The appeal concerned whether the written insurance policy correctly recorded the insurance agreement or whether, as the insurers alleged, the inclusion of ICD cover resulted from a drafting mistake. The court characterised the dispute succinctly, noting that “the issues in this appeal arise from a dispute over the terms of an insurance contract … [and] whether the contract of insurance stands to be rectified, as pleaded by the insurers.”

Background and negotiation process

The insurers, with different percentages of the assumed risk, were AIG South Africa Limited (AIG) with 70% risk, Old Mutual Insure Limited (OMI) with 14% risk, Bryte Insurance Company Limited (Bryte) with 8% risk, Guardrisk Insurance Company Limited (Guardrisk) with 3% risk and Insurance Underwriting Managers (Pty) Ltd (IUM) with 5% risk. The insured were Azrapart (Pty) Ltd and Accelerate Property Fund Limited.

On the eve of the hearing of the appeal, AIG, OMI, Bryte and Guardrisk concluded a settlement agreement with the insured and, as a result, withdrew their appeals. The appeal accordingly proceeded only with IUM against the insured.

The insured entities, having been co-owners of Fourways Mall in Johannesburg, required business interruption cover that would protect them against events capable of disrupting tenant trading. The judgment records that: “The respondents needed an insurance policy that … would provide cover against factors that would cause business interruption … The ICD cover was one such factor.”

Negotiations between the insured and the insurers took place using the POLDRA framework, which regulates the use of “quoting” and “placing” slips. Under these rules, any changes or unusual terms must be clearly highlighted by the party proposing them. The court emphasised the importance of this rule by repeating the governing instruction that, “Anything not highlighted will be taken as accepted.”

It was common cause that two different quoting slips had circulated during negotiations – one including the ICD extension and one without it – but the insurers failed to highlight the ICD exclusion when it appeared. The court noted that the omission “was neither specifically highlighted nor signalled”, meaning the ICD exclusion could not be treated as an agreed change.

The decisive document was the placing slip, which was issued by the insured and signed by the insurers once negotiations concluded. The court described its effect clearly, saying: “The placing slip included the ICD cover … Like the placing slip, the insurance contract included the ICD cover.” This alignment between the placing slip and the policy was fatal to the insurers’ case.

The court further endorsed the High Court’s application of the parol evidence rule, holding that once the insurance contract had been reduced to writing, the placing slip and final policy constituted the exclusive memorial of the parties’ agreement and could not be contradicted by earlier negotiation documents.

Importantly, the court observed that, “Throughout the negotiation, none of the parties raised the issue concerning the inclusion or exclusion of the ICD cover.” The absence of any contemporaneous objection meant there was no factual foundation for the rectification request.

The court also attached significance to the fact that rectification was only raised in 2022, nearly two years after the policy had been concluded and only once an indemnity claim had arisen.

Why rectification failed

The court restated the well established principle that the onus to prove rectification lies with the party seeking it. To succeed, the insurers were required to show that both parties had a prior common intention not reflected in the written policy. The evidence, however, did not support such a conclusion. Instead, the documents that all parties ultimately signed, particularly the placing slip and the final policy, consistently included ICD cover.

Because the insurers never highlighted the ICD exclusion, never raised any objection during negotiations and ultimately signed a placing slip that contained the ICD extension, the court found no basis on which to alter the written record of the agreement. The insurers’ attempt to rely on an earlier, unsigned quoting slip was unpersuasive in light of the mandatory POLDRA sequence and the evidentiary weight put on the placing slip.

IUM further failed to call any witnesses to testify as to its alleged intention when signing the placing slip, leaving the rectification defence unsupported by direct evidence.

Implications for insurers

This judgment underscores that insurers must treat the POLDRA “highlighting requirements” as a strict, non negotiable, discipline. Where an insurer intends to alter or exclude a material policy extension, it must expressly draw attention to such a change, as failure to do so will be treated as acceptance of the unamended terms.

The judgment also illustrates that our courts will not retrospectively correct what an insurer later perceives to be an unfavourable bargain. Since rectification demands clear proof of a shared prior intention inconsistent with the signed documents, it is rarely available as a remedy.

The court’s insistence that the final placing slip formed the contractual foundation also reinforces the need for rigorous internal checking of placing slips and policy documents by insurers before signature. Once a placing slip is executed, its contents will almost inevitably shape the final policy wording and bind all participating insurers.