The court was asked to determine three main points:

• whether Biovac had made material misrepresentations to Guardrisk regarding electrical compliance certificates;
• whether Biovac’s failure to possess such certificates amounted to a breach of the policy’s reasonable precautions clause; and
• whether Biovac’s claim was time-barred due to procedural amendments.

Facts and points in contention

At the heart of the dispute was Guardrisk’s assertion that Biovac had misrepresented its compliance with electrical certification requirements during a pre-insurance survey. Guardrisk further argued that Biovac’s failure to possess up-to-date electrical compliance certificates breached a key policy condition requiring compliance with statutory obligations. Finally, Guardrisk contended that Biovac’s claim was time-barred, citing the timing and amendment of legal pleadings.

The court, however, focused on the substance of these three issues, setting aside procedural matters such as condonation.

Why the court ruled in favour of Biovac

The court found that Guardrisk failed to prove that Biovac had made any material misrepresentation. The evidence presented by Guardrisk did not support the claim that Biovac’s representative had assured it (Guardrisk) of full compliance with electrical certification requirements. Judge S.D.J Wilson noted inconsistencies in Guardrisk’s own inspection survey documents and highlighted that the burden of proof rested squarely on Guardrisk. In the absence of clear, reliable evidence, the court concluded that no misrepresentation had been made.

Turning to the question of regulatory non-compliance, the court emphasised that the policy in question was an “all-risks” policy, which by its nature insures the policyholder against its own negligence. Judge Wilson made a critical distinction between “negligence” and “recklessness”, holding that only the latter could justify repudiation under the “reasonable precautions” policy condition. The court further held that there was no evidence that Biovac had acted recklessly or with conscious disregard for the risk; on the contrary, Biovac’s facility was described by multiple witnesses as well-maintained and professionally managed.

The court’s reasoning on this point is particularly significant for non-life insurers, as it sets a high bar for avoiding liability on the basis of regulatory breaches – noting that the existence of mere negligence is insufficient to justify repudiation.

On the third point, the court dismissed Guardrisk’s time-bar argument as technical and without substance. Judge Wilson found that Biovac had brought its claim within the required period and that amendments to its pleadings did not amount to the introduction of a new claim.

The recklessness principle and lessons for insurers

The most consequential aspect of this judgment lies in the court’s treatment of the “reasonable precautions” policy condition. Judge Wilson explained that, under South African law, recklessness involves a conscious acceptance of a known and serious risk, whereas negligence is simply a failure to take reasonable care.

The court held that:

“The essence of recklessness is that a known and serious risk is accepted as the likely consequence of a given course of action. A reckless person knows that damage is likely to follow from particular conduct but carries on nonetheless. A negligent person merely proceeds without taking reasonable measures to mitigate foreseeable risk.”

In this case, there was no evidence that Biovac knew it lacked the required compliance certificates or that it consciously disregarded the associated risk. Expert testimony described Biovac’s operations as exemplary, further undermining any suggestion 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.

Conclusion

This judgment serves as a reminder that insurers must meet a high evidentiary threshold when seeking to avoid liability for misrepresentation or regulatory non-compliance. 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.