Watson and Another v Renasa Insurance Co Ltd

• Jurisdiction: South Africa
• Court: Western Cape Division, Cape Town
• Judge: Cloete J
• Judgment Date: 14 February 2019
• Citation: 2019 (3) SA 593 (WCC)
• Hearing Date: 14 February 2019
• Docket Number: 14664/2012
• Counsel: DF Irish SC (with AD Brown and N Mauritz) for the plaintiff. SF Burger SC (with A Oosthuizen SC) for the defendant.

Watson and Another v Renasa Insurance Co Ltd
2019 (3) SA 593 (WCC)

2019 (3) SA p593

Citation	2019 (3) SA 593 (WCC)
Case No	14664/2012
Court	Western Cape Division, Cape Town
Judge	Cloete J
Heard	February 14, 2019
Judgment	February 14, 2019
Counsel	DF Irish SC (with AD Brown and N Mauritz) for the plaintiff.; SF Burger SC (with A Oosthuizen SC) for the defendant.

Flynote : Sleutelwoorde

Insurance — Policy — Interpretation — Replacement-value clause entitling insured to replacement value of lost property — Clause subject to condition that insured should commence work on reinstatement with 'reasonable dispatch' — Insurer may not undermine insured's reliance on clause by H withholding payment, thereby inhibiting insured's ability to reinstate.

Headnote : Kopnota

On the morning of 10 January 2011 a fire erupted at a factory from which the plaintiff, Watson, conducted a print-finishing business. It burned to the ground. Watson claimed the cost of replacing or reinstating the destroyed machinery under an indemnity insurance policy issued by the defendant, I Renasa. The policy allowed Renasa to elect to indemnify the insured either by payment or by reinstatement of the lost or damaged property. Renasa never exercised its option to reinstate but instead repudiated liability on ground of fraud, alleging that Watson had instituted a fraudulent claim after deliberately starting the fire. While it was undisputed that an arsonist was responsible, Renasa from the beginning focused on Watson as the prime J

2019 (3) SA p594

suspect. A Watson sued Renasa for breach of contract and won, both in the High Court (October 2014) and in the Supreme Court of Appeal (March 2016). Both courts rejected the arson-by-Watson theory as unproved. The present case concerned the quantification of Watson's claim.

The policy contained a 'reinstatement value conditions clause' (RVC) under B which Renasa undertook to reimburse the insured for the full replacement value of lost property. Payment under the RVC was, however, subject to certain conditions, among them that the insured start reinstatement work with 'reasonable dispatch', failing which no payment beyond the indemnity value of the damaged or destroyed property would be made.

Watson immediately began taking steps to get the factory back on its feet, spending over R900 000 of his own money, all the while time attempting to C get Renasa to commit to a decision on the claim. But Renasa ignored his pleas for assistance and the business ultimately failed. While Renasa accepted that it was bound by the SCA judgment, it argued that it was not obliged to indemnify Watson until he carried out the reinstatement. While it denied that its repudiation of the claim had anything to do with Watson's predicament, Renasa did not contest its underlying liability in respect of the D indemnity value of the machinery in question.

Since Watson's inability to reinstate was not seriously contested by Renasa, the questions that remained were (i) whether this precluded him from relying on the RVC; and (ii) how the value of his claim ought to be quantified, particularly with regard to interest.

Expert testimony was that (see [58]) —

•

E Insurers in the position of Renasa would be expected to make payment on account to enable the insured to begin with reinstatement;

•

insurers should at the very least pay the indemnity value of the damaged machinery, enabling the insured to secure replacement machinery; and

•

it was unreasonable to expect the average insured to have the financial wherewithal to finance or even obtain the necessary financial backing for F the replacement or reinstatement of damaged property and the start-up of the interrupted business without the co-operation and assistance of the insurer.

Held

The term 'reinstatement' was used in two distinct ways: to give the insurer the option to reinstate the property instead of paying out money to the insured; G and to determine the extent of indemnity payable in a replacement-value claim, like the RVC clause in the present case (see [25]). The latter type of clause disadvantaged impecunious claimants by requiring them to reinstate even in the absence of any payment or firm acceptance of liability by the insurer (see [29]).

Watson was, despite his inability to reinstate, entitled on the RVC clause to H payment of the indemnity value, for this was the very mechanism that enabled insurers to compel compliance with RVC clauses. If the insured then failed to use the money for reinstatement, the insurer was absolved from making any further payment (see [59], [60]).

Moreover, as soon as the insurer elected to pay money instead of itself reinstating, it was limited to making payment under the policy (of either an I indemnity or the replacement or reinstatement value) (see [61]). This proposition was fortified by the so-called once-and-for-all rule (see [61]).

It would offend the legal convictions of the community if Renasa were allowed to slash its payment liability by withholding the indemnity payment due under the policy (see [62]). Watson's inability to restart his business was a direct consequence of Renasa's conduct and, in the circumstances, its attempt to J undermine Watson's reliance on the RVC had to fail (see [63]).

2019 (3) SA p595

The court would accept the experts' valuation of the 2011 claim of R15,74 million A ex VAT (see [69]). Interest on this sum would be calculated at the rate of 15,5% from the date of the summons (14 September 2011), and the VAT component would be included as an element of the claim (see [73], [75] – [77]).

Renasa would accordingly be ordered to pay Watson R18 million, together with interest to run at the rate of 15,5% per annum from 14 September 2011 B until the date of payment in full (see [79]).

Cases cited

Southern Africa

Bruwer v Nova Risk Partners Ltd 2011 (1) SA 234 (GSJ): dictum in para [29] applied C

Crookes Brothers Ltd v Regional Land Claims Commission, Mpumalanga, and Others 2013 (2) SA 259 (SCA) ([2012] ZASCA 128): applied

Davehill (Pty) Ltd and Others v Community Development Board 1988 (1) SA 290 (A): dictum at 300J – 301E applied

Drake Flemmer & Orsmond Inc and Another v Gajjar NO 2018 (3) SA 353 (SCA): applied D

Evins v Shield Insurance Co Ltd 1980 (2) SA 814 (A): dictum at 835C – G applied

General Life Assurance Co v Moyle 1919 AD 1: dictum at 9 applied

Grand Central Airport (Pty) Ltd v AIG South Africa Ltd 2004 (5) SA 284 (W): dicta in paras [12] – [14] applied E

Kliptown Clothing Industries (Pty) Ltd v Marine and Trade Insurance Co of SA Ltd 1961 (1) SA 103 (A): dictum at 106 applied

Lake and Others NNO v Reinsurance Corporation Ltd 1967 (3) SA 124 (W): dictum at 127A applied

Malcher & Malcomess v King Williams Town Fire and Marine Insurance and Trust Co (1883) 3 EDC 271: dictum at 284 applied F

Mutual & Federal Insurance Co Ltd v Oudtshoorn Municipality 1985 (1) SA 419 (A): dictum at 430G – 431D applied

Nafte v Atlas Assurance Co Ltd 1924 WLD 239: dictum at 243 and 246 applied

Norris v Legal and General Assurance Society Ltd and Another 1962 (4) SA 743 (C): dictum at 744 applied G

Norwich Union Fire Insurance Society Ltd v SA Toilet Requisite Co Ltd 1924 AD 212: applied

Orenstein Arthur Koppel Ltd v Salamander Fire Insurance Co Ltd 1915 TPD 497: dictum at 501 applied

Renasa Insurance Co Ltd v Watson and Another [2016] ZASCA 13: followed

Signature Design Workshop CC v Eskom Pension & Provident Fund and Others 2002 (2) SA 488 (C): H dictum at 495F – I applied

Watson and Another v Renasa Insurance Co Ltd WCC 14664/2012: referred to.

Canada

Carlyle v Elite Insurance Co (1984) 56 BCLR 331: referred to. I

England

Andersen v Martin 1908 AC 334: referred to

Anderson v Commercial Union Assurance Co (1885) 55 LJ QB 146 (CA): referred to

Brown v Royal Insurance Co (1859) 1 El & El 853: referred to J

2019 (3) SA p596

Davidson v Guardian Royal Exchange Assurance A [1979] 1 Lloyd's Rep 406: referred to

McLean Enterprises v Ecclesiastical Insurance Office plc (1984) 2 Lloyd's Rep 416: referred to

Prudential Insurance Co v Inland Revenue Commissioners [1904] 2 KB 658: referred to.

Case Information

DF Irish SC B (with AD Brown and N Mauritz) for the plaintiff.

SF Burger SC (with A Oosthuizen SC) for the defendant.

An action for the quantification of an insurance claim.

Order

1.

C The defendant shall pay to the plaintiff:

1.1

The sum of R17 947 481,99, being the value of the claim for reinstatement as at January 2011, including VAT.

1.2

Interest on the aforesaid sum at the rate of 15,5% per annum from 14 September 2011, being the date of service of summons, until date of payment in full.

2.

D The defendant shall pay the plaintiff's costs on the scale as between party and party as taxed or agreed, including the costs of two of the three counsel employed, the qualifying fees of Mr Smit and Mr Whalley, the costs of transcribing the record, and any reserved costs orders.

Judgment

Cloete J: E

Introduction

[1] F This case demonstrates the quite extraordinary lengths to which the defendant insurance company has gone to avoid payment to its insured, the first plaintiff. For convenience, I refer to him as 'the plaintiff', given that during 2017 the defendant eventually settled the second plaintiff's claim for damage to the factory from which the first plaintiff's business operated.

[2] G The chapter of this saga before me pertains to the quantum of the plaintiff's claim in respect of machinery destroyed or damaged beyond repair in a fire that occurred on 10 January 2011 at his print-finishing business, Canterbury Coaters, in Elsies River.

[3] H The plaintiff claims the cost of replacing or reinstating his machinery in accordance with the reinstatement...