while the incomplete answer may create the impression that all the facts keep been furnished.

Utmost excellent faith[edit]

In modern case code also literature, insurance contracts keep been classified while contracts “of the greatest excellent faith” (contracts uberrimae fidei). In general, contracts of this type keep been said to impose a duty on top of the contracting parties to display the greatest excellent confidence towards one another

• during the course of their negotiations earlier the contract; also and (albeit exceptionally, also inside circumstances less clearly defined)
• during the reality of the agreement itself.

The duty of greatest excellent confidence (or its companion, an exceptionally high measure of excellent faith) appears inside the case code also letters inside connection accompanied by contracts which are typified by a relationship of close trust amidst the contracting parties.

The notion of greatest excellent faith, also the opinion that the insurance contract, or intended that matter a scrap of additional contract, may be present a agreement of the greatest excellent faith, was rejected inside Mutual also Federal v Oudtshoorn Municipality.^[13] Acknowledging that the origin of the phrase “uberrima fides” was doubtful, however noting that it seemingly made its appearance inside English code inside 1850, the law court was “unable to find a scrap of Roman-Dutch authority inside back of the proposition that a agreement of nautical insurance is a agreement uberrima fidei”. The law court rejected the expression while “alien, vague [and] useless [... and] wanting a scrap of particular message inside law,” explaining

• that “there is certainly not magic inside the expression;”
• that “there are certainly not degrees of excellent faith;”
• that “it is entirely inconceivable that there could be present a little, additional or nearly all (utmost) excellent faith;” and
• that “there is certainly not office intended uberrima fides while a third category of confidence inside our law.”

Despite these remarks, also in spite of the truth that the House of Lords has subsequently, accompanied by reference to them, noted that “the concept of uberrima fides does not appear to keep derived from civil law also [that] it has been regarded while unnecessary inside civilian systems,” Reinecke observes that "old habits die slowly," also that insurance contracts are still occasionally referred to while "contracts of the greatest excellent faith." This usage, he urges, "must be present deprecated," at least insofar while it suggests that the distinction amidst greatest excellent confidence also excellent confidence involves a dissimilarity of principle instead of than merely one of degree.

Good faith[edit]

Contracts of insurance, similar to all additional types of contract, are therefore contracts of excellent faith. The feature of excellent confidence is not an important or distinguishing feature of the insurance contract.

Despite rejecting the notion of greatest excellent faith, the law court inside M&F v Oudtshoorn did not put not in the subject matter of the demand of excellent confidence while it pertains to insurance contracts. Accordingly, former times authority which dealt accompanied by the subject matter of the notion of greatest excellent confidence must still be present consulted intended guidance, while bearing inside head that, inside principle, a scrap of duty involved is not a duty of exceptional excellent faith, however simply one of excellent faith.

The facts of M&F v Oudtshoorn were these: A light jet collided accompanied by pole carrying electric control lines just outside the boundary of the Oudtshoorn aerodrome. The owner of the jet well sued the Municipality intended the importance of the aircraft. The Municipality tried to get better the quantity from its insurers (Mutual also Federal), however the insurers well resisted the claim: When the plan had been negotiated, the Municipality had failed to tell the close proximity of the aerodrome to pole also control lines, which constituted a hazard to jet using the aerodrome at night.

The law court held that there is a duty on top of the insured also the insurance company to tell to every single other, previous to the decision of the agreement of insurance, each truth relative also body to the chance or to the analysis of the premium. The duty of revelation relates to body facts, of which parties had genuine or helpful knowledge previous to the decision of the agreement of insurance. Breach of the duty of revelation amounts to mala fides or fraud, also the aggrieved party may prevent contract.

Materiality test[edit]

A body of representatives relating to body facts cannot be present wrongful. The check intended materiality is, inside principle, an objective test. In M&F v Oudtshoorn, the Appellate Division formulated it thusly: whether or not, having regard to the circumstances, the undisclosed details is reasonably relevant to the risk, or to the analysis of the premium. In additional words, are the facts of such a nature that knowledge of them would, objectively seen, likely influence a represent inside deciding whether or not to judge the contract, also on top of what terminology to perform so? The question, then, is a inquiry of the effect of the non-disclosure: Would revelation influence

• the decision of an insurance company to accept a risk;
• the terminology of chance acceptance; and
• the quantity of the premium?

If the answer is inside the affirmative, the undisclosed details or facts are material. The law court applies a form of the reasonable-person test: that is, whether a sensible individual would keep regarded the particular facts while relevant to the decision of an insurance company concerning the analysis also underwriting of the risk. Some decisions use the grade of the sensible insurer, others the sensible proposer. Reinecke argues that the two are not incompatible: "A sole combined check intended materiality would be present whether, according to the opinion of a sensible individual inside the location of the particular proposer intended instance, the facts inside point are likely to influence the decision of a sensible insurance company when it comes to assessing the risk."

According to M&F v Oudtshoorn, the "reasonable man test" is applied to determine whether or not, from the point of opinion of the sensible man, or of the standard prudent person, the undisclosed facts or details is reasonably relative to the chance or the analysis of the premium. The test, then, refers to those facts which are objectively also reasonably associated to an insurer's decision when all the circumstances of the case are pleased into account.

In terminology of part 59(1)(b) of the Long-Term Insurance Act, also part 53(1)(b) of the Short-Term Insurance Act,

The body of representatives or non-disclosure shall be present regarded while body provided a reasonable, prudent individual would consider that the particular details constituting the body of representatives or which was not disclosed, while the case may be, should keep been correctly disclosed to the insurance company thus that the insurance company could sort its special opinion while to the effect of such details on top of the analysis of the relevant risk.

It is, according to the Appellate Division inside President Versekeringsmaatskappy v Trust Bank,^[14] a matter of perspective. The inquiry is not whether a sensible individual would regard the details while affecting the risk, however whether a sensible individual would keep considered that the details should be present disclosed thus that the insurance company could grip it into report also come to its special decision concerning the risk.

Content of the duty[edit]

The agreement is voidable at the case of the insurance company provided the insurance company can prove

• that the non-disclosed truth was material;
• that it was inside the knowledge of the insured; and
• that it was not communicated to the insurer.

The duty to tell includes

• answering all questions on top of the plan sort correctly; and
• disclosing all body facts.

Knowledge[edit]

It has been said that the duty inside inquiry "is a duty to disclose, also you cannot tell what you perform not know," also that the "obligation to disclose, therefore, naturally depends on top of the knowledge you possess." This implies that the duty imposed is merely to tell facts before inside that party's knowledge; apparently, on top of this dictum, it does not include an duty to collect details thus while to become experienced to tell it.

South African law, however, long appeared to favour the opinion that sole body facts inside one's genuine or special knowledge were included inside the duty of disclosure. In M&F v Oudtshoorn, however, the law court stated inside passing that helpful knowledge—that is to say, knowledge which is imputed or presumed—is and included inside the duty of disclosure.

Knowledge is constructive, also is imputed to an insured,

• if he ought to keep had that knowledge—that is, provided he ought to keep well-known of it—in the ordinary course of business;
• if he would keep ascertained or acquired that knowledge provided he had made such inquiries while a sensible business individual would make; and
• if his employee acquired genuine knowledge of facts inside the course of his employment, also was under a duty to communicate this knowledge to the insured.

Reinecke considers that "this large opinion of the duty of revelation may arguably extend it unjustifiably also impose an arbitrary burden on top of the insured."

In Anderson Shipping v Guardian National Insurance,^[15] a vehicle owned by Anderson Shipping was complex inside an smash accompanied by another vehicle, whose owners claimed damages from Anderson Shipping. The driver of Anderson Shipping's vehicle had previously been found guilty of driving under the influence of alcohol. Guardian National Insurance denied burden on top of the arrangement that Anderson Shipping had failed to tell that its procedure intended employing drivers did not require applicants to produce their drivers’ licenses intended inspection.

The inquiry to be present answered was whether Anderson Shipping had helpful knowledge of the undisclosed fact. It was argued

• that Anderson Shipping could keep ascertained the truth provided it had made such enquiries while sensible business prudence obligatory it to make; and
• that the knowledge of Anderson Shipping's operations manager, who had hired Anderson Shipping's drivers, had to be present imputed to Anderson Shipping.

The law court rejected both arguments also held

• that ordinary business prudence merely obligatory Anderson Shipping to ascertain whether its system of hiring drivers was working satisfactorily, also that it was not incumbent on top of Anderson Shipping to carry not in a detailed investigation while to the manner inside which the system operated; and
• that, though Anderson Shipping's operations manager knew that his system of employing drivers did not require the production of a driver's license inside each case, he was merely an agent to employ drivers, also was therefore under certainly not duty to communicate this knowledge to Anderson Shipping.

Although, then, the Appellate Division inside Anderson Shipping v General National Insurance refrained from deciding the point, it assumed that an insured (at least, a corporate insured similar to Anderson Shipping) should be present deemed to know each circumstance which, inside the ordinary course of business, ought to be present well-known by it.

Material facts[edit]

Information that could affect the insurer's decision—whether or not to come or go in or into into the agreement of insurance, or to charge a higher premium—may include the following:

• that the question matter is exposed to a higher measure of danger than normal;
• that the burden of the insurance company is greater than normal;
• that the insured may cause harm to occur through his special conduct;
• that the importance of the insurer's rights of subrogation would be present reduced; and
• that the insured is inside economic difficulty also may keep trouble paying the insurance premiums.

The insurance record of the proposer may and be present salient.

Non-material facts[edit]

Non-material facts include

• any circumstance that reduces the risk;
• any circumstance that is known, or presumed to be present known, by the insurer;
• any circumstance that is not needed to tell while a consequence of an express or inherent warranty; and
• any circumstances concerning which the insurance company has waived its true to disclosure.

In Qilingele v South African Mutual Life,^[16] an applicant intended existence insurance did not want to undergo a medical examination. To prevent it, he applied intended three separate life-insurance policies accompanied by three insurance companies intended small amounts which, when added together, would otherwise keep obligatory him to undergo a medical examination. Asked inside a plan sort whether a scrap of additional insurance company was considering offering him existence cover, he falsely answered, “No.” The applicant and signed a guarantee that he had not made a scrap of additional application to a scrap of additional insurer.

The law court considered whether the falsehood of the misrepresentation was such that it likely would keep touched the analysis of the chance undertaken by the particular insurer. This was you're on by comparing an analysis of the chance on top of the arrangement of facts distorted by the misrepresentation accompanied by what the analysis would keep been on top of the facts had they been truly stated. The law court found that the difference would be present significant provided the insurer, had it well-known the truth,

• probably would keep outright declined to take on the particular risk; or
• probably would keep undertaken the chance on top of different terms.

In Fine v General Accident Fire & Life Assurance,^[17] one inquiry on top of the plan sort was this: “Has the insurance now proposed been declined inside a scrap of additional office?” The proposer answered, “No”—even though a fire plan over the same goods had been issued, also subsequently cancelled, by another insurance company. The announcement that the proposed insurance was really correct, however the insurance company repudiated the claim based on top of a violate of the duty to tell body facts. The law court held that the abandoning of a previous plan is certainly a body truth that the insured should disclose, since it might well influence the insurance company inside deciding whether or not it determination grip the insurance risk, also at what premium.

In Commercial Union v Lotter,^[18] the buyer of a opulence machine vehicle did not tell to the insurance company that the vehicle had been stolen from another country. When the vehicle was stolen again, the insurance company repudiated the claim. The law court upheld the company's repudiation on top of the arrangement that body facts had not been disclosed. The insurance company argued that its true of subrogation was diminished by the truth that the vehicle inside inquiry was a stolen vehicle when the insurance plan was pleased out: The insured had certainly not name to the vehicle, thus the insurance company could not prosecute a negligent third party, inside terminology of its true of subrogation, intended the filled costs of repairing a scrap of damage to the vehicle.

In Santam v Van Schalkwyk,^[19] a father inside Kroonstad lent his boy inside Florida the deposit intended a machine vehicle. The father took not in an insurance policy, the car was subsequently stolen, also the insurance company repudiated due to father's failure to disclose

• that the vehicle had been bought by the son;
• that the vehicle was used exclusively by the son; and
• that the vehicle was kept inside Florida, not inside Kroonstad.

The law court held that a proposer has a legal duty to tell to his insurance company all facts inside his knowledge which a sensible individual would consider body to the analysis of the chance or the premium. On the facts, also inside the opinion of a sensible person, the undisclosed details would keep impacted the chance assessment. Expert evidence was led to demonstrate that the chance of theft was much greater inside Florida than inside Kroonstad.

In Mutual & Federal v Da Costa,^[20] an insured vehicle was described while a “1991 model Mercedes Benz 230E,” when inside truth it was a built-up vehicle consisting of a combination of a 1998 model Mercedes Benz 200 also a 1990 model Mercedes Benz 230. Da Costa claimed indemnification under his insurance policy, however Mutual & Federal argued that it was liable under the plan sole intended a car that matched the description contained inside the policy; the mismatch, according to the insurance company, amounted to a body misrepresentation or non-disclosure.

The SCA found that, wanting a scrap of evidence on top of materiality, a law court could assume that a misstatement of the year of manufacture of a machine vehicle is per se a body misstatement. The SCA did allow intended an exception, however: A misstated truth determination be present pleased while a body fact, wanting a scrap of evidence having been led on top of the point, provided the “facts speak intended themselves.” The law court held that the existing dispute was not such a case, also therefore found intended Da Costa.

In AA Mutual Life v Singh,^[21] the plan inside inquiry was a ten-year endowment policy, coupled accompanied by existence cover. AA advertised the plan while containing “free existence conceal [...] available complimentary of medical evidence [...] certainly not medical questions whatsoever.” AA instructed its brokers to market the plan on top of this basis, also to sell it to applicants who were actively engaged inside their usual occupations also fit sufficient to lead normal lives. AA's broker told Singh, the insured in casu, that she did not keep to tell NEhng about her health, also that the plan sort which she signed did not require her to provide medical details. AA subsequently sought to prevent burden on top of the ground that the insured had failed to tell that she was suffering from cervical cancer. The law court held that AA had waived a scrap of true which it had to keep the insured's state of health disclosed.

Warranties[edit]

Insurance warranties are strict contractual undertakings by the insured

• that, inside the case of affirmative warranties, certain representations are accurate; or Chicken feet
• that, inside the case of promissory warranties, certain duties determination be present performed.

No particular formal or technical wording is obligatory to found a warranty. There are, however, a few accepted requirements. In command to found that a term inside an insurance agreement is an insurance warranty, it must be present proved

• that the term was intended to sort piece of the agreement (in additional words, that it was not a “mere representation”); and
• that the term is inside the nature of a strict undertaking, accompanied by the debtor agreeing to be present bound, come what may.

Both these requirements intended an insurance guarantee may be present reconciled accompanied by the requirements laid down by the code of agreement intended other, non-insurance warranties.

According to English insurance law, a term determination qualify while an insurance guarantee sole provided it is a "vital term," entailing a true to cancel. English code inside this value is at variance accompanied by the South African code of contract, according to which non-vital terminology may and qualify while warranties. Nevertheless, it is the English opinion that has been received inside the South African case code on top of insurance.

A term may be present "vital," first also foremost, because of the importance of its question matter. If the question matter of a term inside an insurance agreement is body to the analysis of the risk, it determination be present regarded while a vital term, also may, therefore, qualify while a warranty. Breach of a vital term determination quantity to a serious sort of positive malperformance, justifying abandoning of the contract.

Affirmative Warranties[edit]

In the case of affirmative warranties, the insured warrants the truth of a body of representatives relating to the existing or the past. Affirmative warranties may be present sub-divided into

• warranties of fact;
• warranties of knowledge; and
• warranties of opinion.

Warranties of truth keep the effect of warranting that a state of affairs either does or does not exist, irrespective of insured's knowledge thereof.

A guarantee of knowledge is a guarantee that, to the insured's knowledge, a state of affairs does or does not exist. Forgetfulness would not needed excuse the insured; he must apply his mind.

Warranties of opinion should be present distinguished from warranties of truth also knowledge. In the case of warranties of opinion, the insured provides estimates or additional details typical of an opinion. Where a proposer intended insurance inside value of a stack of hay stated that the stack was estimated to yield a certain quantity of wheat also chaff, also warranted his answers, the law court held that he did not warrant that the stack would inside truth yield the quantities stated, also that the insured did not commit a violate of guarantee provided his estimate was fair also reasonable. The insured, inside additional words, did not warrant the reality of certain facts, or his knowledge concerning such facts; he gave a guarantee sole inside value of his opinion.

It is not always easy to determine whether a guarantee relates to a state of affairs (and thus to a fact), or to the insured's opinion about certain matters. Ultimately, it depends on top of how the inquiry is construed. A trend identified on top of the piece of English courts has been to treat questions seemingly eliciting the insured's opinion while demanding statements of fact; the same appears right of local decisions.

Promissory warranties[edit]

Promissory warranties are and well-known (more correctly, since all warranties are promissory, involving while they perform a promise or duty to perform) while “continuing warranties.” They are undertakings by the insured pertaining to his time to come carry out throughout the term of the insurance policy. In Cole v Bloom,^[22] the insurance company avoided burden inside value of a plan containing a promissory guarantee that all doors, windows also roofs of a salesman's vehicle (used to convey samples) would be present shut also locked when the vehicle was left unattended.the courts apply the strict approach when it comes to promissory warranties while they are not governed by the law of Insurance Act.

Breach of warranties[edit]

Breach of a guarantee amounts to violate of contract. The burden of proof lies accompanied by the insurer. Breach of guarantee is irreversible; it cannot be present undone by later conduct. It is important to distinguish amidst relative also absolute warranties. This amounts to an issue of interpretation.

Relative warranties[edit]

Relative warranties are accepted inside their content; they are not specific statements of what is obligatory of the insured. The “reasonable person” is used while a yardstick to measure the insured's carry out inside relation to an alleged violate of warranty. An example of a accepted guarantee is the "iron-safe clause," which is frequently included inside fire-insurance policies. In terminology of an iron-safe clause, the insured warrants that he determination stay a total put of books, display a right also precise record of all business transactions also stock-in-hand, also that the books determination be present locked inside a fire-proof safe or removed to another house at darkness also at all times when the place are not unclosed intended business. In Kliptown Clothing v Marine & Trade Insurance^[23] the plaintiff, a retail accepted dealer, obtained a burglary plan from the defendant. Subsequently, the plaintiff suffered burglaries. In an move claiming a declaration that the defendant was obliged to cause excellent the loss, Marine & Trade Insurance pleaded violate by the plaintiff of a warranty

that the insured keeps, also throughout the whole of the currency of the plan shall keep, a total put of books, accounts also stock sheets or stock books, display a right also precise record of all business transactions also stock inside hand, also that such books, accounts also stock sheets or stock books shall be present locked inside a fire-proof safe or removed to another house at darkness also at all times when the place are not in fact unclosed intended business.

Marine & Trade Insurance alleged

• that there was certainly not (or alternatively certainly not total or accurate) record of the articles or goods sold by the plaintiff, or of the cost thereof;
• that the plaintiff had failed to stay stock sheets or stock books display a right also precise record of stock inside hand; and
• that the plaintiff had failed to stay a right or precise record of all business transactions.

The Appellate Division held that the guarantee meant

• that the insured had guaranteed that his use was, also would continue to be, to stay a total put of books, yearly accounts also yearly stock sheets or stock books;
• that he was not obliged, because of the insurance, to bring into reality such books, etc., at a scrap of earlier date or inside a scrap of different form, whether inside value of contemporaneity or inside value of the details recorded, than was obligatory by real accountancy practice; and
• that he was not obliged to keep, inside a safe or at all, a scrap of records additional than those expressly mentioned inside the warranty.

As the defendant had failed to turn out either a accepted violate of the guarantee arising not in of what the plaintiff had failed to stay inside a safe, or a particular violate based on top of the recording inside the books of the purchase of certain articles, the law court found intended the plaintiff.

Absolute warranties[edit]

Absolute warranties provide a specific or express indication of what is obligatory of the insured, who must comply exactly; provided he does not, violate of the guarantee determination occur. “Substantial performance” is not enough; there must be present exact performance. In Jordan v New Zealand Insurance, intended example, the plaintiff had stated, inside the plan sort intended the insurance of a machine car, his age at his next birthday while twenty-two, when inside truth it would be present twenty-three. The law court held that there was certainly not office intended the contention that the incorrectness of the answer was not material; nor was there a scrap of office intended the application of the doctrine of "substantial performance" inside considering the truthfulness or otherwise of the answers.

Insured’s defences against violate of warranty[edit]

The insured may keep the next defences against a claim that he has breached a warranty:

• The insurance company may keep waived conformity accompanied by the warranty.
• The insurance company may be present estopped from relying on top of violate of warranty.
• There may keep been a change inside circumstances that has the effect that the guarantee is certainly not longer relevant or applicable.
• The guarantee may not be present lawful.

Remedies intended violate of warranty[edit]

In principle, the same remedies live intended violate of guarantee while live intended violate of a scrap of contract. One must, however, distinguish the effects of violate of guarantee from those of violate of agreement through misrepresentation:

• Cancellation of the agreement on top of the arrangement of a violate of guarantee does not render the entire agreement a nullity. Depending on top of divisibility, abandoning merely extinguishes a vested claim of the insured, or regular the insurer's basic duty to protect the insured. Accordingly, the insurance company may still rely on top of terminology unaffected by the cancellation: an arbitration clause, intended example.
• In the case of a dependence on top of misrepresentation, on top of the additional hand, the insurance company avoids entire contract, also accordingly cannot rely on top of a scrap of of its terms.

Problems[edit]

The strict common-law approach, which requires exact performance of an undertaking that has not naturally been established while a “material” aspect of the agreement (and chance assessment), also entitles the insurance company to cancel a agreement on top of the arrangement of a violate of guarantee in spite of the truth that the body of representatives complained of concerns an immaterial inaccuracy, or a matter accompanied by certainly not bearing at all on top of the chance insured against, has led to absurd results inside some cases. Jordan v New Zealand, discussed above, is one such example: Jordan stated that his age at his next birthday would be present twenty-two, whereas inside truth it would be present twenty-three. Since this announcement was warranted, the insurance company was entitled to repudiate liability, inside malevolence of what nearly all would regard while the immateriality of the inaccuracy, also where, inside fact, it "was in fact to the advantage of the insurer."^[24]

Statutory Curtailment[edit]

As a consequence of such absurd results, also the potential intended more, statutory amendment introduced certain curtailments concerning remedies intended violate of warranties. Section 63 of the Insurance Act^[25] (the controlling legislation at the time) was amended inside 1969. The effect of the change was that the insurance company was not permitted to put aside a agreement on top of the grounds of violate of an affirmative guarantee unless the insurance company could turn out that the correctness of the announcement (or body of representatives or warranty) was body to the analysis of the chance at the period the plan was issued or renewed. The reason of the change was to protect the insured against repudiations by insurers based on top of inconsequential inaccuracies or trivial misstatements inside insurance plan forms, regular provided they were warranted to be present true.

In 1989, the Insurance Act of 1943 was repealed. Its part 63(3) was re-enacted, wanting a scrap of change while to substance, inside part 59(1)(a) of the Long-term Insurance Act also part 53(1)(a) of the Short-term Insurance Act, which provided

• that the plan shall not be present invalidated;
• that the duty of the long-term insurance company shall not be present excluded or limited; and
• that the obligations of the policyholder shall not be present increased,

on report of a scrap of body of representatives or failure to tell details made to the insurance company which is not true, whether or not the body of representatives or revelation has been warranted to be present right also correct, unless that body of representatives or non-disclosure is such while to be present likely to keep materially touched the analysis of the chance under the plan involved at the period of its issue or at the period of a scrap of renewal or variation thereof.

Intention of the legislature[edit]

The Act tries to prevent insurers from exploiting warranties made by the insured inside command to prevent paying not in on top of claims. The Act is intended to ensure that an insurance company determination keep certainly not remedy on top of report of an immaterial incorrect representation, whether that body of representatives was warranted or not.

Effect of the statutory reform[edit]

The insurance company is now still liable to pay not in on top of a claim provided the violate of guarantee relates sole to inconsequential inaccuracies. The insurance company is not liable, however, provided the violate of guarantee relates to facts that are body to the risk. The check intended misrepresentation determination apply:

• For misrepresentation by omission, the analysis of the chance is based on top of the objective grade of the "reasonable person."
• For misrepresentation by commission, or positive misrepresentation, the analysis of the chance is based on top of the personal grade of the particular insurer.

Scope of the amendments[edit]

Instead of “warranties,” the Acts use the expressions “representations,” “non-disclosure” also “failure to disclose.” The message of these words is important:

• A “representation” is a statement, made to the insurer, earlier than the agreement is entered into. It is not a term of the contract; it does not become piece of the contract.
• “Non-disclosure” or “failure to disclose” is and a pre-contractual omission to provide information.

If, then, the guarantee is not based on top of a “representation,” or “failure to disclose” or “non-disclosure,” the insurance company determination still be present experienced to prevent burden under the contract.

As a accepted rule, the words “representation,” “failure to disclose” also “non-disclosure” refer to existing facts while well while to time to come events.

The controversy of granting damages intended misrepresentation of a time to come event has mainly been removed by statutory reform. The inquiry of materiality is of backing here.^[26]

Subrogation[edit]

Subrogation is the true of the insurer, having indemnified the insured inside terminology of the policy, to receive the good of all the rights of the insured against third parties. The insurance company may grip charge of litigation against third parties liable intended mislaying to the insured. The proceedings are inside the name of the insured, accompanied by the insurance company while dominus litis. Subrogation, then, is essentially a true of recourse wanting transfer of rights.

The objectives of subrogation are while follows:

• to prevent the insured from receiving matching satisfaction (that is, from recovering both from the insurance company also from a third party inside value of the same loss); and
• to enable the insurance company to regain what was waged not in to the insured. By affording the insurance company a true of redress, the cost of insurance to the public is kept down, since the insurance company may regain its mislaying from a source additional than charge income. This, indeed, is the leading reason of subrogation.
• to cause sure the 3rd negligent party does not go scott-free.

Requirements[edit]

The next are the requirements of subrogation:

• A valid insurance agreement must be present inside existence.
• The insurance company must keep indemnified the insured.
• The mislaying of the insured must keep been fully compensated by the insurer.
• The true must be present fitted of being subrogated.

Rights of the insurer[edit]

The insurance company has a right of recourse against a third party intended mislaying where the insurance company has waged the insured the conceal intended such loss. The insurance company may institute a claim against the third party on top of behalf of the insured while dominus litis.

The insurance company and has a right to details also assistance from the insured, together accompanied by a right to preservation of the claim, which usually takes the sort of a condition inside insurance contracts which requires the insured to grip the needed steps to protect the insurer's true to subrogation (even provided the requirements intended subrogation keep not until now been met inside full).

In Commercial Union v Lotter,^[27] the law court held that the truth that the insured vehicle was a stolen vehicle compromised the appellant's true of subrogation. Having happy the claim of the insured, the insurance company was entitled to be present placed inside the insured's location inside value of all rights also remedies against additional parties which were vested inside the insured inside relation to the subject-matter of the insurance. In a case such while the present, however, where the insured vehicle was a stolen one, an move instituted by Commercial Union (against a negligent third party who had damaged the vehicle) could be present well resisted on top of the arrangement that Lotter (and thus Commercial Union under its true of subrogation) had certainly not name inside the vehicle.

Difference amidst subrogation also cession[edit]

Subrogation allows the insured to retain his special right. This is not the case accompanied by cession, which involves a transfer of the true inside terminology of an genuine agreement.

The effect of this dissimilarity or distinction is that, provided the insured waives his true to claim against a third-party wrongdoer, the insurance company would not be present experienced to claim against the wrongdoer, while the latter is absolved of duty to pay. With cession, inside contrast, the insurance company acquires all of the rights of the insured to proceed against the third party, also has to prosecute inside its special name.

Reinstatement[edit]

If a bringing back condition exists, also provided mislaying occurs, the insurance company has the option either

• of indemnifying the insured inside money; or
• of replacing or repairing the damaged property. This is what is well-known while "reinstatement."

This vote lies entirely accompanied by the insurer; the insured has certainly not declare inside the matter. If the insurance company elects reinstatement, it has the further option either

• of replacement of the article accompanied by a similar object; or
• of restoration of the article to its condition earlier than smash or chance occurred. If the insurance company elects to restore an object, it would appear and to keep the true to choose who determination take on the restoration or repairs.

When the insurance company decides to reinstate, it must notify the insured, after which the vote is binding; the insurance company may not thereafter change its mind. Notice is to be present given inside the period allowed by the contract, or inside a sensible time:

• If notice is not given inside terminology of the contract, or inside a sensible time, the insurance company must protect the insured accompanied by money.
• If notice is given, however the insurance company is inside mora (i.e. has delayed), the insurance company is inside violate of its duty to reinstate, also therefore inside violate of agreement (as debtor). The usual contractual remedies apply.

The insured has a duty to cooperate accompanied by the insurance company inside command to effect the reinstatement. Failure to cooperate would quantity to violate of agreement (as creditor).

Reinstatement may therefore be present described while "direct compensation", because the reason of bringing back is to leave the insured inside the same or similar location while earlier than the mislaying occurred.

Reinsurance[edit]

One insurance company may purchase insurance from another insurance company intended the purposes of chance management. Reinsurance has the effect of transferring the risk—that is to say, the "insured risk"—from the insurance company to the reinsurer. This allows the insurance company to increase its plan limits, taking on top of a higher risk, since the chance is partly carried by the reinsurer.

The two leading categories of reinsurance arrangements are

1. facultative reinsurance; and
2. treaty reinsurance.

Within these two categories, furthermore, there are two leading kinds of coverage:

1. proportional reinsurance; and
2. non-proportional reinsurance.

Both facultative also pact reinsurance can be present written on top of a proportional or non-proportional basis. Both these bases occur inside a change of frequently very complex permutations.

Facultative reinsurance[edit]

Facultative reinsurance is the reinsurance of a particular chance under a sole plan (for a sole or specific risk). It is facultative inside the sense that the reinsurer has the choice to accept or reject the particular chance inside question. This type of reinsurance arrangement is "cumbersome," writes Reinecke,^[28] because a separate negotiation is obligatory intended every single separate chance which an insurance company wishes to overtake on top of to a reinsurer.

Treaty reinsurance[edit]

Treaty reinsurance is an arrangement amidst the insurance company also the reinsurer inside terminology of which the latter agrees to grip over all or piece of the former's chance of a particular grade or description intended a specified term of time.

Proportional reinsurance[edit]

Proportional reinsurance, which may arise inside both facultative also pact reinsurance, refers to a pro rata sharing of risks also losses, also premiums also income, amidst the primary insurance company also the reinsurer.

Non-proportional reinsurance[edit]

In the case of non-proportional reinsurance (or "excess" reinsurance), the reinsurer bears that piece of insurer's mislaying which exceeds an agreed threshold, while the insurance company retains the chance or mislaying below the threshold, or else reinsures this accompanied by a different reinsurer.

Terms also good details[edit]

In value of the terminology also good details contained inside the reinsurance agreement, the same principles apply while intended ordinary insurance contracts.

Retrocession[edit]

Reinsurance companies may and themselves purchase reinsurance. This is well-known while "retrocession." The "retrocessionair" grants reinsurance to the "retrocedent."

Under-insurance[edit]

Under-insurance occurs where the amount insured is less than the quantity of the mislaying that the insured would hurt provided the chance should materialise. For example, a house is insured intended R100,000, however its market importance is R150,000. A individual inside such circumstances may sole get better loss

• that is in fact suffered; and
• up to the amount that is insured.

Over-insurance[edit]

Over-insurance occurs when the amount insured is greater than the mislaying that the insured would hurt provided the chance materialises. For example, a house is insured intended R200,000, however its market importance is R150,000. Even here, the insured may not get better additional than the mislaying he in fact suffers.

Double Insurance[edit]

It is possible to insure the same importance against the same chance accompanied by two or additional insurers. Double insurance does not quantity to over-insurance, unless the sum of all the insurances is additional than the sum importance of the interest.

If mislaying occurs, the insured may choose to get better his entire mislaying from one insurer, or a proportionate part from every single insurer, while long while the sum quantity claimed is not greater than the mislaying in fact suffered.

Contribution[edit]

Most policies keep a “contribution clause,” which means that, provided an insurance company pays additional than its proportionate part to the insured, the insurance company has a true to reclaim a contribution from the additional insurers. This is because the insurance company has the true to pay sole its proportionate part of the loss.

Insurance contracts frequently contain clauses to the effect that the insured must tell additional existing or later policies. In the absence of such a clause, the insured is under certainly not duty to tell policies that he may keep accompanied by additional insurance companies.

Requirements[edit]

The next are the requirements intended the insurer's true to contribution:

• The insurance company claiming contribution must keep discharged its burden to the insured.
• The insurance company claiming contribution must keep waged additional than its proportionate part of the loss. This applies both to sum also to partial loss.
• Payment by the insurance company claiming contribution must keep been inside value of an importance which was the article of double-insurance at the period of the loss.

Determining proportionate loss[edit]

Where the insurance contracts inside a situation of matching insurance are virtually identical inside all body respects (including the quantity insured), mislaying is to be present apportioned equally amidst the insurers.

Where the contracts be dissimilar sole while to the amounts insured, all the amounts must be present added up also compared accompanied by the quantity of the loss. Each insurance company is at that time liable intended such a share of the mislaying while the quantity underwritten by it bears to the aggregate quantity insured by all the contracts.

Where the contracts be dissimilar substantially, there may be present complications. One agreement may, intended example, insure the usual article amongst additional objects, wanting apportioning to it a specific amount. Average clauses may and be present present.^[29]

The code is silent on top of the rules controlling the apportionment of loss. In practice, negotiation amidst the parties is necessary.

Prescription of Claims[edit]

In general, civil claims prescribe after three years from when the debt arose.

Most policies contain time-bar clauses, requiring the insured to claim inside a fixed term of period after the mislaying insured against has occurred. If an insurance company repudiates burden intended a claim, the insured has a specific period term inside which to issue summons against the insurer, failing which the insurance company determination be present released from liability: that is to say, the claim against the insurance company determination prescribe.

The reason of time-bar clauses is to provide legal certainty intended the insurer. An insurance company has an importance inside knowing, inside a sensible period after repudiating a claim, whether it determination countenance litigation or not.

In Barkhuizen v Napier, a short-term insurance plan contained a time-bar condition to the effect that the insurance company would not be present liable under a claim unless summons was served inside ninety days of repudiation of the claim. Summons was served two years after the claim was rejected by the insurer. The Constitutional Court upheld the time-bar clause, however opened the door intended these clauses to be present scrutinised inside time to come on top of the arrangement that they could unfairly discriminate against the insured's true of access to the courts.^[30]

“Fairness, justice also reasonableness” is the yardstick by which to determine whether or not a contractual term (including a time-bar clause) should be present upheld provided such term infringes a constitutional right. In Bredenkamp v Standard Bank,^[31] intended example, the Supreme Court of Appeal was confronted accompanied by a condition inside a agreement amidst banker also client entitling the banker unilaterally to cancel the agreement intended certainly not cause at all, also wanting auditory perception the client. The banker subsequently cancelled the agreement on top of the ground that the client posed a chance to the bank's reputation. The law court found, relying on top of Barkhuizen, that the inquiry of the justice of exercising contractual rights does not arise when it involves certainly not public-policy considerations or constitutional values. The abandoning was therefore not unfair, also the condition was enforceable.

Furthermore, the law court inside Barkhuizen held that consideration must be present given to those special circumstances when a time-bar condition cannot be present complied accompanied by by the insured.

See also[edit]

• Insurance
• South African law

References[edit]

• M Reinecke et al. General Principles of Insurance Law (2002), LexisNexis Butterworths: Durban.
• M Reinecke et al. ‘Insurance’ inside WA Joubert (ed) The Law of South Africa Vol 12 (2002), Butterworths: Durban.
• DM Davis Gordon also Getz: The South African Law of Insurance (1993), 4th edition, Juta: Cape Town.

Notes[edit]

1. ^ 1967 (3) SA 124 (W).
2. ^ Reinecke General Principles para 39.
3. ^ Act 52 of 1998.
4. ^ Act 53 of 1998.
5. ^ Act 27 of 2008.
6. ^ Act 97 of 1990.
7. ^ Act 37 of 2002.
8. ^ Act 53 of 1998.
9. ^ General Principles 6.
10. ^ 1939 TPD 9.
11. ^ Reinecke General Principles para 124.
12. ^ Reinecke General Principles para 124.
13. ^ 1985 (1) SA 419 (A).
14. ^ 1989 (1) SA 208 (A).
15. ^ 1987 (3) SA 506 (A).
16. ^ 1993 (1) SA 69 (A).
17. ^ 1915 AD 213.
18. ^ 1999 (2) SA 147 (SCA).
19. ^ 2002 (4) SA (1) 93 (O).
20. ^ 2008 (3) SA 439 (SCA).
21. ^ 1991 (3) SA 514 (A).
22. ^ 1961 (3) SA 422 (A).
23. ^ 1961 (1) SA 103 (A).
24. ^ Reinecke General Principles para 367.
25. ^ Act 27 of 1943.
26. ^ See Reinecke para 369 intended clarification.
27. ^ 1999 (2) SA 147 (SCA).
28. ^ General Principles para 526.
29. ^ Average clauses seek to prevent the disadvantage to insurers of the insured's claiming up to the limit of the amount insured, irrespective of whether his mislaying is sum or partial, by encouraging possible insured persons to insure up to the filled importance of their importance inside the article of the risk.
30. ^ s 34 of the Constitution.
31. ^ 2010 (4) SA 468 (SCA).

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