The High Court in Johannesburg has ordered Compass Insurance to pay a claim of more than R16.3 million after rejecting its submissions that the insured made a material misrepresentation and breached a warranty.
The case was brought by Samchem Corporation (Pty) Ltd, the principal agent for Samsung’s plastics and chemicals business in sub-Saharan Africa.
During the Covid-19 pandemic, Samchem imported masks from Hong Kong. The masks were to be transported from OR Tambo International Airport to Durban. But the truck was hijacked near Vosloorus in August 2020. The vehicle was recovered, but the masks were not.
Samchem had insured the transportation of the masks with Compass, which repudiated the claim.
The dispute between the parties centred on two issues:
- Compass submitted that the quotation for insurance was based on conveyance by a professional third-party carrier, but Samchem hired a truck and employed a driver. This constituted a material representation.
- Compass submitted that the satellite tracking of the vehicle should have been monitored, but this did not occur. This constituted a breach of a warranty expressly included in the contract.
A representative of the insurer’s underwriting managers testified that Samchem’s broker advised her that conveyance would be by professional third-party carriers. Without this undertaking, the representative said she would probably not have accepted the proposal, or she would have first consulted her superiors or Compass. And if the risk had been accepted, the premium and the excess would likely have been increased to account for the increased risk.
The Court referred to the terms of the contract, which defined “transit” as “road conveyancing (including conveyances owned, hired, or operated by the insured”.
Judge Jabulani Dlamini said even if it were assumed that the broker requested “a different quotation”, Compass chose to contract with Samchem in a way that enabled it to choose to hire the truck and appoint its own driver instead of conveying the goods with a professional third-party carrier.
He pointed out that Compass had drawn up the insurance contract. At the time, it was free to include all the relevant terms and conditions that it deemed essential to protect itself, but it did not.
‘Life’ tracking
It was not in dispute that Compass added a warranty to the contract to the effect that there must be “life” tracking of the vehicle. During the hearing, it was agreed that “life” was a typographical error and should have been “live”.
It was also common cause that the tracking device installed in the truck used a global positioning system to send information about the vehicle’s position at set intervals to an internet-based user interface. The automatic vehicle location (AVL) signals transmitted by the device were not monitored.
Compass submitted that the purpose of the warranty was the constant observation of the truck, to prevent or reduce the risk of the theft of the cargo. The warranty would serve no purpose if it were interpreted to mean it was sufficient for the AVL signals to be sent but not monitored.
Judge Dlamini said Compass’s submission suffered from the same challenges as it did in relation to the issue of misrepresentation. Compass required only that there should only be “life” tracking. Once the parties agreed that “life” tracking should have meant “live” tracking, that was the end of the matter.
Nowhere in the warranty was it stipulated that the tracking must be monitored. This requirement was an afterthought on the part of Compass and was raised only after Samchem issued its claim, the judge said.
The underwriting manager’s representative confirmed that, after Samchem’s claim, Compass changed its policy wording to include that the satellite tracking device must be monitored. “It is evident that this amendment was a result of the realisation on the part of Compass that the policy wording was ambiguous, and Compass failed to remove this ambiguity in the warranty when it contracted with the plaintiff,” Judge Dlamini said.
The Court ordered Compass to pay Samchem R16 311 032.92, plus interest of 7% a year from 9 October 2020 until paid in full, and the legal costs.
The insurer’s application for leave to appeal was also dismissed with costs.
