The joint owners of Fourways Mall have obtained important high court rulings in their attempt to claim more than R1 billion from five insurance companies for business interruption at the struggling super-regional mall linked to the Covid-19 pandemic.

The High Court in Johannesburg was required in terms of an application lodged by Azrapart (Pty) Ltd (controlled by Georgiou) and JSE-listed Accelerate Property Fund, each 50% owners of the mall, to issue an order on three separated issues relevant to the claim.

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The importance of the rulings was that if any of the three separated issues was resolved in favour of the insurance companies, that would end the mall owners’ claim.

In a judgment handed down on Friday, Judge Norman Manoim issued rulings on each of the three disputed points in favour of the mall owners.

Accelerate last month asked existing shareholders to stump up as much as R200 million through the issue of new shares to enable “the repositioning of Fourways Mall” and “to settle existing debt”.

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The five insurance companies all assumed liability to indemnify the owners of the Fourways Mall for loss in various proportions.

They are:

• AIG South Africa (70% of the risk);
• Old Mutual Insure (14%);
• Bryte Insurance (8%);
• Guardrisk (8%);
• Alternatively, Guardrisk assumed 3% of the risk and Insurance Underwriting Managers 5%.

Judge Manoim said in 2020, like many businesses, the lockdown caused by the advent of the Covid-19 pandemic disrupted the business of the mall’s owners while also disrupting the businesses of the mall’s tenants, resulting in Azrapart and Accelerate suffering a major loss in rental income.

The mall’s owners claimed business interruption insurance from the insurers in November 2022.

They claimed the insurance companies had all, in various amounts, indemnified them against business interruption, which included  loss caused by infectious and contagious diseases (ICDs).

Manoim stressed that the case does not concern whether Covid-19 constitutes an ICD for which the mall’s owner could claim in terms of their policies, but rather whether they were covered at all for ICDs.

The insurance companies all claimed the mall’s owners were not covered for ICDs, while the owners claimed they were.

Judge Manoim said the matter has yet to be fully litigated and he heard evidence on the limited separated issue, and thereafter argument.

The principal negotiations about the insurance cover were conducted on behalf of the mall’s owners by the local subsidiary of international insurance brokers firm Marsh and AIG – with Old Mutual, Bryte and Guardrisk “following on”, but with some differences in the limits of their liability (and with these insurers all represented by the same legal team).

Insurance Underwriting Managers (IUM) presented a slightly different defence and was represented by a separate legal team.

Astonishing

Manoim said the case turns on a series of mishaps and the key issue was whether ICD insurance, on which the claim is now premised, formed part of the agreement between the parties.

“Extraordinary as this might seem it turns on the legal implications of oversights in reading documents by employees of the parties,” he said.

“Between the time that the first request for a quotation was made by Marsh on 23 July 2019, and the time a final policy was signed in March 2020, there had been 10 iterations of the contract, with the term ICD, variously in or out.

“But on not one occasion were these modifications noticed by the party to whom the document had been sent.”

Manoim said there is a simple explanation for this, adding that insurance contracts are filled with dense type, most of which is unchanging.

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What the professionals keep a lookout for are the highlighted changes, and then the exclusions, the premiums and the limits, he said.

“But where a term is not highlighted and is buried in a long list of densely typed terms, infrequently modified, they remain imperceptible to the quick look scrutiny that these professionals typically exercise. Such is what happened in this case.”

Two possible ‘actual’ contracts

Manoim said in the various exchanges of documents between the mall owners’ broker Marsh and the insurers, two candidates for the “proper contract” emerged, and this forms the subject matter of the present dispute.

He said there is no dispute about what the term ICD means and this is not a dispute over interpretation, but over which is the correct contract.

“If the plaintiffs [mall owners] are correct, they have cover. If they are not, they have no cover, and it is the end of their claim against the defendants [insurers],” he said.

Three issues …

The three separated issues were:

• Which is the contract?
• Whether a case for rectification is made out on the facts, with the onus on the party seeking rectification to establish that the document does not reflect the common intention of the parties; and
• The contention raised by AIG, Old Mutual, Bryte and Guardrisk that the mall owners had not made payment of the full premium and hence are not entitled to be indemnified.

Manoim ruled that the policy is the contract that contained ICD cover for the purpose of the first separated issue.

He said there is no evidence of any common understanding and this requirement for rectification has not been met, and the second separated issue must also be decided in favour of the mall’s owners.

R4.3m premium paid

Turning to the third separated issue, Manoim said the business interruption insurance was to be calculated by estimating the amount to be insured at the outset of the policy based on the mall’s annual turnover.

But since this could only be ascertained at the end of the year for which the mall was insured, an estimate was made and the mall owners were then to pay 65% of this amount at the commencement of the policy.

Manoim said it is common cause the mall owners paid an amount of R4 384 806.25 and were then required to make a declaration at the end of the insurance period of what the actual amount was and pay the additional insurance that was due.

No declaration made, but …

He said the insurance companies claim that on the expiry of the insurance period, this declaration was never made and nor was the additional premium that was due paid.

Manoim said there is no dispute that the declaration was never made, nor whether there was an amount due and that no further premium was paid.

However, he said the mall owners argue that:

• There was no penalty provided for in the policy if the declaration was not made;
• The insured event occurred prior to the balance of payment being due;
• It was practice for the insurer to call for the declaration and AIG did not;
• Even if a declaration had been made, there was no additional premium owing and more likely a repayment of the deposit was due to the mall owners;
• The insurance policy was renewed without the insurers making any claim for a top-up from the mall owners; and
• To the extent that any top-up was due, which the mall owners deny, they tendered payment to the insurance companies.

Manoim said the general clause in the policy does not provide for a penalty for non-payment of the top-up – and in any event there was no evidence before him that a top-up premium was due.

“Without it, this point is a non-starter,” he said.

“The third disputed point is decided in favour of the plaintiffs [mall owners].”

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