A ruling by the High Court in Johannesburg has sharpened the limits on when non-life insurers may repudiate claims based on misrepresentation or regulatory non-compliance, setting a high evidentiary bar for insurers seeking to avoid liability.
The judgment, delivered on 21 November by Judge Stuart Wilson, dealt with three separated issues: alleged misrepresentation, alleged regulatory non-compliance, and a time-bar defence. All three were decided in Biovac’s favour. The remainder of the case will proceed under the commercial court process.
The dispute stems from a July 2021 fire that destroyed Building B at Biovac’s Cape Town vaccine manufacturing facility. Allianz insured half the risk and paid its portion of the loss. Guardrisk, which covered the other half, repudiated the claim, prompting Biovac to sue.
Ahead of the planned 2025 trial date, Guardrisk introduced additional defences that threatened to delay proceedings by more than a year. To avoid a lengthy postponement, Biovac asked the Court to determine three issues upfront. Guardrisk opposed the split, but the judge allowed it, and a focused hearing followed.
Misrepresentation: burden of proof rests with insurers
At issue was Guardrisk’s allegation that Biovac misrepresented its electrical compliance status during a pre-insurance survey. Guardrisk initially advanced three misrepresentations but ultimately relied only on an alleged assurance that all distribution boards in Building B had valid electrical certificates.
The surveyor, Michael Hasenbroek, testified that he had been told the certificates existed. Biovac employee Nadeem Galant disputed this, saying he would never have made such a statement because he did not know whether the certificates existed, and it was not his responsibility to confirm them.
Judge Wilson found both witnesses credible but noted significant weaknesses in Hasenbroek’s evidence. His notes were drafted after the inspection and contained errors, including the incorrect recording that no flammable liquids were stored on site, despite being shown a clearly labelled flammable-storage building. The Court concluded it was more probable that Hasenbroek assumed compliance based on his general impressions, rather than receiving a specific assurance.
Guardrisk, which bore the onus, failed to prove that any misrepresentation had been made.
As Judge Wilson put it: “Ultimately, it is for Guardrisk to prove that the misrepresentation it relies on was actually made, not for Biovac to prove that it was not.”
According to CDH director Eben Smit, the judgment underlines the extent to which insurers must present consistent, reliable evidence when relying on alleged misrepresentations to avoid liability.
“The judgment has provided important guidance for non-life insurers on the limits of policy repudiation, especially where regulatory non-compliance and alleged misrepresentation are at issue.”
Regulatory requirements: negligence is not enough
Guardrisk also argued that Biovac breached a key policy condition by failing to comply with legal and regulatory requirements, alleging that the absence of electrical compliance certificates amounted to a breach of clause 6 of the policy.
Both parties accepted that the clause required more than simple negligence. Under an all-risks policy, negligence is insured; only recklessness could justify repudiation.
Judge Wilson accepted that Biovac could not produce the certificates but found no evidence that Biovac knew they were missing, appreciated a serious risk, or deliberately ignored it. Witnesses, including Guardrisk’s own experts, described the facility as well managed, with high-quality electrical installations and an expectation that the necessary certification had likely been obtained at some stage.
Smit noted that the Court drew a clear distinction between negligence and recklessness.
“The essence of recklessness is that a known and serious risk is accepted as the likely consequence of a given course of action,” Judge Wilson said, whereas negligence is merely a failure to take reasonable care. On the facts, there was no recklessness, and therefore no breach.
Smit said the reasoning is particularly significant for non-life insurers because it reinforces that regulatory non-compliance will warrant repudiation only where there is clear proof of reckless conduct, not mere oversight or administrative lapse.
Time bar: amendment did not create a new claim
Guardrisk’s final defence was that Biovac’s claim had prescribed. The policy required legal action to be instituted within six months of the rejection of the claim. Biovac issued summons within that period. Guardrisk argued that a subsequent amendment to Biovac’s particulars of claim, correcting the policy wording, created a new cause of action outside the time bar.
The Court dismissed the point as specious. The amendment did not change the nature of the claim; it simply aligned the pleadings with the policy documents Guardrisk itself had introduced. Because the underlying claim remained the same, the time bar had been met.
Implications for insurers
Smit said the judgment’s most consequential outcome is the Court’s firm articulation of the recklessness standard in the “reasonable precautions” clause. The ruling confirms that insurers cannot rely on negligence dressed up as non-compliance and must produce clear, consistent evidence before repudiating a claim.
In this case, he noted, nothing suggested that Biovac knew the required electrical certificates were missing or that it consciously ignored a serious risk. Expert witnesses described the facility as well run and professionally managed, which further weakened any allegation of recklessness.
“The Court’s approach in this regard underscores that, for non-life insurers, policy exclusions based on regulatory non-compliance will only succeed where there is clear proof of reckless conduct, not mere oversight or administrative error,” Smit said.
He added that the judgment is a reminder that insurers face a high evidentiary threshold when alleging misrepresentation or regulatory breach. “The distinction between negligence and recklessness is now firmly underscored in South African insurance law, and non-life insurers should review their policy wording and claims processes accordingly,” he said.
Although Guardrisk may yet prevail on issues still to be heard, the judgment signals a clear judicial unwillingness to uphold repudiations built on uncertain or inconsistent evidence.
