Insurance informer: Prescription – specialised knowledge of damage

​​​​​​​​​​​​​​​​​​​​​In a recent judgment (Zurich Insurance Company South Africa Ltd v Gauteng Provincial Government 1), the Supreme Court of Appeal (SCA) held that prescription, in relation to a claims occurring policy, only began to run about 5 years after the construction of a structure.

The structures were two Gautrain tunnels. The first Gautrain tunnel was completed on 4 January 2009 and the second Gautrain tunnel by 2 July 2009.

The SCA applied the requirements for prescription set out in section 12(3) of the Prescription Act, 1969:

  • the debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor; and
  • the facts from which the debt arises, however a creditor shall be deemed to have such knowledge if it could have acquired it by exercising reasonable care.

It was accepted that Gauteng Province knew the identity of the debtor, which was the insurer Zurich. It was also accepted that the province was aware of facts giving rise to the debt (from 2009) or ought reasonably to have had this knowledge. Zurich therefore alleged that prescription commenced in 2009. However, the issue was that the province was not previously able to identify any damage to the tunnels.

The identified problem with the tunnels was excessive water ingress. The province was aware of the problem at an early stage. It adopted a cautious approach and notified Zurich on a number of occasions that it believed it had a claim under the policy. Zurich dispatched assessors to conduct investigations, and they reported that there was no sign of damage.

The province's investigations were delayed by arbitration with its partner, Bombela (commencing in 2011 and ending in November 2013). The province only resumed its investigations after this arbitration ended.

In April 2014, the province consulted Dr Barton, an expert in rock mechanics, who explained the concept of excavation disturbance zones (EDZs).

In May 2014, Dr Barton investigated the tunnels and found that the 4th type of EDZ was present. In his opinion, the failure to pre-grout when blasting had caused EDZ4 damage to the rock mass that surrounded the void of the tunnel.

In considering Dr Barton's evidence, the court a quo held that EDZ4 is a specialist matter which would not be physically detectable during an ordinary inspection. The Province could only notify Zurich of its claim after it had obtained the specialised knowledge that damage to the tunnels had occurred.

On 5 February 2015, the province filed a claim under its policy and on 25 February 2015, following the rejection of the claim, it served summons against Zurich.

Considering the chronology of events, the SCA ultimately held that prescription began to run in May 2014, and was interrupted when summons was served in February 2015.

1 Zurich Insurance Company South Africa Ltd v Gauteng Provincial Government (Case no. 734/2021) [2022] ZASCA 127 (28 September 2022).

​Also, for those of you who enjoy a bit of knowledge testing, we set out below a quick quiz "The Webber Wentzel Insurance Cipher", to try and test your insurance law knowledge in practical ways.​


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