PATEL J: This matter concerns an
insurance claim arising from an accident involving one of the plaintiff's motor
vehicles. The plaintiff seeks a declaratory order that its insurance cover with
the 1st defendant was effective and operational as from 1 January
2009. It further seeks an order for the 1st defendant to meet its
claim, submitted on 4 March 2009, within 14 days of judgment.
At the commencement of suit, the plaintiff had also claimed consequential loss
arising from the non-use of its vehicle. However, this claim was abandoned at
the trial because the relevant documents had not been duly discovered. The
summons and declaration were accordingly amended by consent.
The first
issue for determination is whether there was a contract of insurance between
the parties at the time when the plaintiff suffered its loss. The second issue
is whether payment of the premium for the period of insurance was a condition
precedent for insurance cover. The final issue is whether the plaintiff's claim
was submitted within a reasonable time.
The Evidence
Webster
Tendai Choruma is employed as an accountant at the plaintiff's headquarters. He
is responsible for the plaintiff's group insurance portfolio. His evidence was
as follows. The plaintiff entered into a contract of insurance with the 1st
defendant (Policy No. MFHR000953) brokered through the 2nd
defendant, for the period from 1 October to 31 December 2008. Thereafter,
following a letter from the plaintiff to the 2nd defendant on 24
December 2008, the insurance policy was extended for a further two months from
1 January to 28 February 2009. This was confirmed by a letter from the 2nd
defendant dated 6 January 2009. Subsequently, the plaintiff received an
endorsement to the policy covering the renewal period. This was signed on
behalf of the 1st defendant on 30 January 2009. The premium of
US$4250 for the renewal period was paid on 6 February 2009.
The
accident involving the plaintiff's Toyota Hilux (Reg. No. ABE 5753) occurred on
14 January 2009. The witness telephoned the 2nd defendant the next
day and followed up with a letter on 16 January 2009 giving notice of the
accident. The relevant claim documents, including three quotations for repairs,
were then submitted on 4 March 2009. This was because the driver of the vehicle
had damaged his right arm and was hospitalised. He was only available to
complete the claim form after his release from hospital in late February 2009.
On 19 March 2009 the 2nd defendant wrote to the plaintiff
repudiating the claim on the grounds that the premium was paid after the loss
had occurred and that the claim papers had been submitted after the permissible
period of 30 days.
Under
cross-examination, the witness was shown several documents and asked to explain
them. On 16 January 2009 the plaintiff wrote to its bank in Bulawayo applying
for the transfer of foreign currency to renew its motor insurance policy. He
stated that the plaintiff had previously made the same application, on 13
January, to its bank in Harare. The police report in respect of the accident
was date-stamped 20 November 2008 and shows that the driver paid a deposit fine
for driving without due care and attention. He explained that the date-stamp
was clearly wrong but conceded that the insurer's consent was not obtained
before the admission of guilt was made. He also accepted that the claim form
itself was completed and signed by the driver (Nkomo) on 5 February 2009 but
the claim papers were only submitted on 4 March 2009. When questioned by the
Court, the witness was unable to satisfactorily explain why he obtained two
further quotations for repairs to the same vehicle in November 2009. These
quotations were for figures that were less than half the amount of US$28690
originally claimed by the plaintiff.
Charles
Makirimani is the Managing Director of the 2nd defendant and has
been an insurance broker for 14 years. He testified as follows. In terms of the
policy of insurance between the parties, and the endorsement thereto, insurance
cover only began after the premium was paid. Similarly, the extension of the
policy was also subject to payment of the premium. This was normal practice at
that time. Where a claim is submitted, what is required are a claim form,
three repair quotations, a copy of the driver's licence and a police report.
Under normal circumstances, it should be possible to notify the accident within
7 days and to submit the claim papers within 30 days. This accords with
prevailing practice in the insurance industry. In exceptional circumstances, it
might take longer to submit the claim. In this case, the delay of 48 days after
the accident and 26 days after the claim form was completed was unreasonable.
The only inference one could draw is that the plaintiff was waiting for the
required foreign currency amount to be reflected in its bank account. The
letters of 13 and 16 January 2009 from the plaintiff to its bank, requesting
the transfer of foreign currency, were not stamped by the bank and were
therefore probably not authentic. In March 2009 the plaintiff submitted three
quotations for repairs to the vehicle. The second set of quotations obtained by
the plaintiff in November 2009 was never submitted to the 2nd defendant.
It was not clear why they were attached to the plaintiff's further particulars
filed in May 2010.
Under
cross-examination, the witness conceded that the premium of US$4250 received by
the defendants related to the full two-month period of insurance. The witness
also accepted that the endorsement to the original policy covered the entire
period of insurance and was signed by the 1st defendant on 30
January 2009. As at that date, the 2nd defendant was aware that the
plaintiff had given notice of the accident on the 16th of January.
In turn, the 2nd defendant would have notified the 1st
defendant within a week, i.e. by the 23rd of January. Both
defendants were therefore aware of the accident when the 1st
defendant signed the endorsement on the 30th of January.
The Established Facts
As shown
by the evidence adduced at the trial, the following facts are common cause. The
plaintiff wrote to the 2nd defendant on 24 December 2008 requesting
an extension of the original policy of insurance. By letter dated 6 January
2009, the 2nd defendant confirmed the extension of the policy. The
accident involving the motor vehicle in question occurred on 14 January 2009.
The plaintiff telephoned the 2nd defendant the next day to give
notice of the accident. The plaintiff then followed up with a written
notification on 16 January 2009 stating that the claim documents would be
submitted in due course. Thereafter, on 30 January 2009, the 1st
defendant signed an endorsement renewing the policy as from 1 January 2009 to
28 February 2009. At that stage, both defendants were fully aware of the
accident in casu and of the pending claim. On 6 February 2009, the
plaintiff paid the premium of US$4250 for the renewal period. Subsequently, on
4 March 2009, the plaintiff submitted the requisite claim documents.
Eventually, on 19 March 2009, the 2nd defendant wrote to the
plaintiff repudiating the claim.
Contract of Insurance at Time of Loss
It is
evident from the foregoing that, before the accident in question, the original
policy of insurance had been extended by the 2nd defendant. The
renewal of the policy was confirmed by the 1st defendant after the
accident but before the stipulated premium was paid. Thus, subject to what is
stated below, it is reasonably clear that there was a contract of insurance
between the parties in place at the time when the plaintiff suffered its loss.
What is in dispute is whether the obligations of the 1st defendant
under that contract were subject to the prior payment of premium by the
plaintiff.
Payment of Premium as Condition Precedent for Cover
Adv. Uriri,
for the plaintiff, makes two differing submissions in this regard. The first is
that the condition requiring the payment of premium had already been met under
the original policy and did not apply to the renewed policy after it was
extended by the 2nd defendant. This is because an insurance contract
requires no special form and comes into existence as soon as the parties have
agreed on its terms, without any policy having been issued or any premium
having been paid. The second is that the 1st defendant agreed to
extend the policy with full knowledge that the accident had occurred during the
period of insurance. It is therefore estopped from relying on facts entitling
it to repudiate, i.e. non-payment of the premium. Consequently, it
must be held to have undertaken to cover the claim in question. Counsel relies
for these submissions on Gordon and Getz: The South African Law of
Insurance (4th Ed. 1993) at pp. 133-4 and 152.
While
there may be some merit in these submissions, they ignore one critical aspect
of all contractual relations, to wit, what the parties have actually agreed. As
the learned authors themselves explain, at pp. 133-4:
“Neither the issue of a policy nor the payment of a
premium is essential to the conclusion of the contract, unless the parties
have expressly or impliedly agreed to the contrary.”
(The
emphasis is mine).
The
plaintiff's case is founded on the endorsement signed by the 1st
defendant on 30 January 2009. This clearly covers the date of the accident in
question within the agreed period of insurance. However, the endorsement, which
operated to renew the insurance policy, explicitly incorporates and forms part
of the original policy. Therefore, it cannot be doubted that it is governed by
the provisions of that policy. In other words, the policy as renewed is subject
to the same terms and conditions as applied to the original policy. In terms of
the preamble to that policy:
“In consideration of the Insured having actually
paid the premium for the period of insurance … the Insurers agree to indemnify
the Insured in respect of accident loss or damage occurring during the period
of insurance”.
Taken in
its ordinary and unadorned sense, what this means is that the insured must have
actually paid the premium for the period of insurance in order to be
indemnified for any loss or damage that occurs during that period. In short,
the payment of premium is clearly a condition precedent to the provision of
insurance cover.
The fact that the endorsement renews the policy for the entire period of
insurance does not assist the plaintiff's case. As was recognised in Malaba
v Takangovada 1991 (1) ZLR 1 (H) at 4-5, a contract of sale subject to
as condition precedent that has not been fulfilled cannot be regarded as a
sale; no sale exists until fulfilment of the suspensive condition. By parity of
reasoning, an insurance contract subject to a condition precedent cannot be
enforced before the fulfilment of the condition. After that condition is
fulfilled, the contract operates prospectively. In National Employers'
Mutual General Insurance Association Ltd v Myerson 1938 TPD 11 at
15, the court was called upon to interpret a clause similar to the one
presently under consideration. It was held that:
“It is not contended on the appellant's behalf that
these documents constitute a contract of insurance, but merely a contract to
insure, and if this be correct the so-called premium is the consideration (a)
for the promise to insure if the event, namely the payment of the premium,
takes place and (b) for the subsequent insurance.”
Thus, in the instant case, what existed between the parties as at the date
of the accident was not a contract of insurance sticto sensu. It was
essentially a contract to insure subject to the payment of premium by the
plaintiff as a condition precedent to the 1st defendant's obligation
to indemnify. Moreover, this obligation only materialised once the premium had
been paid and then only in relation to any accident, loss or damage that
occurred thereafter. It follows that the plaintiff's claim for a declaratur
and consequent relief cannot be sustained.
In any event, I should add that the relief sought by the plaintiff is
questionable on the further ground that the amount it originally claimed in
March 2009 was US$28690. This is more than double the amount reflected in the
repair quotations that it subsequently obtained in November 2009. This aspect
was not satisfactorily explained by the plaintiff's witness in his testimony
and not addressed at all by plaintiff's counsel in his closing submissions.
Submission of Claim in Reasonable Time
Although
the final issue seems redundant in view of the above conclusion, I think
necessary to deal with it for the sake of completeness. In this regard, the
undisputed facts are as follows. The accident in casu occurred on 14
January 2009. The plaintiff gave notice of the accident by telephone the next
day and in writing on 16 January 2009, stating that the claim forms would
follow in due course. Coincidentally, on the same day, the plaintiff wrote to
its bank applying for the transfer of foreign currency to renew the insurance
policy. The claim form was signed by the plaintiff's driver on 5 February 2009.
The full premium of US$4250 was paid on 6 February 2009. Eventually, on 4 March
2009, the plaintiff submitted the claim form with the necessary supporting
documents.
The
relevant conditions incorporated in the original policy are clauses 1 and 12.
Clause 1 stipulates that notice in writing of any accident, loss or damage must
be given to the insurer as soon as possible after its occurrence. Clause 12
exempts the insurer from any liability after the expiration of 12 months from
the happening of the event, unless the claim is the subject of any pending
action or arbitration.
It is
clear that the policy itself only deals with notification of an accident and
not the submission of claim documents. Does this mean, as is contended by Adv. Uriri,
that once notice of the accident is duly given, the insurer is liable to
satisfy any subsequent claim made within 12 months? It seems to me, however,
that the relevant case authorities lean heavily against any such contention.
The purpose of immediate written notification is to enable the insurer to
investigate the matter quickly in order to obviate the perpetration of any
fraud or forgery. In this context, the claim itself should be expeditiously
lodged within a reasonable period. See Wamambo v General Accident
Insurance Co. (Zimbabwe) Ltd 1997 (1) ZLR 299 (H); Radar Holdings Ltd
& Another v Eagle Insurance Co. Ltd 1998 (1) ZLR 479 (H); Ndawana
v Nasho & Others 2000 (1) ZLR 23 (H).
According to the uncontested testimony of the 2nd defendant's
witness, the documents that need to be furnished for the purpose of making a
claim are the claim form, three quotations for repair work, a copy of the
driver's licence and a police report. Under normal circumstances, in keeping
with prevailing practice in the insurance industry, it should be possible to
notify the accident within 7 days and to submit the claim documents within 30
days. However, in exceptional circumstances, it might take longer to submit the
claim.
In the instant case, having regard to the relative practicability of the
steps required, the documents furnished by the defendant could have been
obtained and forwarded within two weeks. Instead, they were furnished almost 50
days after the occurrence of the accident in question. The reason given for
this delay is that the driver of the vehicle had fractured his right arm and
was only available to complete the claim form after his release from hospital
in late February 2009. It seems to me that this explanation tendered by the
plaintiff's witness is no more than a tissue of lies. It does not appear in the
plaintiff's pleadings and was put forward for the first time at the trial. No
plausible explanation was given as to why the claim form could not have been
completed or signed by someone else on behalf of the driver. Moreover, the fact
that the driver himself completed and signed the claim form on 5 February 2009
utterly belies the allegation that he was hospitalised until late February
2009. Again, the plaintiff's witness was unable to explain why further repair
quotations for considerably lesser amounts were obtained over 8 months after
the claim papers were submitted. All in all, taking into account all the
surrounding circumstances, I am satisfied that the delay in submitting the
claim documents was unreasonably inordinate. It follows that the plaintiff's
claim was not submitted within a reasonable time.
The plaintiff's reliance on clause 12 of the policy conditions does not
detract from this conclusion. That clause is a prescriptive provision which
precludes any court action or arbitration beyond the stipulated period of 12
months. It does not assist the plaintiff in advancing its contention that its
claim was submitted within a reasonable time.
Disposition
One outstanding issue pertains to the additional defence put forward by Adv.
Mpofu at the trial. This arises from clause 2 of the policy conditions
which prohibits any admission by or on behalf of the insured without the
consent of the insurer. It was conceded by the plaintiff's witness that its
driver had admitted to driving without due care and attention without obtaining
the 1st defendant's consent. Ordinarily, this would operate to
disentitle the plaintiff from making any claim.
It is
fairly well established that, where a relevant issue of fact or law is not
pleaded but is adequately canvassed at the trial, the court is not strictly
bound by the pleadings and has the discretion to take it into account in making
its determination. However, the exercise of this discretion is always subject
to the limitation that any such departure from the pleadings should not cause
any prejudice to either party or prevent full enquiry. See Robinson v Randfontein
Estates GM Co. Ltd 1925 AD 173 at 198; Shill v Milner
1937 AD 101 at 105. In the present matter, an amendment to the Plea at the
trial stage, advancing an entirely new defence founded on the driver's
admission of guilt, would undoubtedly occasion prejudice to the plaintiff. In
any event, having regard to my findings and conclusions on the agreed issues
for determination, I take the view that the proposed amendment is superfluous
and entirely unnecessary at this stage in the proceedings.
For all
of the afore-stated reasons, the plaintiff's claim for a declaratory order and
consequential relief cannot succeed. Its only remedy might be to seek a
proportional refund of the premium paid in respect of the period for which it
was unindemnified. I note that an offer to that effect was in fact made by the
2nd defendant through its letter dated 12 June 2009.
As for costs, there is no reason in casu why costs should not
follow the cause in the ordinary way. In the result, the plaintiff's claim is
hereby dismissed with costs.
Dube Manikai & Hwacha, plaintiff's legal practitioners
Mbidzo Muchadehama & Makoni,
defendants' legal practitioners
