The Supreme Court of Appeal has delivered a significant judgment in AIG South Africa Limited and Others v Azrapart (Pty) Ltd and Another, confirming that an infectious disease extension formed part of the insured’s business interruption cover. The case arose from the Fourways Mall COVID 19 losses and provides critical guidance on rectification, contract formation, and the legal effect of POLDRA drafting procedures. The decision is of particular importance to insurers, brokers, underwriters, and commercial property owners seeking certainty in the wake of pandemic related claims. insurance
The respondents Azrapart (Pty) Ltd and Accelerate Property Fund Ltd, co owners of Fourways Mall, sought comprehensive business interruption insurance that included cover for infectious and contagious diseases. Marsh (Pty) Ltd acted as their broker and conducted negotiations with multiple insurers using the industry standard POLDRA processes and Quoting Slips. While the initial quotation documents clearly included the infectious disease extension, a later Quoting Slip circulated by an insurer omitted the clause, but without the mandatory highlighting required for any amendment or deletion under POLDRA. This omission was never flagged, discussed, or agreed to by the insured or their broker, and the final Placing Slip and policy that were ultimately signed by all insurers did include the infectious disease extension.
When COVID 19 lockdowns forced the mall’s tenants to cease trading, the insured claimed under the infectious disease clause. Only one insurer, Insurance Underwriting Managers (Pty) Ltd IUM, continued to argue that the inclusion of this clause was a mistake and sought rectification of the contract to remove it. Rectification is an exceptional remedy, requiring clear proof of a prior common intention inconsistent with the written agreement, a drafting error that caused the inconsistency, and precise evidence of what the corrected agreement should contain.
The Court found that no such evidence existed. The insured’s intention to secure infectious disease cover was clear from the first request for a quotation. The omission of the clause in the alternative Quoting Slip was neither highlighted nor agreed to, and therefore had no effect in terms of POLDRA. The final Placing Slip, which all insurers signed and which must form the basis of the final policy wording, expressly included the clause. Despite this, the rectification defence was only raised two years later, after substantial COVID 19 losses had materialised. IUM also failed to lead any witness to explain its intention or reconcile its acceptance of the Placing Slip with its later objection.
The SCA held that the Placing Slip and final policy formed the exclusive memorial of the parties’ agreement, as required by the parol evidence rule. There was no mutual mistake, no incorrect reflection of contractual intention, and no justification to rewrite the contract. The appeal was dismissed with costs, including the costs of two counsel. The infectious disease extension therefore remained fully enforceable.
This judgment confirms that insurers must comply strictly with industry governed drafting protocols such as POLDRA. Any deviation from agreed terms must be clearly highlighted, otherwise the courts will regard the unhighlighted wording as accepted. The Court also reinforced the contractual authority of the Placing Slip and made it clear that rectification cannot be used as a mechanism to escape liability after an insured event has occurred. For commercial landlords and corporate property owners, the decision confirms that infectious disease extensions included in the signed policy documentation remain valid and enforceable even if later disputed by insurers.
