On
26 August 2004, the plaintiff instituted proceedings in the High
Court wherein it sued for $60,000,000= being the sum assured in terms
of a motor vehicle comprehensive policy it held with the second
defendant. The first defendants were the insurance brokers who
facilitated the policy.
On
21 December 2006, and before the pre-trial conference, the plaintiff
amended ...
On
26 August 2004, the plaintiff instituted proceedings in the High
Court wherein it sued for $60,000,000= being the sum assured in terms
of a motor vehicle comprehensive policy it held with the second
defendant. The first defendants were the insurance brokers who
facilitated the policy.
On
21 December 2006, and before the pre-trial conference, the plaintiff
amended its claim by the addition of paragraph 10 which is a claim
for consequential damages in the sum of $100,000,000= being the
replacement value of the vehicle.
The
first defendant pleaded that it first acted as the second defendant's
agent and its obligation ended as soon as the policy was in place and
that the premium had not been paid at the time of the accident hence
the policy was revoked.
The
second defendant, in its plea, pleaded ignorance of the policy and
put the plaintiff to the proof thereof.
At
the commencement of the trial, the second defendant applied for, and
was granted an amendment to its plea. The amendment was a withdrawal
of the initial plea and its substitution with a plea to the effect
that;
1.
The first defendant, as agent of plaintiff, entered into an agreement
with the second defendant that the plaintiff should pay the insurance
policy premium of $3,524=26 in equal installments over a period of 3
months as from 25 February 2004.
2.
That the plaintiff did not comply with this agreement, and, as at the
date of the accident the plaintiff had not performed its obligations
to pay the instalments.
3.
In any event, the plaintiff is covered for a total of $60,000= in
terms of the policy and is contractually precluded from claiming
more.
The
plaintiff gave evidence through its Managing Director, Mr. Zisengwe.
Mr. Gideon Muchakwa gave evidence for the first defendant after which
Mr. Moses T. Chakaringa and Mr. Member Murasiranwa gave evidence for
the second defendant.
From
the evidence adduced in court the following are common cause.
The
plaintiff entered into an insurance contract with the second
defendant. This was done through the first defendant who acted as
broker. The premium was put at $3,524,259=. The insured value was put
at $60,000,000= (old currency). On 10 February 2004, the plaintiff
paid $200= (revalued) towards the premium. The plaintiff was then
issued with a policy document dated 18 February 2004. The period of
insurance was stated as 'From 10/02/ 04 to 31/01/05 (both dates
inclusive)'.
On
23 March 2004 the motor vehicle so insured was involved in an
accident and was declared a write off. As at the time of the
accident, the plaintiff had not paid the balance of the premium. Such
balance was only paid on 7 April 2004 to the first defendant. When
the plaintiff attempted to make a claim on the policy the second
defendant refused to honor the claim on the basis that the plaintiff
had not paid the premium as per policy.
The
testimony by Mr. Zisengwe was to the effect that the plaintiff had
been asked to pay the premium in three months. It was never stated
that the instalments had to be equal. At the time of the accident the
three months period had not lapsed. When the accident occurred the
plaintiff was asked to pay the balance in order that its claim can be
sent to the second defendant - and it did so. In this regard he
tendered two receipts as exhibits 1 and 2 for the payments.
The
first defendant's evidence, on the other hand, was to the effect
that when Mrs. Zisengwe came to insure the plaintiff's motor
vehicle she was told the premium that had to be paid. As she did not
have the full amount she was allowed to pay $200= on her undertaking
to pay the balance in two weeks time. She was warned of the
consequences of not paying the full premium. After failing to pay
within that period the first defendant extended the period to three
(3) months. According to Mr Muchakwa, this extension was at the
plaintiff's risk.
At
the pre-trial conference, the issues were viewed as;
“1.
The interpretation of clause 1 of the contractual document. It being
admitted that plaintiff paid its premium on 25 February 2004; and
2.
The quantum of damages.”
After
hearing evidence from the witnesses, it was apparent that the parties
were not agreed that the premium was paid on 25 February, 2004. The
receipts tendered showed the initial payment was on 10 February 2004
and the second payment was on 7 April 2004.
The
main issues would thus be;
1.
Whether or not the plaintiff had paid the premium in terms of the
policy;
2.
Whether or not the defendants are liable to the plaintiff as per
claim;
3.
Whether or not the plaintiff is entitled to payment of the sum of
$100,000,000= in respect of its claim for the loss of its motor
vehicle in terms of the policy agreement; and
4.
Who between the defendants is liable to pay the plaintiff.
PAYMENT
IN TERMS OF THE POLICY
The
policy document, in its preamble, states that “whereas the insured,
by a proposal and declaration which shall be the basis of this
contract and deemed to be incorporated herein, has applied to the
company for the insurance and has paid the premium as consideration
for such insurance in respect of accident loss or damage occurring
during the period of insurance.”
That
preamble presupposes the applicant has paid the premium.
I
did not hear any party to interpret that paragraph in any way as
pre-supposing that premium would not have been paid. It is in that
light that the issue of payment of the premium is important.
The
plaintiff's case was that in spite of this there was a premium
payment plan in place which was agreed with the first defendant at
the time the policy was agreed in terms of which the premium was
payable over a period of three months. Mr. Zisengwe tendered exhibit
3 as proof of the arrangement.
Paragraph
2 thereof states that;
“We
hasten to add that a premium payment plan had been agreed to spread
payment over three months and initial payment had been effected on
receipt of policy before the accident, which we take cognizance of.”
This
letter is from the first defendant to the plaintiff. The first
paragraph thereof shows clearly that the second defendant was
refusing to pay on the premise that premium payment was done after
the loss which aspect they contended vitiates the terms and
conditions of the policy.
In
his evidence Mr. Muchakwa did not deny this.
The
first defendant having allowed the plaintiff to pay in instalments
found itself in difficulties to persuade the second defendant to pay.
In
both its plea and in evidence the first defendant acknowledged that
it had no authority to allow the plaintiff to pay its premium in
installments. It is because of that lack of authority that it asked
the plaintiff to pay up before they could file their claim. It is
clear beyond doubt that the payment arrangement was initially as
between the plaintiff and the first defendant. That arrangement was
apparently not in terms of the policy document. It was an arrangement
the first defendant agreed to for the convenience of the plaintiff
and not because there was express authority from the second defendant
for the first defendant to grant such payment terms.
The
second defendant's evidence was to the effect that the insurance
policy the plaintiff took out required a one off payment. In the
instance case no such payment was made hence it declined the
plaintiff's claim. However, in its amended plea, the second
defendant stated that “first defendant, acting in its capacity as
agent for plaintiff entered into an agreement with second defendant
that plaintiff should pay the insurance policy premium of $3,524= 26
in equal installments over a period of 3 months as from 25 February
2004.”
There
was thus contradiction between the second defendant's plea and
evidence by its witnesses. The witnesses could not explain away the
contradiction.
Mr
Muchakwa who should have been better placed to testify on this was a
ball of confusion and contradictions. For instance, whilst being
categorical that the policy was of a one off payment at inception he
was, at some stage, heard to say the second defendant should
nevertheless have honored the claim. He found it difficult to admit
the first defendant's negligence in not advising the plaintiff of
the consequences of partial payment and also in not advising the
second defendant about the credit arrangement with the plaintiff.
The
second defendant, through Mr Murasiranwa, indicated that upon receipt
of $200 towards payment of the premium they questioned the first
defendant about it. The first defendant was reminded that a failure
to pay the full premium would lead to the invalidity of the policy
for non-remittance. When asked why the second defendant had not
advised the first defendant of the invalidity of the policy in view
of non payment of the premium Mr Murasiranwa said that events took
over as the accident took place. In terms of clause 8 of the General
Conditions of the policy document the second defendant could have
cancelled the policy.
Despite
not receiving full premium the second defendant issued the policy
document and had not cancelled it by the time of the accident.
The
amended plea acknowledges the arrangement to pay in instalments. If
therefore the second defendant wishes to rely on a breach of contract
the burden of proof is on it. See Brightside
Enterprises (Pvt) Ltd v Zimnat Insurance Co. Ltd
1998 1 ZLR 117.
In
casu,
the second defendant seemed to have condoned the payment in
installments and conceded in its amended plea that; “First
defendant, acting in its capacity as agent for plaintiff entered into
an agreement with second defendant that plaintiff should pay the
insurance policy premium of $3,523=26 in equal installments over a
period of 3 months from 25 February 2004.”…,.
The
second defendant can thus not seek to rely on such mode of payment
not to honor the claim.
Another
point regards the first defendant's position.
Though
in their initial pleadings impression was created that the first
defendant was the second defendant's agent the closing submissions
were clear that an insurance broker can act as agent for both the
insured and the insurer. In Gordon and Getz on The South African Law
of Insurance, 4th
edition by D.M DAVIS…, it is stated that:
“An
insurance broker acts primarily as the insured's agent to obtain
insurance, though he receives his commission from the insurer, and
may, for limited purposes, such as collecting the premium, be the
latter's agent.”
In
casu, therefore, the first defendant was the insured's agent when
they secured insurance cover for the plaintiff from the second
defendant, but, in collecting the premiums and remitting them to the
second defendant the first defendant acted as the second defendant's
agent.
When
the first defendant was now collecting money this was for and on
behalf of the second defendant. Upon receipt of the money it was the
first defendant's responsibility to account to the second defendant
as the second defendant's agent. The second defendant, by accepting
part payment of the premium, was in fact confirming its acceptance of
the arrangement the first defendant had made with the plaintiff for
the payment of the premium and that the first defendant was its agent
in collecting the premium.
That
probably explains the assertion in its amended plea acknowledging the
arrangement to pay in three instalments.
If
the second defendant had rejected the arrangement it should not have
issued the policy document, or, at least, it should have cancelled
the contract as soon as it became aware of the credit arrangement if
such had not been known to it when it issued the policy document.
Instead
of cancelling the contract, the second defendant opted to merely warn
the first defendant, who, by then, had become its agent of the risk
of non-payment of the full premium yet the contract provides that the
second defendant could have cancelled the contract. Paragraph 8 of
the General Conditions states that;
“The
Company may cancel this policy by sending seven days notice by
registered letter to the insured at his last known address, and, in
such event, will return to the insured the premium paid pro-rata
portion thereof for the period the policy has been in force…,.”
The
second defendant gave an impression to the plaintiff that the
arrangement was acceptable. If the second defendant now wishes to
rely on such breach, which was there from inception, the onus is on
it to prove such breach and to show that such vitiated the contract
in spite of its own conduct.
This,
the second defendant did not do.
The
question of payment of the balance of the premium is between the
first defendant and the second defendant. This is so because the
plaintiff paid to the first defendant and it was for the first
defendant, as agent for the second defendant, to account to the
second defendant. The first defendant received the money on 7 April
2004 as agent for the second defendant. The second defendant had an
arrangement with the first defendant on when and how premiums
received on its behalf by the first defendant would be transmitted.
Though
the two witnesses for the second defendant did not seem of the same
mind on the period of credit the first defendant was granted, it was
certainly a period of at least 60 days. Mr. Chakaringa put the credit
period granted the broker at 90 days whilst Mr. Murasiranwa put the
period at 60 days. They both agreed, however, that such credit was
only to the broker and did not extend to the insured. As already
alluded to, this contradicts the amended plea. Both witnesses
indicated that queries on premium payments would be by the Accounts
Department of which they were not part of.
Exhibit
2 confirms payment of the balance to the first defendant on 7 April
2004.
The
first defendant alleged that it paid that sum over to the second
defendant. As proof of the payment, the first defendant produced a
document called BORDEREAU. Mr. Muchakwa argued that this was proof of
payment to the second defendant. The document is addressed to Global
Insurance from Kantharia Insurance Brokers and is titled; 'INTIMATION
OF MARCH 2004 BORDEREAU'. It was tendered in as exhibit 5.
Item
6 thereon refers to the plaintiff and the balance of the premium.
Whilst
Mr. Muchakwa argued that that was proof of payment Mr. Murasiranwa
said that was just an intimation of what was to be expected. Proof of
payment would be titled 'Payment bordereau'.
In
any case, this could not have been proof of payment as the plaintiff
had not paid the balance.
It
is my view that not enough evidence was adduced to show that that sum
was paid over to the second defendant. That is however as between the
defendants and should not prejudice the plaintiff.
QUANTUM
It
is common cause that the plaintiff insured its motor vehicle with the
second defendant, through the first defendant, for the sum of
$60,000= (revalued). In terms of that contract, the second defendant,
in the event of a loss may pay the plaintiff the estimate of the
value of the motor vehicle as specified in the schedule or the
reasonable market value of the motor vehicle at the time of the loss
or damage whichever is less. Paragraph 2(a) of section 1 of the
policy document is quite clear on this when it states that, inter
alia;
“…,.
The Company may, at its own option, repair, reinstate or replace the
motor car and /or…, may pay in cash the amount of the loss or
damage and the liability of the Company shall not exceed the actual
value of the parts damaged or lost plus the reasonable cost of
fitting and such parts shall in no case exceed the insured's
estimate of the value of the motor car including the accessories and
spare parts thereon as specified in the schedule or the reasonable
market value of the motor car including accessories and spare parts
thereon at the time of the loss or damage whichever is less.”
I
did not hear the plaintiff to deny that this was a limited value
policy.
In
his evidence, Mr. Zisengwe conceded that the policy was indeed a
limited value policy. His argument for $100,000,000= was thus not
based on the provisions of the contract.
The
plaintiff alleged that “as a result of the defendants' breach of
the insurance contract the plaintiff has suffered consequential
damages in the sum of $100,000,000= which is the current replacement
value of the motor vehicle.” This amendment was only to that
extent. It did not go so far as to expunge the initial basis of the
claim which was contractual.
In
his closing submissions, the plaintiff's legal practitioner argued
that it is not unheard of that even where a party is contractually
bound to perform certain obligations, should he do so negligently the
wronged party may sue both in contract and in delict.
Unfortunately,
counsel could not cite any authority in support of this, and, in any
case, the suit here was in contract and not delict. The nature of the
amendment did not change the nature of the suit at all. Nowhere in
the amendment is there any allegation of negligence on the part of
the defendants.
The
basis advanced by the plaintif'fs counsel for seeking consequential
damages are based on what he termed common cause that;
1.
That the sum assured is $60,000,000= (which is now $60,000=
revalued).
2.
That at the time of the inception of the contract that sum was the
pre-accident estimated value of the motor vehicle.
3.
That due to the volatile economic environment (which the court was
urged to take judicial notice during the trial), the sum of $60,000=
is but a tiny fraction of the actual market value or replacement
value of such a vehicle.
4.
That the first defendant, in a letter to the plaintiff, acknowledged
the premium payment plan and acknowledged liability on behalf of the
plaintiff.
5.
That had payment of the $60,000= been made in 2004 the plaintiff
would have been indemnified against his loss.
6.
That the refusal to pay was grossly unreasonable in view of the
facts.
Counsel
for the plaintiff argued that in view of the above facts and also of
what he perceived to be clear liability the defendants acted
wrongfully in repudiating the claim.
The
law in this aspect is quite clear.
“Property
insurance is a contract for indemnity. The insurer's liability is
therefore limited to the 'real and actual' value of the loss
suffered by the insured through the happening of the event insured
against. It cannot exceed either the amount insured or the amount of
the insurable interest; and if it exceeds either or both these items,
it must be reduced to correspond with the smaller of them.”
See
Gordon and Getz on The South African Law of Insurance, 4th
edition by D.M DAVIS …,.
In
cases of limited valued policy which specified the agreed value of
the subject matter of the insured therefore the parties are bound by
the value agreed to. In the case of Elcock
v Thomson
[1949] 2 ALL ER 381…, MORRIS J said;
“When
the parties have agreed a valuation, then, in the absence of fraud or
of circumstances invalidating their agreement, they have made an
arrangement by which for better or for worse, they are bound.”
In
General Principles of Insurance Law by E.R.H. IVAMY, 4th
edition…, the author thereof states that;
“In
the case of a 'valued' policy the amount recoverable is fixed by
the policy…,. In the case of an insurance upon property, the value
of the subject matter may be fixed by agreement and inserted in the
policy as the amount recoverable in the event of loss. This valuation
is binding, except in the case of fraud or mistake, and dispenses the
assured from the necessity of proving the value of his interest,
though he still must prove that he has an interest in the
subject-matter of insurance.”
A
valued policy is one which specifies the agreed value of the
subject-matter of the insurance.
In
casu, there is no allegation of fraud or mistake. The plaintiff
simply argued that by their refusal to pay when he lodged his claim
the defendants acted grossly unreasonably and so must be made to pay
consequential damages that would enable the plaintiff to buy a
similar motor vehicle.
From
the evidence adduced can it really be said that the defendants'
refusal to pay was grossly unreasonable?
It
is my view that there was no such unreasonableness as clearly the
defendants were entitled to contest the claim as the plaintiff had
only paid a fraction of the premium by the time of the accident. The
contract required a one-off payment but for the plaintiff's failure
to do so that led to the first defendant granting an extension of
time within which to pay the balance. This not having been an express
term of the contract, and, in fact, being contrary to the express
provisions of the contract the second defendant cannot be said to
have been unreasonable in seeking to repudiate the contract.
The
defendants had an arguable case.
I
am of the view that the plaintiff has not made out a case for a claim
outside the policy document. The policy document shows the sum
insured as $60,000,000=. In terms of that document there are some
deductions to be made in the event of a claim as indicated in exhibit
6. The defendants witnesses outlined the deductions as including
salvage value @ 30% of the sum assured, excess applicable in terms of
the policy @ 4% of the value.
Mr.
Murasiranwa confirmed the calculations as per exhibit 6. The
calculations were as follows:
Sum
insured of the vehicle at the time of the loss
$60,000.00
Less
salvage value @ 30% of the sum insured $18,000.00
$42,000.00
Less
Excess applicable in terms of the policy
(4%
of vehicle value) $
2,400.00
Claim
amount $39,600.00
Less
outstanding premium $3,524.26 less $200 $
3,324.26
Amount
due and payable $36 275.74
As
it was proved that the plaintiff paid the balance of $3,324=59,
albeit after the accident, it follows that the sum payable to
plaintiff is $39,600=.
As
between the defendants the issue is who must pay the plaintiff?
In
as far as the first defendant acted as agent for the second in
collecting the premium, the second defendant cannot be absolved as
the principal. Indeed “where the agent has authority to receive
payment of premiums on behalf of the insurers, the effect of the
payment is the same as if it had been made to the insurers themselves
and the fact that the premiums thus received by the agent have been
misappropriated by him, or have not reached the insurers owing to his
bankruptcy, affords them no defence against a claim by the assured
upon the contract.” See General Principles of Insurance Law by
E.R.H. IVAMY, 4th
edition…,.
In
the circumstances, the second defendant is liable as the insurer.
COSTS
In
as far as the plaintiff has succeeded, albeit to the sum as per the
policy document, I am of the view that the plaintiff's
argument for costs on a higher scale cannot succeed. The plaintiff is
entitled to costs on the general scale from both defendants.
Accordingly,
judgment is entered for the plaintiff and against the second
defendant in the sum of $39,600= (re-valued) with interest at the
prescribed rate from the date of summons to date of payment in full.
Costs
on the general scale against both defendants jointly and severally
with one paying and the other to be absolved.
