The recent High Court case involving Blackspear Holdings, Bryte Insurance and the South African Special Risk Insurance Association (Sasria) had a sequel last month, when the court had to decide whether the claim pay-out should include or exclude the cost of removing equipment from a mine.
Read: High Court orders Sasria to pay up for equipment lost during flooding
Blackspear’s earthmoving equipment was destroyed when the Thutsi mine in Ermelo was flooded during a labour dispute in 2016.
In May, the High Court in Johannesburg ordered Sasria to pay Blackspear the sum of its “proven damages”, which were not stated in the order. However, Blackspear submitted that incurred a loss of more than R18.6 million.
Judge Roland Sutherland ruled that vandalism and denial of access made it impossible for pumping operations to be carried out, which resulted in the mine being lost to flooding.
According to the judgment, the relevant common cause facts in the latest case over how the equipment should be valued were:
- Blackspear had suffered a total loss;
- It was uneconomical to recover the insured property from the mine;
- Blackspear would not be indemnified for the cost of removing the equipment from where it was; and
- The equipment had no residual value.
The issue that had to be decided was the proper interpretation of the following clause in the insurance contract:
- Total loss
In the event that the insured property is totally lost or destroyed, the amount payable shall be the cost of removing the damaged property (limited to the removal costs of 15% of the claim) less the value of the remains plus (a) … cost of replacing or reinstating on the same site property of equal performance capacity and age but not superior to or more extensive than the insured item insofar as is practicable.
Judge Sutherland said an examination of the text revealed that:
- The concept of a total “loss” or total “destruction” relates to the utility of the insured goods and does not necessarily mean they have literally “disappeared”. This construction accommodates the notion of residual value in the scrap.
- In instances where scrap is accessible and might have another use, of however modest a nature, it self-evidently has a residual value that can be set off against the utility value of the goods. However, where the scrap is inaccessible, this factor can have no practical application.
- The valuer must conceptualise what would be needed to replace the goods at the place where they were located. This encompasses the notional assumption that the goods would typically be acquired at some other place and moved on to the site at a cost to be taken into account.
- However, it was self-evident that where the insured goods could not actually, as distinct from notionally, be replaced, the aspect of removal can play no role in the valuer’s calculations, and the clause cannot be read to imply that such a factor must, in every case, be catered for. “The striving for business sense must prevail.”
In the circumstances, Judge Sutherland said “the reasonable valuer” would put a value on the goods without factoring in the removal costs. This outcome “would be consistent with the proper interpretation of the clause”.
He ordered Sasria to pay Blackspear R6 491 750, plus interest of 13.5% a year calculated from 27 March 2017 until the date of payment.
Costs, including the costs of Blackspear’s expert witness, were also awarded against Sasria.
