Excess “Other Insurance” Clauses: to Contribute or Subrogate?

• Jurisdiction: South Africa
• Date: 27 May 2019
• Citation: (2009) 20 Stell LR 97
• Pages: 97-123
• Author: Durand M Cupido
• Published date: 27 May 2019

97

EXCESS “OTHER INSURANCE” CLAUSES: TO

CONTRIBUTE OR SUBROGATE? [DISCUSSION

OF SAMANCOR LTD V MUTUAL & FEDERAL

INSURANCE CO LTD 2005 4 SA 40 (SCA)]

Durand M Cupido*

BA LLB LLM

Lecturer, Department of Mercantile Law, University of Stellenbosch

1 Introduction

    

and Orange Free State1 app ears to have paved the way for t he int roduc-

tion of the rights to contribution and su brogation into South Af rican law.2

This introduction took place without due regard for the doctrinal bases of

these concepts in their systems of origin. 3 Contribution and subrogation still

     

areas of application and inte raction. The question whether to use subroga-

tion or contr ibution can be crucial in a given situation, since a wrong choice

would probably res ult in an i nsurer being non -suited.4  

also exa cerbated by i nsurers adopting standard clauses, including so-cal led

“other insur ance” clauses,5 which have established mea nings in foreign

jurisdictions. The impact of these “other insurance” clauses on the rights to

contribution and subrogation has not received much attention in South African

law. The excess “other insurance” clause, in particular, is an example of a

clause which has escaped judicial scr utiny.6

* The valuable advice of Phi llip Sutherland, S adulla Karjike r, Jenni Darling an d the anonymous rev iewers

is gratefu lly acknowledged.

1       

           

        

Free State via t he General Law Amen dment Ord 5 of 1902.

2 In this regard see the in structive comments of Harms ADP in Rand Mutu al Assuran ce Co Ltd v Road

Accident Fund [2008] ZASCA 114 ht tp://www.safli i.org/za/cases/Z ASCA/2008/114.html (acc essed

26-01-2009). See also n 8.

3     

equity. See also Me rkin Colinvaux’s Law of Ins urance 8 ed (2006) 379, 414.

4 See the discussion of Sa mancor Ltd v Mutual an d Federal Insuranc e Co Ltd 2005 4 SA 40 (SCA) below.

5 “Other insur ance” clauses govern the in surer’s relationsh ip with the insured whe re another val id policy

also covers the r isk insured aga inst. See 4 below.

6 South Afr ican case s on “ot her ins urance” clauses have focused mainly on pro rata “oth er insu rance”

clauses, where the existence of double insurance effectively means th at the i nsurer w ill only be liable

for its pro rata s hare of the insu red’s loss. See Lange & Co v SA Fi re & Life Assurance C o 1867 5 Searle

358; Nathanson v Commerc ial Insuran ce Co 1886 4 SC 461. Althou gh escape clauses have featured in

some cases, our co urts have not dealt with t hem specifical ly (see Refrigerated Trucki ng v Zive NO (Aegis

Insurance Co L td, third party) 1996 2 SA 361 (T)).

(2009) 20 Stell LR 97

© Juta and Company (Pty) Ltd

In Samancor Ltd v Mutu al & Federal Insurance Co Ltd7 (“Samancor”),

the Supreme Cou rt of Appeal had the opportunity to assess the impact of an

excess “other insurance” clause on the right s to contribution and subrogation.

This article analyses the impa ct of excess “other insur ance” clauses on the

rights to contribut ion and subrogation with reference to this decision.

2 The right to subrogation

The right to subrogation was introduced into South African law in Ackerman

v Loubser.8 In this case Ward J held that

“[an] accident policy is a contract of indemnity and from that it follows that the insurers who have



vested in the latter”.9

 

           

means the substitution of one person for another, so that the person substituted

or subr ogated succeeds to the rights of the person whose place he takes”.10

 11 the South Afr ican application of the right t o subroga-

tion has been limite d to contracts of insurance.12



          

insured m ay have against the thi rd party who cause d the loss of the insu red.

The right to sub rogation arises ex lege, where an in surer has indemni-

           

insur ance.13

Subrogation does not ef fect a transfer of the insured’s rights of recourse

against th ird parties.14 The claim remains that of the insured, and is brought

by the insurer in the name of the insured. However, in Rand Mutual Assurance

Co Ltd v Road Accide nt Fund,15 Harms ADP questioned t he practice that the

insurer must institute action against a third party wrongdoer in t he name of

the ins ured.16 He allowed the insurer to sue in its own name on the basis of

subrogation. The judge questioned whether the rule that the ins urer has to sue

7 2005 4 SA 40 (SCA). For a discus sion of the unreporte d WLD deci sion and the SCA decision, see Van

Niekerk 2003 Juta’s Insura nce L Bul 28; Van Niekerk 2003 Juta’s Insura nce L Bul 166.

8 1918 OPD 31. In Rand Mu tual Ass urance C o Ltd v Road Accident Fund [2 008] ZASCA 114 para 14,

Harms ADP allu des to the fact that this int roduction was the resu lt of the General Law Amendme nt Act 8

    

introduci ng the right of an insu rer to be subrogate d to the rights of the i nsured.

9 Ackerman v Loubse r 1918 OPD 34.

10 Davis Gordon a nd Getz’s The South Afri can Law of Insuranc e 4 ed (1993) 257.

11 See McGee Th e Modern Law of Insu rance (2001) 297.

12 Subrogation is ge nerally regarded a s a naturale of the contract of i nsurance. See al so discussion below.

13 See Davis SA Law o f Insurance 25 7.

14 Reinecke, Van der Me rwe, Van Nie kerk & Have nga General Principle s of Ins urance Law (2002) par a

373.

15 [2008] ZASCA 114.

16    

SA Merc LJ 502. The author descr ibes the right of the insurer to in stitute action in the nam e of the insured

as funda mental to the right of s ubrogation.

98    

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