The High Court in Pretoria has dismissed a challenge to SASRIA’s treatment of jointly co-owned properties under its revised special-risks policy.
At issue was SASRIA’s decision to issue cover to the main interested party in a co-owned property and apply a R500-million aggregate loss limit across that party’s property interests. The applicants, referred to in the judgment as the Moolman Group, contended this treatment of joint co-owners was unlawful and unconstitutional.
Before 9 May 2024, SASRIA provided special-risk cover through coupons issued to consortia of co-owners of a particular property, with a R500m loss limit applying to each property. Under the revised arrangement, it issues a single policy to the main interested party, applies a single R500m aggregate limit across all properties in which that party has an ownership or co-ownership interest, and merely notes the interests of the other co-owners.
SASRIA revised its policy after the July 2021 unrest exposed it to significant financial liability. It said allowing each co-owner to obtain a separate coupon could multiply its exposure to the same underlying risk, whereas consolidating co-owners under one coupon allowed it to apply the R500m aggregate limit to the main interested party’s property interests.
During the hearing, the Moolman Group abandoned its challenge to the R500m loss limit itself, leaving the Court to determine whether SASRIA was entitled to refuse special-risks cover to co-owners in the manner complained of.
The Moolman Group contended that SASRIA’s treatment of co-owners arbitrarily deprived them of effective short-term insurance against special risks. It argued that access to such insurance was an incident of property ownership, and the deprivation infringed the constitutional protection of property rights.
It further contended that SASRIA’s differentiation between the main interested party and other co-owners infringed the right to equality. The applicants argued there was no rational basis for treating co-owners differently when they had ownership interests in the same property.
Entitlement to SASRIA cover is not property
In a decision handed down this month, Judge Ronèl Tolmay rejected the Moolman Group’s property-rights argument. The Court held that, even on a broad interpretation, an entitlement to insurance from SASRIA did not constitute property under section 25(1) of the Constitution. Rather, it was a derivative benefit created by legislation and SASRIA’s policies and regulations.
The Court said SASRIA’s implementation of its policy might conceivably result in a deprivation of property, but that issue fell within the scope of fair administrative action and was not before it. In any event, SASRIA had explained that the policy was intended to protect the fiscus and ensure its sustainability. Judge Tolmay therefore found that the applicants had not shown that any deprivation was arbitrary.
Differentiation rationally connected to risk management
Turning to the equality argument, the Court accepted that SASRIA differentiated between the main interested party and the other co-owners. However, it found that the differentiation was rationally connected to SASRIA’s risk-management objectives.
SASRIA assessed risk at the level of the insured natural or juristic person, rather than at the level of each property or co-owner. Judge Tolmay described this as a standard insurance approach that kept each insured entity’s total exposure controlled and predictable. She accepted that allowing each co-owner to obtain a separate coupon would artificially increase SASRIA’s exposure to the same underlying risk.
The Court also found that financial constraints were relevant to SASRIA’s performance of its statutory duties and could justify the differentiation. It concluded that the requirements for limiting rights under section 36 of the Constitution had been met. The equality argument therefore failed.
Legality challenge not made out in founding papers
The Court found that the Moolman Group’s legality challenge had not been properly made out in its founding papers. The group accepted the R500m loss limit only in its heads of argument, whereas the co-owner relief sought in its founding affidavit was premised on an entitlement to cover without that limitation.
Nor had the founding papers addressed the legality of SASRIA’s treatment of co-owners. Judge Tolmay said the applicants could not introduce this case in their heads of argument because a party must make out its case in its founding papers.
Not an offence to public policy
Judge Tolmay said a party relying on unreasonableness or unfairness must plead and substantiate a case showing that the impugned decision is so unjust or unconscionable that it offends public policy. The Moolman Group had not made out such a case.
SASRIA said consolidating co-owners under one coupon and applying the aggregate loss limit were necessary to maintain its financial soundness and solvency, ensure equitable access to cover, and protect the scheme’s sustainability. The Court found nothing in the papers to contradict this explanation.
Referring to the Constitutional Court’s decision in Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others, Judge Tolmay said it was not for courts to second-guess policy decisions involving competing considerations and the allocation of finite resources. It was constrained by the facts before it and was in no position to second-guess SASRIA’s implementation of its policy and internal regulations.
Alternative cover
The Moolman Group further argued that SASRIA’s monopoly left it with no alternative means of obtaining cover.
The Court rejected this argument. It held that the exclusivity provided for in section 4 of the Reinsurance of Material Damages and Losses Act applied only to the extent that SASRIA elected to provide cover.
Judge Tolmay said cover beyond R500m could be obtained through excess-of-loss or facultative cover in domestic and international markets. The applicants had not alleged that they had investigated these options or that they were not viable. Their principal complaint concerned the cost of such cover, which the Court found could not sustain a public-policy challenge.
Application dismissed
The Court concluded that the Moolman Group had not shown that the legislative scheme entitled it to the relief sought and dismissed the application. Because the parties had sought to assert constitutional rights, it applied the Biowatch principle and ordered each party to pay its own costs.
