30 January 2009 by

An insurance contract means what it says

A golden rule of legal interpretation says that "in construing ... all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no farther."

This all sounds self evident but words rarely stand in isolation and rarely enjoy a meaning completely independent of the context of their use. Hence it has been held by the Supreme Court of Appeal (the SCA) that "notwithstanding that the words used in a contract have a plain meaning, the parties to the contract can always say, ......, that they both understood a particular word or phrase to have had a meaning different from the true and ordinary meaning of the word or phrase."

In the context of contract interpretation, the decision of the SCA in the matter of SASRIA Ltd v Slabbert Burger Transport (Pty) Ltd 2008 (5) SA 270 SCA is an interesting example. The respondent (Slabbert Burger) claimed from the appellant (SASRIA) under an indemnity policy for the value of the respondent's truck which was destroyed in a fire during the course of a strike by the South African Transport and Allied Workers' Union. The driver of the truck was not participating in the strike and had parked his truck at a truck stop in Leslie, Gauteng. Three men, two of whom were wearing overalls similar to those worn by employees of the respondent, bought petrol and matches from the shop at the truck stop and shortly afterwards the truck was on fire and was destroyed. The men were not seen actually setting fire to the truck but the cause of the fire was flammable liquid ignited on the side of the truck and the trial judge drew the inference from the stated facts in the case that the truck was destroyed by employees of the respondent. The SCA agreed that the inference drawn by the trial judge was the most probable inference to be drawn from the facts.

The case then came down to the question as to whether the destruction of the truck was covered by the insurance policy issued by the appellant. The wording of the policy described the indemnity given to the respondent as being "against any loss of or damage to (the truck) directly related to or caused by ... any riot, strike or public disorder, or any act or activity which is calculated or directed to bring about a riot, strike or public disorder."

The judges looked first at the ordinary dictionary definition of the word "strike" which they found to be "a concerted cessation of work on the part of a body of workers for the purpose of obtaining some concession from the employer or employers". The appellant attempted to persuade the SCA that there must be elements of violence and unlawfulness in the strike in order to bring the damage within the indemnity contracted for under the insurance policy.

Various definitions for the word "strike" were postulated but were rejected by the court on the basis that the definitions made the word redundant as the violence and unlawfulness were adequately catered for under the already existing concepts of "riot" and "public disorder". The SCA also found that to the extent that the wording of the contract brought an unintended liability upon the appellant, it ought to have drafted the wording in clear language and accordingly it had only itself to blame.

In the result the SCA found that "riot" should be given its ordinary meaning and that therefore the damage to the truck fell within the scope of the indemnity provided under the policy of insurance.

Although the appellant will doubtless disagree, there is something comforting in a judgement which upholds the plain meaning of words.

To quote Albert Einstein: "Most of the fundamental ideas of science are essentially simple, and may, as a rule, be expressed in language comprehensible to everyone".

Tim Fletcher

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