THE FINE PRINT IS IN YOUR FAVOUR: WHAT INSURERS CANNOT UNDO

Introduction

Insurance policies are only as valuable as the wording of their contractual provisions. A recent judgment by the Supreme Court of Appeal - AIG South Africa Ltd & Others v Azrapart (Pty) Ltd and Another (898/2024) [2025] ZASCA offers a crucial message for policyholders: insurers cannot rewrite their obligations simply because they later prove to be costly.

At the centre of the dispute was the inclusion of business interruption cover in the insurance contract for Fourways Mall, located in Johannesburg. Lockdown regulations as a result of the COVID-19 pandemic disrupted trade resulting in financial distress for tenants which led the owners of the shopping centre to claim in terms of the clause covering infectious and contagious diseases (ICD). The insurers resisted, arguing that this clause had been included by mistake and should be removed.

The central issue to this case is whether the insurers can undo what they had agreed to?

In simple terms, the insurer claimed: ‘We never intended to include infectious disease cover, even though it appears in the policy.’

The insurers sought to rely on rectification, a legal remedy that allows a contract to be corrected if it does not reflect the parties’ true, shared intention. The requirements to successfully invoke rectification are the following:

a)    ‘That an agreement had been concluded between the parties and reduced to writing;

b)    That the written document does not reflect the true intention of the parties – this requires that the common continuing intention of the parties, as it existed at the time when the agreement was reduced to writing, be established;

c)    An intention by both parties to reduce the agreement to writing…;

d)    A mistake in drafting the document, which mistake could have been the result of an intentional act of the other party or a bona fide common error; and

e)    The actual wording of the true agreement.’

As a policyholder this would naturally beg the question: Can an insurer avoid paying a valid claim by arguing that the wording was a mistake?

The court’s answer was clear: only in very limited circumstances and certainly not on these facts. The court reinforced an important rule that a contract will only be changed (rectified) if both parties shared the same mistake. It is therefore not sufficient for an insurer to merely allege, as they did with reference to these facts, that confusion arose or the insurer(s) had a common continuing intention to exclude infectious disease cover. The onus rests with the insurer, in this instance, to prove that the policyholder shared an intention different from what was recorded in the contract. In this case, the evidence showed that the policyholders consistently required and pursued cover that included business interruption arising from infectious disease, as provided for in the contract. As a result, the court found in favour of the insured.

In summary, the following technical facts were crucial in the determination of this case:

1. The very first request for insurance by the policyholders specifically included  protection against business interruption caused by infectious diseases. It was the commercial purpose of the policy;

   
   

2. At no point before the claim or when the parties concluded the contract did the insurers object to, or exclude infectious diseases cover from the policy. The insurers accordingly failed to prove a shared intention to exclude the cover;

   
   

3. The insurer had raised the point of rectification two years after the contract was concluded and after the claim was submitted;

   
   

4. In furtherance of the above point 3, the insurer referred to inconsistencies in earlier documents, where one version omitted the infectious diseases cover. However, the omission was not identified in accordance with the shared POLDRA drafting rules as agreed to by the insurers and neither was the inconsistency objected to or corrected during the negotiation process. Furthermore, the aforesaid omission was never communicated clearly to the policyholder;

   
   

5. Despite the above, the policyholders were entitled to rely on the final agreed wording. Insurers cannot rely on their own uncommunicated or internal drafting errors in the absence of proof of a mutual mistake.

Conclusion

For policyholders, the message is both simple and reassuring. If your insurance contract clearly provides cover and the insurer agreed to it without objection, the obligation in question is likely to be enforced by the courts. This case underscores a broader principle of fairness in commercial dealings in our law. Parties are accordingly bound by the final agreements as concluded and not by after the fact attempts to reinterpret them.

Kindly note that the case illustrated above is based on its own unique factual matrices and does not provide a uniform solution to all insurance related matters. It is therefore necessary to seek legal advice from our skilled attorneys who are eager to assist you in navigating this complex area of law. Contact our offices at info@rouxlegal.com to schedule a consultation.

By Jarryd Thurston

(Candidate Attorney)

30 April 2026

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