Training Material Contracts

LEVEL 4 SKILLS PROGRAMME
Self Study Guide

Short Term Insurance Personal Lines February 2004
and Banking
2
Introduction 1
Purpose 1
Linked Unit Standards 1
Note to the Learner 2
Introduction to Commercial Lines
Module 1
The Law of Contract 4
Learnin! "utcomes 4
Introduction #
Consensus #
Capacity $
Physical Impossibility 11
Le!ality 11
Formalities 1
%ischar!e o& Contract 1
'reach o& Contract 1(
La) o& %elict 1*
+no)led!e Sel& ,ssessment - .odule 1 20
.odel ,ns)ers to +no)led!e Sel& ,ssessment - .odule 1 24
Module
The Short Ter! In"urance Contract #
Learnin! "utcomes 2(
Introduction 2/
%e&inition 2/
0he Contract 2/
Caveat Emptor 1ersus Uberrima Fides 2$
%uty o& %isclosure 0
Insurance Contracts 2
Summary
2arranties and 'reach o& 2arranties
Interpretation o& Contracts 4
Insurable Interest #
Indemnity *
Subro!ation 40
Contribution 41
Pro3imate Cause 41
Some Speci&ic Short 0erm Insurance Principles 44
+no)led!e Sel& ,ssessment - .odule 2 4(
.odel ,ns)ers to +no)led!e Sel& ,ssessment - .odule 2 #2
Module $
Practice of %nderwritin& '(
Learnin! "utcomes #/
Perils #*
"ther Forms o& 0he&t (1
Sur1eys (2
0he Sur1ey 4e5uest (
0he Completed Sur1ey ($
Under)ritin! the 4isk /4
Section I - 0he Premises /4
Section II - Fire and ,llied Perils /#
Section III - 'ur!lary /$
Section I6 - .oney *2
Section 6 - Claims 7istory *4
Sur1eyor8s Comments *#
,skin! &or Impro1ements *(
+no)led!e Sel& ,ssessment - .odule */
.odel ,ns)ers to +no)led!e Sel& ,ssessment - .odule *$
Module 4
Standard )eature" of the Multi!ar* Polic+ ,-
Learnin! "utcomes $0
Introduction $1
9eneral Pro1isions $4
+no)led!e Sel& ,ssessment - .odule 4 $(
.odel ,ns)ers to +no)led!e Sel& ,ssessment - .odule 4 $$
Module '
)ire and Peril" .Multi!ar*/ 1-1
Learnin! "utcomes 101
Introduction 102
%e&ined :1ents 102
Speci&ic :3ceptions 10
Speci&ic Condition - ,1era!e 10
,dditional Perils ;i& stated in the schedule to be included< 104
Clauses and :3tensions 10/
"ther Fire Classes 11
'ody Corporate 2ordin! 114
S,S4I, - South ,&rican Special 4isks Insurance ,ssociation 11(
+no)led!e Sel& ,ssessment - .odule # 11/
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule # 11$
Module #
0u"ine"" Interru1tion 11
Introduction 122
0he Co1er 122
%e&ined :1ents 12
Speci&ic Conditions 12
Item 1= 9ross Pro&it 124
Item 2= 9ross 4entals 12#
Item = 4e1enue 12#
Item 4= ,dditional Increase in Cost o& 2ordin! 12#
Item #= 2a!es ;Number o& 2eeks 'asis< 12(
Item (= Fines and Penalties &or 'reach o& Contract 12(
%e&initions 12/
:3tensions and Clauses 10
9eo!raphical Limits 12
S,S4I, 1
+no)led!e Sel& ,ssessment - .odule ( 14
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule ( 1(
Module (
Princi1le" of Lia2ilit+ In"urance 1$3
Learnin! "utcomes 1*
Introduction 1$
Le!al Principles 1$
%e&ences 140
0he Purpose o& Liability Insurance 141
+no)led!e Sel& ,ssessment - .odule / 142
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule / 144
Module 3
Other )or!" of Lia2ilit+ Co4er 14'
Learnin! "utcomes 14#
Introduction 14(
'uildin!s Combined Section 14(
"&&ice Contents Section 14(
:mployer8s Liability Section 14/
Pro&essional Liability 14/
%irectors and "&&icers8 Liability 14*
Libel Policies 14*
Construction 4isks 14*
Product 4ecall 14*
Pollution and :n1ironmental Impairment ;:IL< 14$
6ehicle 4isks 14$
S,S4I, 14$
+no)led!e Sel& ,ssessment - .odule * 1#0
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule * 1#2
Module ,
Theft5 Mone+5 )idelit+5 Good" in Tran"it 1'$
Learnin! "utcomes 1#
Introduction 1#4
0he&t Section - %e&ined :1ents 1#4
S,S4I, 1#(
.oney Section - %e&ined :1ents 1#(
Fidelity Section 1#$
9oods in 0ransit Section 1(#
+no)led!e Sel& ,ssessment - .odule $ 1(*
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule $ 1/0
Module 1-
Account" Recei4a2le5 Gla""5 0u"ine"" All Ri"*"5 Accidental 6a!a&e
1(
Learnin! "utcomes 1/2
Introduction 1/
,ccounts 4ecei1able Section 1/
Speci&ication 1/4
9lass Section 1/#
'usiness ,ll 4isks Section 1//
,ccidental %ama!e Section 1/*
+no)led!e Sel& ,ssessment - .odule 10 1*
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule 10 1*#
Module 11
Grou1 Per"onal Accident and Stated 0enefit" 13(
Learnin! "utcomes 1*/
Introduction 1**
Personal ,ccident and Stated 'ene&its 1**
%e&ined :1ents 1*$
%e&initions 1*$
Pro1isos 1$1
:3tensions 1$2
Speci&ic :3ceptions 1$2
S,S4I, 1$
+no)led!e Sel& ,ssessment - .odule 11 1$4
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule 11 1$(
Module 1
Electronic E7ui1!ent Section 1,3
Learnin! "utcomes 1$*
Introduction 1$$
Sub>section ,= .aterial %ama!e 1$$
'asis o& Indemni&ication 200
%e&inition o& .arket 6alue 201
Limit o& Liability 201
Clauses and :3tensions 202
Sub>section '= Conse5uential %ata?Pro!rammes 202
%e&ined :1ents 20
%e&initions 20
Clauses and :3tensions 204
Special :3ception ;Sub>sections , @ '< 20#
9eneral :3tension - Incompatibilty Co1er 20#
S,S4I, 20(
+no)led!e Sel& ,ssessment - .odule 12 20/
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule 12 20$
Module 1$
Other Cla""e" of In"urance 11
Introduction 212
,d1ance Pro&its 212
,ssets ,ll 4isks 212
,1iation 21
Cancellation and ,bandonment 21
:n!ineerin! Insurance 214
.arine Insurance 21$
4einsurance 21$
+no)led!e Sel& ,ssessment - .odule 1 22
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule 1 22#
Module 14
Clai!" (
Learnin! "utcomes 22/
Introduction 22*
Fire and 'usiness Interruption 22*
0enants 22$
,ccident Classes 22$
Personal ,ccident 20
,ccidents in the Course o& :mployment 21
Liabilities 22
Fidelity 22
.otor 2
Court 'onds 2
9o1ernment 'onds 24
Commercial 9uarantees 2#
+no)led!e Sel& ,ssessment - .odule 14 2(
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule 14 2$
Module 1'
South African S1ecial Ri"*" In"ruance A""ociation .SASRIA/ 41
'ack!round 242
0ypes o& Co1er 242
Functrionin! o& S,S4I, 'usiness 242
0ypes o& Coupons 24
Underlyin! Policy 24
Premium ,ccountin! 24
,ccountin! 4eturns to S,S4I, 244
6alue ,dded 0a3 ;6,0< 244
.onthly Premiums 244
Pro 4ata Premiums 244
Cancellation o& S,S4I, 24#
Claims 24#
Claims Procedures 24#
Claim %ocumentation 24(
,dAusters Loss 24(
Prescription Period 24(
6,0= Claims 24(
Namibian Special 4isks Insurance ,ssociation ;N,S4I,< 24/
+no)led!e Sel& ,ssessment - .odule 1# 24*
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule 1# 24$
Module 1#
Co!1en"ation for Occu1ational In8urie" and 6i"ea"e" Act .COI6A/ '-
Learnin! "utcomes 2#0
4easons &or the ,ct 2#1
:1ents Co1ered under C"I%, 2#4
Classes o& 'ene&its under C"I%, 2#4
0he :mployer 2#(
,ssessments o& :mployers 2#(
4isks under C"I%, 2#*
InAury 4elated 'ene&its 2#$
Fatal ,ccidents 2#$
%eath 'ene&its under C"I%, 2(#
"ccupational %iseases 2(#
0he Course o& :mployment 2(/
Under)ritin! Criteria 2(*
Claims 4atios 2/0
Ne!li!ence o& the :mployer 2/1
%etermine o& Ne!li!ence 2/2
.isconduct on the part o& the :mployee 2/
+no)led!e Sel& ,ssessment - .odule 1( 2/
.odel ,ns)ers on the +no)led!e Sel& ,ssessment - .odule 1( 2/*
Glo""ar+ of Ter!" 31
Pur1o"e
0he purpose o& this skills pro!ramme is to enable youB the learnerB to meet the minimum
re5uirements in terms o& the F,IS le!islation as stated )ithin the Fit and Proper !uidelinesC
0he skills pro!ramme is comprised o& 1( .odulesC :ach o& these .odules is linked to unit
standards taken up in the NDF 5uali&ications &rame)orkC
Lin*ed %nit Standard"
0he &ollo)in! unit standards are linked to this skills pro!ramme=
%nit Standard
9u!2er
Title Le4el Credit"
14,,4 %emonstrate kno)led!e and understandin! o& insurable risk 4 2
14,3-
,pply technical kno)led!e and skill in order to mana!e risk in
business interruption
4 2
14,,3
%escribe the operational conse5uences o& incidents and losses on
an entity
4 2
1-1,4
%emonstrate kno)led!e and insi!ht into the Short 0erm Insurance
,ct ;No # o& 1$$*< and the accompanyin! re!ulations
4 2
1-$#4
%escribe insurance co1er a!ainst dama!e caused by riots and
acts o& terrorism and 1iolence a!ainst public authorities in South
,&rica
4
1-$(#
%emonstrate kno)led!e and understandin! o& Commercial and
IndustrialB and Corporate insurance in South ,&rica
4 4
1-$((
%emonstrate kno)led!e and insi!ht into the Compensation &or
"ccupational InAury and %isease ,ct 10 o& 1$$ ;C"I%,<
4 2
1-$(3
%emonstrate kno)led!e and understandin! o& the statutory co1er
a&&orded under the Compensation &or "ccupational InAuries and
%iseases ,ctB 10 o& 1$$B as amended ;C"I%,<
4
11#4
%emonstrate kno)led!e and insi!ht o& the Financial ,d1isory and
Intermediary Ser1ices ,ct ;F,IS< ;,ct / o& 2002<
(This unit standard will be addressed via the Awareness
Training.)
4 2
14,,1 ,pply the la) o& contract to insurance 4 2
14,,' :3plain the nature o& risk and the risk mana!ement process 4 4
1'--3
%etermine risk e3posure in order to mana!e the risk in a speci&ic
situation
4 2
SHORT TERM INSURN!E !OMMER!IL LINES February 2004
BN"IN#
$
9ote" to the Learner
Tar&et Audience
0his learnin! inter1ention is aimed at all bankin! sta&&B ne) and e3istin! )ho are in1ol1ed in Short
0erm Insurance Commercial LinesC
6eli4er+ Method
0his is a sel& study !uide )hich contains all the in&ormation you re5uire in order to meet the
re5uirements o& the unit standards linked to this pro!rammeC
6uration
It )ill take you appro3imately hours o& sel& study to master the outcomes o& this pro!rammeC
Knowled&e Self A""e""!ent"
,t the end o& each .odule you )ill be re5uired to complete a kno)led!e sel& assessmentC .odel
ans)ers ha1e been pro1ided a!ainst )hich you can assess you ans)ersC
A""e""!ent Method
"nce you ha1e )orked throu!h the learnin! materialB you )ill be re5uired to ans)er a number o&
kno)led!e 5uestionsC 0hese 5uestions )ill be presented in the &orm o& an ,ssessment 9uideC
Eou are re5uired to achie1e 100F in order to pass this assessmentC
0he assessment process and !atherin! o& e1idence )ill be discussed )ith you by your
,ssessor?Line .ana!er durin! a pre>assessment discussionC
BN"IN#
2
Co!!ercial in"urance i" a 2road ter! that i" a11lied to the "hort ter! in"urance
re7uire!ent" of 2u"ine""e": Thi" could ran&e fro! a "!all 1ro1rietor"hi1 ."uch a" a
corner caf; or ho!e indu"tr+ SMME/ to lar&e con&lo!erate": In !o"t in"urance
co!1anie"5 the lar&er ri"*" are actuall+ handled throu&h a "1ecial cor1orate di4i"ion:
The 2ul* of the "tandard co!!ercial 2u"ine"" in South Africa u"e" the Multi!ar*
.currentl+ 4er"ion III/ clau"e" that ha4e 2een a&reed u1on 2+ the indu"tr+ in &eneral5 2ut
the"e are "o!eti!e" !odified "li&htl+ to "uit 1articular ri"* circu!"tance":
BN"IN#
%
Module 1< The Law of Contract
Learnin& Outco!e"
0+ the end of thi" Module5 +ou will 2e a2le to<
:3plain the need &or consensus bet)een t)o partiesB the one makin! an o&&er and the
other si!ni&yin! acceptanceB in order that a contract can come into bein!G
%iscuss the di&&erent aspects o& consensus that can result in a!reement bein! deemed to
be in placeG
%escribe the di&&erent means o& communication that can be used to con&irm consensusG
%iscuss some o& the special terms that may result in consensus to enter into a contractG
%iscuss the need &or a person to ha1e some type o& le!al capacity to be able to enter into
a contractG
:3plain )hat circumstances )ill result in it bein! deemed physically impossible &or a
contract to be entered intoG
%iscuss the le!ality o& contracts entered into under particular circumstancesG
'rie&ly describe the &ormalities applicable to the comin! into bein! o& a contractG
:3plain ho) a contract can be Hdischar!edI ;terminated<G
%iscuss the circumstances under )hich a party to a contract )ill be deemed to be in
breach thereo&G
%escribe some o& the remedies a1ailable )here a breach o& contract has occurredG
:3plain the importance o& the la) o& delict in a discussion on contract la)C
BN"IN#
&
Introduction
0he la) o& contract is a cate!ory o& the la) o& obli!ationsC In 4oman la) obli!ations could arise
&rom contractB delictB 5uasi>contract or 5uasi>delictC Duasi means Has i&IB and this is the sense in
)hich the term is used hereC 0he obli!ations &allin! under that headin! did not truly arise &rom
contract or delictB but it seemed as i& they arose &rom that sourceC For purposes o& the present
discussion delict and 5uasi>delict can be disre!arded ;this )ill be dealt )ith in a later module<C
0)o important e3amples o& obli!ations )hich arise &rom 5uasi>contract are those &or unAust
enrichment and the negotiorum gestorC :nrichment )ill be re&erred to in more detail in the
discussion on minorsB and negotiorum gestor )ill be re&erred to in the later module on a!encyC
Lee and 7onorJB in their )ork entitled on The SA Law of bligationsB de&ine a contract as an
a!reement )hich creates or is intended to create le!al obli!ations bet)een the parties theretoC
In Farlam and 7atha)ayB Contra!t" Cases# $aterials and Commentar%B it is stated that
contractual obli!ations are created by the a!reement ;or apparent a!reement< o& the parties -
unlike many other obli!ationsB they are supposed to arise 1oluntarilyC
0he parties to the contract usually a!ree to do or not to do somethin!B or to !i1e or not to !i1e
somethin!C , person cannot contract )ith him> or hersel&B and there&ore there must be t)o or
more parties to constitute a 1alid contractC
0he essentials o& a 1alid contract can be listed as &ollo)s=
i< consensus ;a!reement<
ii< capacity
iii< physical possibility
i1< le!ality
1< &ormalities
0hese essential )ill be discussed in more detail in this moduleC Note that i& any one o& these
components is lackin! a 1alid contract does not come into e3istence and the purported
a!reement is said to be 1oidC
Con"en"u"
0he easiest )ay to e3plain the comin! into e3istence o& a contract is to state that it consists o& an
o&&er and acceptanceC 0his is !enerally the caseB but it cannot al)ays be stated that one party
made an o&&er and another acceptedC HConsensusIB or Ha!reementIB implies an actual Hmeetin! o&
the mindsIC 0here areB ho)e1erB cases )here a contract comes into bein!B or is !i1en a certain
contentB e1en thou!h there is no actual meetin! o& the mindsC 0he courts do not )ork only )ith a
simple psycholo!ical concept o& contract but )ill also consider a normati1e 1ie) soB )hile the
courts use Hmeetin! o& the mindsI as a point o& departureB in certain instances a normati1e 1ie)
;iCeC )here the parties are e3pected to beha1e in certain )ays and their acts attract particular
conse5uences<B )ill be heldC In Anglo Carpets (&t%) Ltd v Sn%man ('()*) Aud!e CoetKee said= HIt
is per&ectly true that there is no e1idence o& a crisp o&&er and acceptance L but this is not a &atal
&la)CI
BN"IN#
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0he element o& certainty can also be re!arded as an essential &or a 1alid contractB althou!h this is
o&ten seen as part o& the HconsensusI re5uirement - the parties must be certain about )hat they
a!ree uponC 0he courts are reluctant to hold 1oid &or uncertainty any pro1ision in an a!reement
bet)een parties )hich )as intended to ha1e le!al e&&ectC
0he courts al)ays try to balance matters so thatB )ithout 1iolatin! essential principlesB the
dealin!s o& persons in business may as &ar as possible be treated as e&&ecti1eB and that the la)
may not incur the reproach o& bein! a destroyer o& bar!ainsC
Ca"e" of True Con"en"u"
2e )ill proceed on the basis that there is an o&&er and an acceptanceC 0he o&&er must be &irmB
de&inite and couched in such &orm that it can be acceptedB and that the result )ould be the
e3istence o& a contractC 0he o&&er must contain all the essentials re5uired &or the speci&ic type o&
contractC I& the person to )hom the o&&er is directed does not simply accept itB but adds a &urther
termB this is called a counter>o&&erB )hich must be accepted by the person )ho made the initial
o&&er be&ore the contract can be said to ha1e come into e3istenceC I& the o&&er is not so de&inite that
it can lead to a contract upon mere acceptanceB it is usually described as an in1itation to do
businessC
0he so>called H!entlemen8s a!reementI must be distin!uished &rom a contractC Sharro!+G
0u"ine"" Tran"action Law 5uotes a !ood e3ample o& a !entlemen8s a!reement= , document
embodyin! an a!reement bet)een t)o parties contained a clause )hich speci&ically stated that it
)as only Ha de&inite e3pression and record o& the purpose and intentionI and that the a!reement
)as not si!ned Has a &ormal or le!al a!reementB and shall not be subAect to le!al Aurisdiction in the
la) courtsIC 0he court ruled that this )as merely a !entlemen8s a!reement and not le!ally
en&orceableC
0here is an important distinction bet)een an o&&er on the one hand and an option on the otherC ,n
option is an a!reement to hold an o&&er open &or a certain or reasonable time )ithin )hich the
other party can then decide )hether or not to acceptC 0he option is in e&&ect a contract to enter
into a contract and i& the o&&eror &ails to obser1e one or more o& the terms s?he commits a breach
o& contract and can be held liable in dama!esC 0he so>called Hri!ht o& &irst re&usalI must a!ain be
distin!uished &rom the optionC
Conduct Conflictin& with Intention< The 6octrine of =ua"i>!utual A""ent
It happens on occasions that a party to a contract has some particular idea in mindB but conducts
him> or hersel& in such a )ay as to !i1e the impression that s?he intends to do somethin!
di&&erentC 7is or her conduct is then said to be in con&lict )ith his or her intention and since it
)ould be 5uite impossible &or the parties to a contract to read each other8s mindsB the la) on this
point is that it is the conduct )hich is bindin! and not a person8s thou!hts or intentionsC 0his type
o& contract comes into e3istence throu!h the doctrine o& H5uasi>mutual assentI - there is no true
consensus bet)een the partiesB yet the contract has the same &orce as othersC
BN"IN#
(
)or!" that Contract" can ta*e
, contract can e3ist in 1arious &orms=
in )ritin!G
1erbalG
tacitG or
impliedC
2ritin! is a le!al re5uirement &or certain contracts ;)hich are discussed under H&ormalitiesI<B but
in most cases an oralB tacit or implied contract is Aust as 1alidC , contract can come into e3istence
)ithout a )ord bein! said and in such a case is re&erred to as a tacit contractC , typical e3ample
)ould be )here a person takes a ne)spaper &rom a 1endor and o&&ers moneyC , contract has
come into bein!C
The Parol E4idence Rule and Rectification of Contract"
0his rule states that i& a contract has been reduced to )ritin!B the )ritin! is the sole source o& the
contract and e1idence may not be !i1en as to 1erbal ne!otiations or other terms )hich preceded
the actual si!nin!C 0he document is the only source o& the terms o& the contractC 7o)e1er there
are e3ceptions to this ruleB and the la) also pro1ides &or recti&ication )here the )ritten document
does not &ully or correctly re&lect the parties8 true a!reement butB in !eneralB they should ensure
that the contract )hich has been reduced to )ritin! contains all the terms upon )hich consensus
)as reachedC
Tacit Ter!"< The Officiou" 0+"tander Te"t
Sometimes there is disa!reement bet)een the parties as to )hether a particular term is part o&
the contract or notC "ne party alle!es that it is a tacit termB the other disa!rees and in such cases
the o&&icious bystander test is appliedB the latter person bein! one )ho has nothin! to do )ith the
contractC I& s?he in5uires about a certain aspect and both parties respond the same )ayB that
particular point does not re5uire &urther clari&ication since a!reement had seemin!ly been
reached althou!h not &ormally e3pressedC ,s suchB the matter concerned is said to be an implied
term o& the contractC
, distinction can be dra)n bet)een ,ta!it terms- )hich are mani&ested by the conduct o& the
partiesB and ,implied terms- )hich are &ictitiously imported into the contract by the la)C 0he &ormer
are in&erred &rom the &acts and the conduct o& the partiesG the latter are implied by la)C 0his
distinction is not al)ays dra)n and the )ords HtacitI and HimpliedI are o&ten used to distin!uish
such terms &rom those )hich )ere e3pressly a!reed upon by the partiesC
Ter!" I!1lied 2+ Law5 Trade %"a&e or Circu!"tance
0erms can be implied in contract by la)B by usa!e and circumstanceC In a contract o& purchase
and saleB &or e3ampleB an in&erence deri1ed &rom common la) is that the !oods are &ree &rom
latent ;hidden< de&ectsC I& t)o people ha1e been doin! business &or a considerable period and
payment has al)ays been made by che5ueB it can then be re!arded as a term implied by
circumstance that payment under &uture contracts )ill &ollo) the same courseC , contract isB
there&oreB subAect to implied terms - some bein! imported by la) - )hich mi!ht not e1en ha1e
been considered by the partiesC ,s suchB it may be said in this sense that a contract is made
partly by la)C
BN"IN#
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Mean" of Co!!unication
'e&ore a contract can come into e3istence the parties must communicate their respecti1e
intentions to each otherC I& they are both present and the contract is an oral oneB no di&&iculty
e3istsC It isB ho)e1erB also possible that the parties may discuss the contract o1er the telephone or
by letterC In these cases special rules apply re!ardin! the o&&er and acceptanceC Usually )hen an
o&&er is madeB it is assumed that the o&&eror pre&ers that method o& communication and )ould )ish
the acceptance by the same meansC I&B ho)e1erB s?he de&initely re5uires the acceptance in a
particular )ay the instruction must be clearly !i1en ;eC!C Hthis o&&er can only be accepted by letter
postedI<C In such case the acceptance communicated by other means is in1alid ;e1en i& more
e3peditious than that used< and does not lead to a 1alid contractC
,n o&&er may be re1oked be&ore it has been accepted but not therea&terC "nce there has been
acceptanceB the contract comes into bein! and cannot be re1okedC In cases )here both parties
are present )hen the contract is madeB and )ith contracts entered into o1er the telephoneB it is
5uite clear that once the acceptance has been communicated to the other party the contract
e3ists and cannot be undone by the re1ocation o& the acceptanceC 0he position re!ardin!
contracts entered into by post is not 5uite so simple as the contract only comes into e3istence
)hen the letter o& acceptance is postedC ,s the o&&eror thus does not kno) about the acceptance
until s?he recei1es the letter it )ould seem that there is no true meetin! o& the minds until that
timeC 0his also allo)s the o&&eree the opportunity to use a 5uicker method o& communication ;iCeC
telephoneB tele!ramB tele&a3< to cancel his or her acceptanceC
S1ecial Ter!" in Contract" .?tic*et ca"e"@/
0he 5uestion sometimes arises )hether special terms &orm part o& a contract or notC ,n e3ample
)ould be )here a person purchases a ticketB on )hich special terms ;usually e3cludin! liability &or
loss or dama!e< are printedC 'e&ore it can be said that such terms &orm part o& the contract
bet)een the partiesB the &ollo)in! must be clear
i< The terms must be in !ontra!tual form
I& a person takes an item and recei1es a ticket merely as a receiptB terms printed on that
receipt do not &orm part o& the contractC
ii< The terms must be !ontemporaneous with the !ontra!t
I&B ha1in! entered into a contract to stay at a hotelB a !uest &inds a notice behind his or her
door listin! certain termsB the latter do not &orm part o& the contract because they )ere not
in e3istence at the time s?he completed the a!reement at the reception deskC
iii< The terms must have been read and understood b% the person see+ing to be bound b%
them
In this re!ardB parkin! !ara!e cases come to mindC Usually the si!n e3cludin! liability &or
any loss caused by the&t or other haKard is e3hibited on a 1ery lar!e notice displayed at
the entrance to the parkin! !ara!eC 0his notice )ill assist the o)ner o& the !ara!e to pro1e
that the terms )ere read and understood by the person )ho parked the carC Should the
latter ho)e1er say thatB &or some e3cusable reasonB s?he did not see the si!n or could not
read it s?he )ill not be bound to the terms thereo&C
i1< The person who wishes to hold the other to the terms must show that s.he too+ all
reasonable steps to draw the noti!e to the attention of the other part%
In this re!ard s?he must sho) thatB in so &ar as may ha1e been necessaryB s?he pointed
out and e3plained the si!n containin! the special terms to the otherC
BN"IN#
*
The True 9ature of the Contract Pre4ail"
Parties may themsel1es misunderstand the true nature o& the contract bet)een themB or they
mayB &or some reason best kno)n to themsel1esB desire to clothe it in a &orm )hich is not trueC
0hus a contract o& sale may be called a leaseC In this re!ard the la) states that the true nature o&
the a!reement pre1ails and not )hat the parties say they are doin! ;plus valet /uod agitur /uam
/uod simulate !on!iptur - it is more 1alid )hat parties do than )hat apparently comes into bein!<C
2here one person makes an unambi!uous statement o& &act to another intendin! that the latter
should act upon itB and the representation turns out to be untrueB the representor is pre1ented or
HestoppedI &rom denyin! its truth i& the other does act upon it to his or her preAudiceC ,s the result
o& the application o& the doctrine o& estoppelB a person may be pre1ented &rom pro1in! the actual
position as s?he !a1e the other party the impression that a di&&erent situation pre1ailedC
0he state inter&eres in the contractual relationship bet)een parties to a !reater or lesser e3tentC
0hree situations can be distin!uished )here the state=
i< &orces parties to make contracts )hich contain certain termsG
ii< pre1ents a person &rom en&orcin! his or her ri!hts under contractG and
iii< actually amends the terms o& the contract bet)een the partiesC
.any contracts today are in a standard &orm dra)n up by the party in the stron!er bar!ainin!
positionC S?he simply says to the other= H0hese are my terms o& contractB take it or lea1e itIC In
many instances the other party )ill &ind that the terms are 1irtually HstandardI throu!hout the
particular industryB as is )ell illustrated by standard clauses used by li&e insurersB and the short>
term industry8s use o& products such as H.UL0I.,4+IC
It must be appreciated that the makin! o& a contract is not - i& it e1er )as - a completely pri1ate
thin!C 0here are other than merely pri1ate interests in the makin! o& a contract and the stateB by
le!islation and throu!h the courtsB and by applyin! normati1e rather than psycholo!ical criteriaB
ha1e !i1en due )ei!ht to theseC 0he e3istence o& a contract and the e3act terms thereo& cannot
be determined by simply lookin! at )hat the parties thou!ht ;psycholo!ically< they )ere doin!C
0he norms o& societyB as e3pressed in le!islationB the common la) and by the courtsB must be
superimposed on the parties8 Ha!reementIB in order to determine the true and e3act nature o& the
contractC HConsensusI is obAecti1ely determinedB not subAecti1elyC
Ca1acit+
0his re5uirement relates to the capacity o& the parties to the contractC 2hilst there are a number
o& instances )ere a person may not ha1e &ull contractual capacity the one that is probably best
kno)n is that o& a minorC In terms o& common la) persons under the a!e o& 21 years are minorsC
7o)e1erB as marria!e automatically chan!es a person8s status &rom that o& a minor to that o& a
maAorB married personsB di1orceesB )ido)s and )ido)ersB e1en i& under the a!e o& 21 yearsB ha1e
&ull contractual capacityC 0he !eneral rule re!ardin! minors is that they ha1e a limited contractual
capacityC 0his means that no obli!ations arise &or the minor but obli!ations do arise &or the other
contractin! party i& s?he is o& &ull a!eC 0his limited capacity can be supplemented by the consent
o& the !uardian o& the minorC 0he consent can be !i1en be&oreB durin! or a&ter the contractC 2here
the consent is !i1en a&ter the contractB it is re&erred to as rati&icationC
BN"IN#
+
'oth parents are the le!al !uardians o& a minorB e1en )here the parents are di1orced and li1in!
apartC 0his )ill only not apply i& a special order )as made at the time o& the di1orce a)ardin!
Hsole !uardianshipI to one o& the parentsC 0he court can also at any time appoint a !uardian &or a
minorC 0he 7i!h Court is the upper !uardian o& all minors in its area o& AurisdictionC 2here parents
thus unreasonably re&use to consent to any contract into )hich a minor )ishes to enterB the 7i!h
Court can !rant such consent ;and o1errule the parents<C
0here areB ho)e1erB certain circumstances under )hich a minor may enter into contracts )ithout
the consent o& his or her !uardiansC ,n e3ample )ould be )here a minorB )ho is o1er the a!e o&
1*B has been e3pressly emancipated by the 7i!h CourtC , minor )ho is emancipated has &ull
contractual capacityC 0here is also the possibility o& a Htacit emancipationIC ,s a !eneral rule it can
be stated that a minor is tacitly emancipated i& s?he li1es economically independent o& his or her
parentsC 0acit emancipation can be !eneral or specialC , minor at boardin! school may be tacitly
emancipated &or purposes o& his or her re5uirements ;iCeC clothes and books<B but not !enerally
;eC!C to buy a car or to start a business<C
, minor )ho has entered into a contract be&ore the a!e o& 21B and then continues )ith his or her
obli!ations under the HcontractIB is held to ha1e rati&ied and accepted the contractB )hich is then
o& &ull &orce and e&&ectC
0here are also 1arious statutory pro1isions )hich enable minors to enter into certain contracts
)ithout the need &or consent &rom their !uardiansC For e3ampleB a minor )ho has attained a!e 1*
has &ull contractual capacity to enter into lon!>term insurance contracts in terms o& the Lon!>0erm
Insurance ,ct o& 1$$*C
I& a minor enters into a HcontractI unassisted by his or her !uardianB s?he is not bound by it
because one o& the essentials is lackin!B namely his or her capacity to contractC 7o)e1erB there is
a doctrine in our la) )hich states that no person may be unAustly enriched at the e3pense o&
anotherB and thus a minor is liable in enrichmentC S?he )ill ha1e to reimburse the other party to
the e3tent o& his or her enrichment ;but not accordin! to his or her obli!ations under the
HcontractI<B )hile the other party must place the minor back in the position s?he )as be&ore the
contractC
0he &raudulent minor )ill also not be immune to some &orm o& obli!ationC For e3ampleB a minor
in&orms the other party that s?he is o& &ull a!e and thus has &ull contractual capacityB or states that
s?he has the permission o& his or her !uardians to enter into the contractC "nce the contract has
been &ormalised the minor no) admits to his or her status or lack o& permissionB and in&orms the
other party that s?he is thus not bound by its termsC 0he courts ha1e a!reed that the &raudulent
minor is not liable in contract ;because there is no 1alid contract<B neither is s?he liable on the
basis o& estoppel ;because the e&&ect )ould be the same as i& there had been an contract<C
7o)e1erB the court has held that a minor cannotB because o& &raudulent conductB be placed back
in the same position as be&ore the contract and that the court )ould thus lea1e the situation as it
)asC 0he &raudulent minor can also be held liable in delict on the basis o& the ci1il )ron! )hich
s?he committed ;&raud<B causin! the other party to su&&er a lossC
,s )as mentioned earlier there are other instances in )hich a person8s contractual capacity is
restrictedC 0he &ollo)in!B althou!h not an e3hausti1e listB are a &e) e3amples o& the more
common occasionsC
$entall% ill persons
, person )hose mind at the time o& enterin! into the purported contract )as such that s?he could
not understand the nature o& the transaction because o& his or her speci&ic mental illness or
conditionB is not bound by the contract because s?he did not ha1e the re5uisite capacityC
BN"IN#
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0run+enness
%runkenness )ill in1alidate the contract only i& the person )ho entered into it could not
understand the pro1isions because o& his or her state o& inebriationC "ne must ho)e1er
appreciate that the person )ill not be able to !ain &rom the contract as a result o& this de&enceC
&rodigals
, person )ho )astes a)ay his or her means mayB on applicationB be declared a prodi!al by the
7i!h CourtC , curator is then appointed to mana!e his or her a&&airsB and s?he )ill not be able to
enter into any contracts )ith &inancial implications )ithout the consent o& the curatorC
1nsolvents
, person )ho has been se5uestrated under the Insol1ency ,ct may enter into contracts so lon!
as s?he does not purport to alienate any portion o& his or her estateC
Ph+"ical I!1o""i2ilit+
It is essential that the obli!ations undertaken must be physically possible o& per&ormanceC 0he
&ollo)in! principles apply in cases o& alle!ed impossibility o& per&ormance=
i< i& the impossibility arises )hen the debtor is already in de&aultB this situation is o& no help
to him or her in so &ar as s?he could ha1e per&ormed pre1iouslyG
ii< the impossibility must not be due to the &ault o& the debtorG
iii< i& the debtor accepted the risk o& impossibilityB s?he may not in1oke this situation to assist
him or herG
i1< i& the impossibility )as &oreseeable and the contract )as o& a speculati1e natureB the
debtor is at riskG
1< the impossibility need not be absoluteB in the sense that the debtor must sho) that s?he
could not per&orm by other meansB be&ore this can succeed as a de&enceG
1i< the courts only reco!nise obAecti1e impossibilityC .ere subAecti1e impossibility is not
su&&icient to render a contract 1oidC ;Lack o& &unds is al)ays considered a subAecti1e
impossibility and )ill not relie1e the debtor &rom the contractC<
Le&alit+
0he ma3im applied here by the courts is ,e2 turpi !ausa non oritur a!tio- - an immoral cause o&
action does not !i1e rise to a claimC Note that in such cases the ,par deli!tum- ;e5ual !uilt< rule
)ill applyB iCeC ,in pari deli!to potior est !onditio defendentis- ;i& the parties are e5ually !uilty the
de&endant is in a better position<B and there&oreB in other )ordsB the courts )ill not inter&ereC 2hile
in certain cases the speci&ic &acts may re5uire the court to rela3 the par deli!tum rule and come to
the assistance o& one o& the partiesB in !eneral it )ill ha1e nothin! to do )ith an ille!al contractC In
such cases the court does Hsimple Austice bet)een man and manIC It must be appreciated that a
contract may be ille!al &or se1eral reasonsC
BN"IN#
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A&ain"t Co!!on or Statutor+ Law
.urder is an o&&ence under common la)C , contract )hereby t)o persons a!ree to commit a
murder is thus ille!al and 1oidC , statute may prohibit parties enterin! into certain contracts )hichB
i& concludedB could then be 1oid and unen&orceable dependin! on the )ordin! and intent o& the
le!islatureC Sharrock in 3usiness Transa!tions Law lists the &ollo)in! considerations in
determinin! the intent o& the le!islature=
i< )hether the statute pro1ides su&&icient criminal penalties and other measures to control or
pre1ent the acti1ity at )hich the le!islation is aimedG
ii< )hether reco!nition o& the contract )ould brin! about or !i1e sanction to the 1ery situation
)hich the le!islature )ishes to pre1entG and
iii< )hether !reater hardship or incon1enience )ould &lo) &rom holdin! the a!reement 1oid
than &rom reco!nisin! itC
Sharrock re&ers to the decision in $etro 4estern Cape v 5oss ('(*6) )here the court &ound that
the &act o& the trader not possessin! a certi&icate o& re!istration or a tradin! licence did not render
a sale o& !oods 1oidC 0he court held that the penalties pro1ided in the le!islation )ere su&&icient to
achie1e the aim that businesses !enerally are run by suitable persons in proper premises and
that to &ind the sale 1oid )ould cause !ra1e incon1enience and inAusticeB both to innocent
members o& the public and to tradersC
Contract" with Ille&al Pur1o"e"
In the past much )ei!ht )as !i1en to the intention o& the le!islatureB especially )ith re!ard to
apartheid>le!islationC 0his approach chan!ed under the 1$$( Constitution )ith its horiKontal
approach - !i1in! ri!hts to all personsC
Ga!2lin& Tran"action"
9amblin! transactions are re!arded as a!ainst public policy and there&ore !amblin! debts are
unen&orceableC 7o)e1erB i& , re5uests ' to place a bet &or him the contract bet)een , and ' is
not ille!al and ' is obli!ed to pay o1er the )innin!s to , as he acted as a!ent in terms o& a le!al
a!ency contractC "nly the !amblin! debt itsel& is unen&orceableC
A&ree!ent" in Re"traint of Trade
In the past the 1ie) )as held that a person should be entirely &ree to enter into any contract s?he
)ishesB and i& a contract restricted his or her &reedom o& trade it )ould be 1oidC 0his 1ie) has
under!one considerable de1elopment o1er the years and the position today is that a person
mustB on the )holeB do )hat s?he has a!reed toB irrespecti1e o& )hether his or her contractual
&reedom is restrained or notC 7o)e1erB the 5uestion as to )hether a restraint can be en&orced
must be decided in the li!ht o& the possible harm to the public interestC In order to decide this
5uestionB the reasonableness o& the restraint is consideredB especially as to the area and time
periodC
BN"IN#
$2
)or!alitie"
.ost contracts are e5ually 1alidB no matter that they are entered into 1erbally or impliedly and not
in )ritin!C In a number o& casesB ho)e1erB the la) re5uires compliance )ith certain &ormalitiesC
For e3ample some contractsB particularly those dealin! )ith the sale o& landB must be in )ritin!
and si!ned by the parties theretoB other)ise they are o& no &orce or e&&ectC Contracts under the
Credit ,!reement ,ct o& 1$*0 are also re5uired to be in )ritin!B but &ailure to do so does not a&&ect
their 1alidityC 0here are some contracts that ha1e to be notarially e3ecutedB )hich means they
must be attested by a notary public - the ante>nuptial contract bein! an e3ampleC
"ther e3amples o& )here contracts must be in )ritin! in order to be en&orceable are )ith
donations )here the obAect has not yet been !i1enB or suretyship contractsC Lon! leases ;in
e3cess o& 10 years< must also be in )ritin! and must be re!istered in the %eeds "&&ice in order to
be bindin! on third partiesC
It is necessary here to distin!uish bet)een a contract o& suretyship - )hich must be in )ritin! in
order to be 1alid - and an indemnityB )hich need notC , surety promises to ans)er &or a debtB
de&aultB or misappropriation o& another personC 0here are three parties concerned in a suretyshipB
namely the creditorB the debtor and the suretyC In simple termsB the surety says to the creditorB HI&
the debtor does not pay youB I shallIC Under the contract o& indemnity there are only t)o parties
and the indemni&ier in e&&ect says to the creditorB HLet him?her ha1e the !oods and I shall see that
you are paidIC
6i"char&e of Contract
0he ri!hts and obli!ations o& the parties to a contract can be ended in a number o& )aysC 2hile
each method may be dri1en by its o)n uni5ue circumstances the end result remains the sameB
the termination o& the contractC
Completion of the obligation
"ne method o& termination is throu!h the completion o& the obli!ations o& the parties concernedB
in accordance )ith the terms o& the contractC 0his per&ormance and completion o& an obli!ation is
the usual )ay that contracts are dischar!edC I& there is a time &i3ed &or per&ormance o& the
contractB it must be concluded at or )ithin that timeC 2here no time&rame is setB completion )ithin
a reasonable time is re5uiredC 2hat is reasonable depends on the &acts o& the case in 5uestionC
2here a particular mode o& per&ormance is stipulated it must be obser1edB but i& there are se1eral
di&&erent )ays in this can be doneB a person may choose )hiche1er is the more con1enient to him
or herC 0he per&ormance o& the task may be the pro1ision o& a ser1ice as a!reed bet)een the
parties to the contractB or the payment o& a debt )ithin a !i1en periodC It sometimes happens that
a debtor o)es se1eral distinct sums to one personB and s?he then makes one payment in respect
o& one or more o& the amounts outstandin!C In makin! payment the debtor can e3pressly or
impliedly intimate that it is in respect o& a particular debtB other)ise the creditor may in&orm him or
her that s?he has decided ho) the payment )ill be appropriatedC I& no party makes an
appropriationB the la) allocates the money accordin! to a &i3ed Morder o& precedenceMC I& a debit
bears interestB payment is made &irst to the interest and therea&ter o& the capitalC
BN"IN#
$%
3% mutual agreement
0he parties to a contractB ha1in! entered into it by mutual a!reementB may similarly brin! it to an
endC 2here both ha1e obli!ations to per&ormB they may mutually a!ree to release each otherC
0his is sometimes described as )ai1erB and no particular &ormality is re5uired to !i1e up the
contractC 0he )ai1er may be oral e1en thou!h the ori!inal contract )as in )ritin!C 0his o& course
does not apply )here the ori!inal )ritten contract speci&ically pro1ides that no addition to it )ill be
o& any &orce or e&&ect unless reduced to )ritin! and si!ned by the partiesC
5elease
2here one party has per&ormed all his or her obli!ations under a contract and is entitled to
per&ormance by the otherB he may release the latter &rom his or her obli!ationsC 2hileB in :n!lish
la) MconsiderationM is re5uired &or a releaseB in South ,&rican la) any reasonable cause &or the
release is su&&icientB and e1en !enerosity in itsel& )ould be acceptableC
2hen debtor and creditor become the same personB the obli!ation is terminatedC 0his )ould &or
instance be the case )here the lessee o& a property becomes the o)ner and thus becomes both
lessor and lesseeC ,s it is impossible to contract )ith yoursel&B the lease a!reement is dischar!ed
by mer!erC
7ovation
No1ation is the substitution o& a ne) contract &or an e3istin! oneC 0he parties to an in1estment
arran!ement a!reeB &or e3ampleB that instead o& buyin! a house &or 41 millionB they )ill purchase
a hotel on o&&er &or 410 millionC 0here must be a clear intention to no1ateB other)ise both
contracts )ill be Aud!ed independentlyC
Compromise
CompromiseB accordin! to Chri"tie5 The Law of Contract in South AfricaB is the settlement by
a!reement o& disputed obli!ationsC It is a &orm o& no1ationB and in1ol1es a )ai1er o& e3istin! ;or
claimed< ri!htsC Compromise must be clearly pro1ed by the party alle!in! itC , mandate to
ne!otiate in this )ay is !enerally included in a Po)er o& ,ttorney )hich a client !i1es to his or her
le!al ad1isors at the outset o& proceedin!sC Compromise brin!s to an end the contract and acts
as an absolute bar to &urther proceedin!sC
I& t)o parties to a contract o)e each other money the debts can be set o&& a!ainst each otherB and
are thereby e3tin!uishedC 2here the amounts are not e5ualB they can be e3tin!uished to the
e3tent that they correspondC Certain re5uirements &or the Hset>o&&I o& a contract o& mutual debt
must be metB iCeC=
i< both debts must be dueG
ii< both debts must be li5uidated ;able to be e3pressed in money terms<G
iii< both debts must be bet)een the same partiesG
Note that set>o&& is automatic and thus has to be pleaded and pro1ed only to in&orm the court that
it has occurredC
, creditor should be ali1e to obli!ations )hich are o)ed to him or herB and i& s?he &ails to attempt
to reco1er the debts &or a certain period o& timeB they are dischar!ed throu!h prescriptionC , debt
can become prescribed throu!h e3tincti1e prescriptionB meanin! that it is slo)ly e3tin!uished and
o& no &urther &orce or e&&ectC
BN"IN#
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&res!ription
9oodsB ri!hts or obli!ations can be ac5uired or lost throu!h prescriptionC I& a person holds
property openly ;iCeC not by &orce and not by permission o& the o)ner<B as i& s?he is the o)ner &or a
continuous period o& 0 yearsB s?he can become the o)ner thereo&C 0his is kno)n as ac5uisiti1e
prescriptionC 0he concept o& e3tincti1e prescription is &ound in the la) o& contract and delictC ,
debt can be e3tin!uished as the result o& e3tincti1e prescriptionC 0he Prescription ,ctB 1$($
contains !eneral pro1isions re!ardin! prescriptionC 0he limit &or most debts is three yearsB no
distinction bein! dra)n bet)een )rittenB 1erbal or implied contractsC Prescriptions be!ins to run
as soon as the debt is dueB unless the debtor pre1ents the creditor &rom &indin! outB in )hich case
it commences )hen the latter becomes a)are o& his or her liabilityC
Se/uestration
0he process o& se5uesterin! the estate o& a personB or li5uidatin! a company or close
corporationB does not automatically terminate all contracts to )hich they )ere partyC 2here no
speci&ic pro1ision is made &or the type o& contract in 5uestion in the Insol1ency ,ct the trustee is
1ested )ith a discretion to continue or terminate the a!reementC 0his discretion is 1ested in the
trustee?curator as persons )ho are declared insol1entB or the directors o& a company placed in
li5uidationB are restricted &rom all &urther dealin!s )ith their estates or companiesC 7o)e1erB the
&inal se5uestration or li5uidation )ill put an end to all prior debts as the resultant closin! o& the
estate or company )ill mean that these are no) to be &inally paid accordin! to rules determined
by the Insol1ency ,ctC
0eath
0he death o& one o& the parties does not as a !eneral rule result in the endin! o& a contractB the
ri!hts and obli!ations o& that person passin! to his or her e3ecutorC It is possible thatB in makin!
the contractB the parties e3pressly or impliedly a!ree that it )ill come to an end on the death o&
either or bothC I& there is no such a!reement re!ard must be had to the nature o& the contractC
0hose o& a personal nature are !enerally terminated by deathC 0husB )hile the death o& an
employee )ill put an end to an employment contractB the demise o& the employer )ill not ;unless
the ser1ices rendered )ere o& a personal nature<C
Estoppel
I& a person by his or her )ords or conduct allo)s an opinion to &orm that a certain set o& &acts
e3istsB and thereby moti1ates another to act on that representation to his or her preAudiceB the &irst
party is pre1ented ;estopped< &rom raisin!B as a de&enceB that in truth such a state o& &acts did not
e3istC ;:stoppel is a disability )hereby a person is precluded &rom alle!in! that a &act is not as
s?he made it appearC< , party may lose a ri!ht to en&orce a claim by the operation o& estoppelB and
i& s?he cannot en&orce his or her le!al ri!hts because o& the doctrineB this has the same e&&ect as
puttin! an end to the obli!ationC It may also be said there&ore that estoppel can e3tin!uish an
obli!ationC
BN"IN#
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0reach of Contract
Parties enter into contracts &or the purpose o& ha1in! obli!ations per&ormedB but in some cases
the obli!ations arisin! &rom the contract are not al)ays &ully appreciated and may thus not be
&ul&illedC 0his is kno)n as breach o& contract and !i1es the innocent party the option to cancelB so
creatin! a &urther means )hereby a contract may be dischar!edC State o& mind ;eC!C &ault or
intent< is not considered rele1antC 0here are a number o& )ays in )hich a party can be considered
to be in breach o& a contractC
late per&ormance by the debtor ;mora debitoris<G
late per&ormance by the creditor ;mora !reditoris<G
repudiationG
pre1ention o& per&ormanceG
de&ecti1e per&ormanceC
0o determine )hether the debtor is late in his or her per&ormance it )ill be necessary to
determine )hen this is dueC 0here are three possibilities=
time &or per&ormance is stipulated in the contract ;mora e2 re<G
&rom the nature o& the contract it is clear that althou!h not stipulated time is o& the essence
and per&ormance must be on or be&ore a !i1en dateC ,lternati1ely there should be no
undue delayC
time &or per&ormance has not been determined in the contract and is not there&ore o& the
essence= here the debtor has to be !i1en reasonable notice to per&orm ;mora e2 persona<C
In a case )here the time &or per&ormance is stipulatedB the contract is breached i& the speci&ied
date arri1es and the debtor &ails to per&ormC I& there is a cancellation ;le2 !ommissoria< the
creditor is entitled to in1oke it and cancel the contractB other)ise s?he may only cancel )hen time
is o& the essenceC 2here no date &or per&ormance has been &i3ed by the parties in the contract
the creditor may place the debtor in mora by demandB !i1in! him or her a reasonable time to
per&ormB &ailin! )hich it )ill be re!arded as a breach ;mora e2 persona<C 0his entitles the creditor
to cancel and use the other remedies a1ailable on breach o& contractC
2here the parties to a contract are re5uired to per&orm simultaneouslyB or )here the plainti&& is
obli!ed to per&orm be&ore the de&endantB the latter can raise the so>called e2!eptio non adinipleti
!ontra!tus i& s?he is sued &or an alle!ed breach o& contractC 'y raisin! this de&ence the de&endant
admits that s?he has not per&ormedB but alle!es that the plainti&& also has &ailed to do so > it is the
Me3ception o& the un&ul&illed contractMC
, creditor is in breach i& s?he should delay &ul&ilment o& the debt )hen per&ormance completion is
possibleC 0his is also the case )here the debtor o&&ers to per&orm but the creditor re&uses to
cooperateC It is a &undamental duty o& the creditor to co>operate and his or her &ailure to do so
constitutes a breach o& contractC
'reach o& contract by repudiation is said to arise )hen one partyB either e3pressly or by
implicationB indicates that s?he does not intend to per&orm his or her obli!ations orB ha1in!
per&ormed part thereo&B does not propose to complete per&ormanceC In 8o!hster v de la Tour
('*9:) the de&endant a!reed to employ the plainti&& as &rom 1 ,u!ustB but be&ore that dateB
repudiated the a!reementC 0he plainti&& immediately brou!ht an action &or dama!esB and it )as
held that he )as entitled to do soB and did not need to )ait until the time &or per&ormanceC
7o)e1erB the innocent party may i!nore the repudiation and )ait &or the day set &or per&ormanceB
at )hich timeB i& the other persists in his or her re&usal to per&ormB there )ill be a breach o&
contract in the &orm o& mora debitorisC 4epudiation may be made by )ords or conductB pro1ided it
is clearly madeC
BN"IN#
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0he test o& an intention bein! su&&iciently e1inced by conduct is )hether the party repudiatin! has
acted in such a )ay as to lead a reasonable person to the conclusion that s?he does not intend to
&ul&il his or her part o& the contractC
I& one party pre1ents the other &rom per&ormin! its obli!ations under a contractB it cannot say that
the second party has committed a breachC In such case the obli!ation is deemed to ha1e been
;&ictionally< &ul&illedC
Re!edie" for 0reach of Contract
, breach does not normally put an end to a contractC "nce a breach has been committed by one
party the other must decide )hat s?he )ishes to do about itB and a&ter s?he has made his or her
choice > to cancel or to claim &ul&ilment - s?he is normally bound by itC 0he most common remedy
is a claim &or dama!esB coupled to cancellation or a claim &or &ul&ilment o& the contractC
Normally a breach !i1es the innocent party the ri!ht to cancel the contract or stand by it ;and
possibly claim dama!es in either case<C 0hese alternati1e ri!hts reser1ed &or the plainti&& are
clearly inconsistent= one aims at the en&orcement o& the a!reementB the other at its dissolutionC
2here a plainti&& thus claims both alternati1e ri!hts his or her claim )ould be e2!ipiable ;open to
obAection< as s?he )ould be Mapprobatin! and reprobatin!M > on the one hand s?he )ould be
standin! by the contractB and on the other s?he )ould already ha1e cancelled it - and these t)o
positions are clearly irreconcilableC
2here a debtor is in de&ault o& the stated and a!reed termsB the creditor may cancel the contract
i& it contains a term kno)n as a le2 !ommissoria ;cancellation clause<C I& there is no such clause
the creditor may still cancel )here time is o& the essenceB e1en )hen no stipulation to this e&&ect
is includedC In cases )here no time is laid do)n in the contractB and it is not o& the essenceB the
creditor may !i1e the debtor notice to per&orm )ithin a speci&ied reasonable timeB and i& s?he &ails
to do soB the creditor may cancel the contractC
Cancellation o& a contract e3tin!uishes the duties to be per&ormed thereunderC In place o& this a
reciprocal duty arises to return )hate1er has been recei1edC 0he innocent party is entitled to a
return o& )hat s?he has !i1en i& s?he is )illin! and able to return )hate1er s?he has recei1edC
7o)e1er a tender &or return is unnecessary )here the liability to do so is not attributable to the
&ault o& the innocent partyC
, plainti&& may pursue his or her remedy &or the implementation o& an a!reement in one action
andB should the de&endant &ail to comply )ith the courtNs relie& orderB s?he may institute a second
action claimin! rescission o& the a!reement and dama!esC , procedural practice hasB ho)e1erB
!ro)n up in our courtsB allo)in! a plainti&& to demand implementation o& an a!reement and in the
same action to ask the court &or an order thatB should the de&endant &ail to do soB it be set aside
and conse5uential relie& !rantedC 0his has been described in the courts as the Mdouble>barrelledM
remedyC
0he cancellation o& a contract is considered to simply be an act o& a party thereto )hereby s?he
puts an end to the contract and its &uture per&ormanceB and a court order is not necessary &or this
purposeC 2hile the parties )ill sometimes ask the court to con&irm that a contract )as properly
and )ith due ri!ht cancelled this simply &ollo)s &rom the &acts and their actionsC
2here a breach o& contract arises an order &or speci&ic per&ormanceB re5uirin! the de&aultin!
party to do )hat s?he undertook in the &irst place in terms o& a contractB can be re5uested &rom a
courtC In South ,&rican la) a plainti&& is in principle entitled to claim speci&ic per&ormance and this
)ill be !ranted subAect to the courtNs discretionC
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0he court )ill as &ar as possible !i1e e&&ect to a plainti&&8s choice to claim speci&ic per&ormance
butB )here appropriateB it has discretion to re&use and lea1e the plainti&& to pro1e his or her claimC
0he discretionB althou!h it must be e3ercised AudiciallyB is not con&ined to speci&ic types o& casesB
nor is it circumscribed by ri!id rulesC , ri!ht to speci&ic per&ormance e3ists in our la)B subAect only
to the 5uali&ication o& the courtNs discretionary po)ersC 0his ri!ht is the cornerstone o& our la)
relatin! to speci&ic per&ormance and the matter o& discretion is not completely un&ettered > it
remains a Audicial discretionB and is not to be e3ercised capriciously or upon a )ron! principleC
,n order &or speci&ic per&ormance is made by applyin! the &ollo)in! principles=
i< 0he order o& the court should not produce an unAust result )hich )ill be the case i&B eC!C in
the particular circumstances it )ill operate unduly harshly on the de&endantC
ii< 0he remedy should al)ays be !ranted or )ithheld in accordance )ith le!al and public
policyC
iii< 0he court )ill not order speci&ic per&ormance )here this has become impossibleC 7ere a
distinction must be dra)n bet)een the situation )here impossibility e3tin!uishes the
obli!ation and that )here per&ormance is impossibleB althou!h the debtor remains
contractually boundC It is only the latter type o& case that is rele1ant in the present conte3tB
&or in the &ormer the creditor clearly has no le!al remedy at allC
It should be noted thatB althou!h the 1ie) held in the past )as that courts )ould not order speci&ic
per&ormance in a contract o& personal ser1iceB the courts ha1e ordered reinstatement o& an
employee on the basis o& a breach o& contractC In 1ie) o& the speci&ic po)er o& the court to !rant
reinstatement orders under labour le!islation it seems clear that speci&ic per&ormance can thus
also be ordered in the case o& employeesC
In a claim &or speci&ic per&ormanceB demand is not necessary be&ore issue o& summons= the
cause o& action e3ists i& the debtor &ails to per&orm timeouslyB and summons can be issued )ithout
&irst sendin! a letter o& demandC
Law of 6elict
2hen considerin! the la) o& contract ;e2;!ontra!tu< and its le!al statusB and the le!al
responsibilities associated there)ithB the &ollo)in! can be considered a summary thereo&=
contractual actions can be brou!ht only by the parties to the contract > these are easily
reco!nisedB and limited in numberG
liability under contract la) is assumed 1oluntarilyC
'y contrast a delictual action can be brou!ht by anyone )ho has su&&ered harm throu!h a breach
o& !eneral duty not to harm him or her in personB property or personality ;character?reputation<C
0here&ore=
no contractual relationship is neededG
there may be many claimants in1ol1edG delictual duty does not depend on anyoneNs
consentC It arises in1oluntarilyB althou!h as a result o& our actions or omissionsC
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Naturally some o1erlap bet)een contract and delict can occurC For e3ampleB a sur!eon per&orms
an operation on a patient in terms o& a contractC I& s?he lea1es a s)ab in the patientNs bodyB the
patient ;plainti&&< has the option o& suin! the sur!eon in contract or in delictC
In essence there&ore a delict is a ci1il )ron! &or )hich dama!es can be claimed as compensation
and &or )hich redress is not usually dependent on a prior contractual undertakin! to re&rain &rom
causin! harmC 0hus the distinction bet)een delict and crime can be stated as &ollo)s=
delict is a ci1il )ron! )hereas crime is a public )ron!G
the main aim o& an action in delict is to compensate the 1ictimB not to punish the !uiltyG
action o& delict are brou!ht by the person )ho su&&ered the harmC Criminal actions are
brou!ht by the StateG
it may be easier to succeed in a delictual action than in criminal proceedin!sC Crime must
be pro1ed beyond reasonable doubtC %elict can be settled on the balance o& probabilitiesC
Note that &or delict to be alle!ed there needs to be an element o& each o& the
&ollo)in!=
)ron!&ulness
conduct ;either as intentB positi1e actionsB ne!li!ence or omission<G
&aultG
causationG
loss or harmC
;Some commentators combine the &irst t)oB but they are perhaps best split &rom each otherC<
In delict conduct is de&ined as a 1oluntary human act or omissionC , Auristic person ;such as a
close corporation< may act throu!h its members and thus be delictually liableC ,llied to this is the
capacity to actB and?or to understand the conse5uences o& one8s actionsC For liability to attach
preAudice ;harm< must be caused in a )ron!&ul ;le!ally reprehensible or unreasonable< mannerC
2ithout )ron!&ulness a de&endant cannot be held liableC 2ron!&ulness is a conclusion o& la) that
the court dra)s ;or does not dra)< &rom the &acts pleaded and pro1ed by the plainti&&C "ne cannot
Hpro1e )ron!&ulnessI thou!h one can pro1e &acts &rom )hich the court is prepared to dra) the
conclusion that the de&endant acted )ron!&ullyC 0his can there&ore relate to both a de&endantNs
positi1e act or a de&endantNs omission to actC 0he !eneral rule is that an author o& a deed does
not deliberately act unla)&ully )hen s?he merely &ails to pre1ent dama!e or bodily inAury to
anotherC Liability only &ollo)s i& its &ailure )as unla)&ulB and it )ould only be unla)&ul i&B under the
speci&ic circumstancesB there )as a le!al duty on the author to act positi1ely to pre1ent the
dama!eB and s?he &ailed in this le!al dutyC 2hether such a le!al duty actually e3ists is ans)ered
by means o& the le!al conception o& societyB the boni moresC
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Knowledge Self Assessment Module 1
In"truction"
0he kno)led!e sel& assessment consists o& lon!er )ritten 5uestionsC ,ns)er all o& the 5uestions
to assess )hether you ha1e mastered the kno)led!e componentC .odel ans)ers ha1e been
pro1ided )hich you can use to assess your ans)ersC
1: Li"t the e""ential" of a 4alid contract:
OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
: Li"t the for!" that a contract can ta*e:
$: 0riefl+ di"cu"" the "1ecial condition" lin*ed to contract" *nown a" ?tic*et ca"e"@:
4: EA1lain what the ter! ?tacit e!anci1ation@ !ean" when a""ociated with the
contractual ca1acit+ of a !inor:
': Bhen will a contract entered into 2+ a 1er"on who wa" drun* at the ti!e 2e declared
in4alidC
BN"IN#
2,
Knowledge Self Assessment Module 1 - cont
#: Can an in"ol4ent enter into a contractC EA1lain +our an"wer:
(: 0riefl+ eA1lain what the continued "tatu" of a contract will 2e if one of the 1artie" to
the contract die":
3: 6i"cu"" the difference 2etween a delict and a cri!e:
,: EA1lain what i" !eant 2+ the ?officiou" 2+"tander@ te"t:
BN"IN#
2$
1-: EA1lain at what "ta&e a contract co!e" into 2ein& where acce1tance i"<
a/ 2+ letterD or
2/ 1er 1hone:
11: 6i"cu"" the contractual ca1acit+ of a !inor5 with "1ecial !ention of the conce""ion"
&rated 2+ the In"urance Act":
1: There i" no dou2t that !urder i" an offence under co!!on law and that an+
contract entered into with "uch intent i" therefore ille&al and 4oid: 6i"cu"" thi"
"tate!ent with "1ecial reference to a lon& ter! in"urance contract5 1articularl+
where the !urderer i" na!ed a" the 2eneficiar+ on the 1olic+ in the e4ent of the
death of the !urder 4icti!:
BN"IN#
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1$: Li"t the wa+" in which a 1art+ can 2e con"idered to 2e in 2reach of a contract:
BN"IN#
2%
Model Answers to Knowledge Self Assessment
Module 1
.=ue"tion" 1 E 3< the an"wer" to the"e 7ue"tion" can 2e found in the ModuleF" teAt:/
,: EA1lain what i" !eant 2+ the ?officiou" 2+"tander@ te"t:
Sometimes there is disa!reement bet)een the parties as to )hether a particular term is
part o& the contract or notC "ne party alle!es that it is a tacit termB the other disa!rees and
in such cases the o&&icious bystander test is appliedB the latter person bein! one )ho has
nothin! to do )ith the contractC I& s?he in5uires about a certain aspect and both parties
respond the same )ayB that particular point does not re5uire &urther clari&ication since
a!reement had seemin!ly been reached althou!h not &ormally e3pressedC ,s suchB the
matter concerned is said to be an implied term o& the contractC
1-: EA1lain at what "ta&e a contract co!e" into 2ein& where acce1tance i"<
a/ 2+ letterD or
2/ 1er 1hone:
'e&ore a contract can come into bein! the parties must communicate their respecti1e
intentions to each otherC I& they are both present and the contract is an oral oneB no
di&&icult e3istsC 7o)e1erB it is also possible that the parties may discuss the contract o1er
the telephone or by letterC In these cases special rules apply re!ardin! o&&er and
acceptanceC
a< , in Cape 0o)n makes an o&&er to ' in Pohannesbur! )hich the latter accepts
durin! their telephone con1ersationC ,ccordin! to le!al principles the contract
comes into e3istence in Cape 0o)n )here , ;the o&&eror< heard the acceptanceC
Should the line !o dead durin! their con1ersation and , thus not hear the
acceptance there is no contract as there )as no a!reement > no Mmeetin! o& the
mindsMC
b< , in Cape 0o)n posts and o&&er to ' in Pohannesbur!C 0he o&&er is acceptable to '
)ho then sends a letter o& acceptance by return postC 0he contract comes into
bein! )hen the acceptance letter is posted by 'C Note that this scenario only
applies )here , initially posted the o&&erB thus !rantin! ' the opportunity to use the
same medium to si!ni&y acceptanceC
11: 6i"cu"" the contractual ca1acit+ of a !inor5 with "1ecial !ention of the
conce""ion" &rated 2+ the In"urance Act":
In terms o& common la) persons under the a!e o& 21 years are minorsC 7o)e1erB as
marria!e automatically chan!es a personNs status &rom that o& a minor to that o& a maAorB
married personsB di1orceesB )ido)s and )ido)ersB e1en i& under the a!e o& 21 yearsB
ha1e &ull contractual capacityC 0he !eneral rule re!ardin! minors is that they ha1e a
limited contractual capacityC 0his means that no obli!ations arise &or the minor but
obli!ations do arise &or the other contractin! party i& s.he is o& &ull a!eC 0his limited
capacity can be supplemented by the consent o& the !uardian o& the minorC 0he consent
can be !i1en be&oreB durin! or a&ter the contractC 2here the consent is !i1en a&ter the
contractB it is re&erred to as rati&icationC 7o)e1erB there are 1arious statutory pro1isions
)hich enable minors to enter into certain contracts )ithout the need &or consent &rom their
!uardiansC
BN"IN#
2&
Module 1 - cont
"ne o& these pro1isions o& particular interest to those acti1e in the lon!>term insurance
industry are contained in the Lon!>0erm Insurance ,ct o& 1998. In terms o& these
pro1isions a person o& 1* years but not yet 21 years has also !ot &ull contractual capacity
to enter into a lon!>term insurance contractB and deal )ith the contract in any)ay that
s.he )ishesB )ithout needin! the consent o& his or her !uardianC
1: There i" no dou2t that !urder i" an offence under co!!on law and that an+
contract entered into with "uch intent i" therefore ille&al and 4oid: 6i"cu"" thi"
"tate!ent with "1ecial reference to a lon& ter! in"urance contract5 1articularl+
where the !urderer i" na!ed a" the 2eneficiar+ on the 1olic+ in the e4ent of the
death of the !urder 4icti!:
.urder is an o&&ence under common la)C , contract )hereby t)o persons a!ree thus to
commit a murder is ille!al and )ould there&ore be 1oidC 7o)e1erB a lon!>term insurance
contract entered into bet)een an insurer and the murder 1ictim has absolutely no bearin!
on the le!ality or other)ise o& a murder contractC 0he contract is a per&ectly le!itimate
instrument andB in the e1ent o& the death o& the insured the insurer is obli!ed ;under
circumstances other than )here normal e3clusions apply< to meet the claimC 0his is e1en
so )here the e3istence o& the insurance policyB and the nomination o& the murderer as the
bene&iciaryB directly resulted in a decision to commit the murderC
7o)e1erB ha1in! said thisB public opinion )ould ne1er condone a murderer bene&itin! &rom
his or her actionsC 4oman>%utch common la) also speci&ically states that Mthe bloody
hand must not bene&it &rom its actionsM ;0ranslated &rom the ori!inal %utch<C 2hile the
insurer )ill there&ore be re5uired to meet the claim the bene&it )ill not be paid to the
nominated bene&iciaryC 0he dependants or heirs o& the deceased )ould thus inherit in
terms o& the la) o& intestate succession but )ith the murdererB i& related to his or her
1ictimB deemed to ha1e pre>deceased the insured deceased and there&ore unable to
inheritC
1$: Li"t the wa+" in which a 1art+ can 2e con"idered to 2e in 2reach of a contract:
0here are a number o& )ays in )hich a party can be considered to be in breach o& a
contractC
Clate per&ormance by the debtor (mora debitoris)<
late per&ormance by the creditor (mora !reditoris)<
repudiationG
pre1ention o& per&ormanceG
de&ecti1e per&ormanceC
BN"IN#
2'
Module < The Short Ter! In"urance
Contract
Learnin& Outco!e"
'y the end o& this .oduleB you )ill be able to=
,pply the principles o& the la) o& contract to insurance policiesG
:3plain the di&&erence bet)een !aveat emptor and uberrima fidesG
%iscuss the implications o& the introduction o& the Hreasonable man testI on the insurance
industry and the onus o& responsibility placed on a proposer by this doctrineG
%iscuss the concept o& H)arrantiesI as this applies to insurance contractsG
:3plain the !eneral practices used in the interpretation o& contracts and ho) these impact
on the insurance industryG
:3plain ho) the need &or an insurable interest became entrenched as a re5uirement o& a
1alid insurance contractB and )hen an insurable interest must be pro1ed in the di&&erent
cate!ories o& insuranceG
%iscuss the concept o& Hpro3imate causeI as it applies to insurance contractsG
:3plain the meanin! o& the terms HindemnityIB HcontributionI and Hsubro!ationI as they
apply to short term insurance contractsG
%iscuss the duty o& disclosureG
:3plain )hat is meant by HindemnityI and some common measures o& indemnityC
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2(
Introduction
Insurance is about the trans&er and distribution o& the &inancial conse5uences o& a riskC It is an
arran!ement under )hich an insurer contracts to do somethin! o& 1alue to the insured ;payB
replaceB reinstate or repair< on the happenin! o& a speci&ied harm&ul chance e1entC
0he insurance policy is the )ritten e1idence o& this contractC
Note thatB )ith a short>term contractB the purpose o& the insurance is compensation &or a
determinable loss and not the unnecessary enrichment o& the insuredC In the case o& a lon!>term
insurance contract this takes the &orm o& a cash payment ;or payments< to assist the insured or
his or her bene&iciaries in o1ercomin! the trauma associated )ith deathB illnessB inAury or
disablementC Co1er is usually unrelated to any speci&ic 1alue placed on the li&e o& the insuredC
6efinition
HInsurance is a contract o& ;the utmost< !ood &aith bet)een an insurer and an insured )hereby
the insurer undertakes in return &or the payment o& a price or premium to render to the insured a
sum o& money or its e5ui1alent on the happenin! o& a speci&ied uncertain e1ent in )hich the
insured has some interestIC
1
NoteB ho)e1er that
i< It is usual to char!e a premiumB but this is not essential in South ,&rican La)C
ii< 0he )ords Hthe utmostI can no) be considered redundant ($utual = Federal 1nsuran!e
Compan% Limited vs udtshoorn $uni!ipalit% ('(*9)).
The Contract
For there to be a 1alid contract bet)een a proposer and an insurer there there&ore needs to be
a!reement on the &ollo)in! points=
)ho the insured person isG
the risk that has been insured a!ainstG
the amount at risk ;sum insured<G
the premiums due in terms o& the contractG
the period o& the insurance ;the term o& the contract<C
FurthermoreB
0he insurance contractB like any otherB is concluded )hen the parties a!ree to be bound in
accordance )ith certain termsC
2
1
9ordon and 9etKB The SA Law of 1nsuran!e.
2
9ordon and 9etKB The SA Law of 1nsuran!e
BN"IN#
2)
Normally it is the insured )ho makes the Ho&&erIB the insurer merely in1itin! the public to do
business )ith himC 0he o&&er is made in an application re5uestin! the issue o& a policy on
its usual terms and conditionsC
0he insurance contract is complete only )hen the insurer accepts the proposal
unconditionally > as is re5uired &or all contractsC I& the insurer seeks to introduce di&&erent
termsB there is no acceptance at that sta!eC
2hat constitutes acceptance depends on the &acts > it may be e3pressed by letterB or
implied &rom the insurer8s conductC 0he issue o& a Hco1er noteI may amount to an
acceptance o& the proposalC
"nce completeB the contract cannot be alteredB e3cept by a!reement o& the partiesC
Short>term insurers )ishin! to introduce di&&erent terms usually do so as a condition &or
rene)al o& the policyB )hich mi!ht be on a monthly or an annual basisC "ther)ise unless
the insured a!rees to the chan!eB they must in1oke the cancellation condition and start a
ne) contractC
For personal lines business ;de&ined in the Short>term ,ct as business )here the policy
holder is a natural person< the policyholder must be pro1ided )ith a copy o& the policy
document )ithin 0 days o& enterin! into the a!reementC
Co!!ence!ent of the Contract
0he policy is en&orceable as &rom the date o& its issueB unless the insurer suspends or 5uali&ies its
bindin! e&&ect by statin! eC!C that it )ill only become bindin! once the &irst premium has been
paidC
Payment o& a premium by a policyholder in terms o& his policy to an authorised intermediary
re&erred to in Section 4# o& the Short>term Insurance ,ct and part 4 o& the re!ulationsB is deemed
to be speci&ic per&ormance in terms o& the policyC
Rule" of Inter1retation
0he !eneral rules discussed apply to insurance contracts in the same )ay as to others and the
&ollo)in! are e3amples=
I& a policy is issued in standard printed &orm and a type)ritten endorsement attachedB the
)ordin! o& the endorsement o1errides that o& the policy inso&ar as the )ordin! may be
inconsistentC
0echnical termsB such as the phrase HsubAect to a1era!eI in a property policyB are
construed by the courts as ha1in! the meanin! associated )ith them in the normal course
o& business dealin!sC
In a phrase such as HAe)elleryB )orks o& art and other similar articlesI the e>usdem generis
rule )ould re5uire the )ords Hand other similar articlesI to be con&ined to items o& hi!h
monetary 1alue in comparati1ely small bulk ;althou!h it is ob1iously pre&erable to a1oid
the use o& e3pressions such as Hand other similar articlesI or Hand the likeI<C
I& a phrase in a policy is ambi!uousB the meanin! more &a1ourable to the insured is taken
under the !ontra proferentem ruleB as it is only e5uitable that the insurers should su&&er the
conse5uences o& the uncertainty &or )hich they are responsibleC IndeedB rule is taken
e1en &urtherB and the meanin! is adopted )hich &a1ours the insuredB so as not )ithout
necessity to depri1e him o& his protection under the contract ;?liptown Clothing 1ndustries
(&t%) Ltd v $arine = Trade 1nsuran!e Co of SA Ltd ;1$(1<<C
3
9ordon and 9etKB 0he S, La) o& InsuranceG Afri!an @uarantee = 1ndemnit% Co v Couldridge ;1$22<C
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If a policy is issued in standard printed form and a typewritten endorsement attached, the wording
of the endorsement overrules that of the policy insofar as the wording may be inconsistent.
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I!1lied Ter!"
0he same rules )ith re!ard to the presence or absence o& implied terms apply to insurance as in
the case o& other contractsC
In Aidets+% v Libert% Life 1nsuran!e Asso!iation of Afri!a Ltd ;1$$0< it )as su!!ested that there is
an implied term in an insurance contract to the e&&ect that i& any &raudulent claim is kno)in!ly or
recklessly made by an insuredB he )ill not be entitled to reco1erC 0he Aud!e held that in South
,&rican la) there is a presumption that the insurer )ho desires additional protection )hen claims
are submitted need only insert an appropriate term in the contractC .ore recent Aud!ements ha1e
challen!ed this 1ie)B but South ,&rican policies usually contain a speci&ic condition e3cludin!
&raudulent claimsC
Caveat Emptor 4er"u" Uberrima Fides
0here are basically t)o distinct )ays that contracts can di&&er le!allyC Contracts undertaken in the
normal course o& business are !enerally based on the premise o& !aveat emptor or Hlet the buyer
be)areIB but contracts o& insurance are based on a di&&erent concept - uberrima fides or Hutmost
!ood &aithI=
"ne must appreciate that in all business dealin!s one undertakes some &orm o& contractB e1en i&
most o& these are simply oralC :3amples o& these are the purchasin! o& a loa& o& bread or a packet
o& ci!arettes &rom a local tea roomC Some contracts )ill not be as simpleC 0hey could be &or lar!e
amountsB such as the purchase o& a car or e1en a houseC
,ll o& these contracts are based on M!aveat emptorMC 0he terms and conditions o&&ered by the
seller are either 5ueried at purchase or are other)ise accepted as true and correctC 7o)e1erB i& it
can subse5uently be pro1ed that the seller deliberately )ithheld in&ormation &rom the buyer that
)ould in all likelihood ha1e a&&ected his or her decision to buy the buyer )ill ha1e recourseB i&
necessaryB to the courtsC Should this not be the case it is only )here the seller pro1ides some
&orm o& )arranty that there is a possibility o& a HcomebackIC It is o&ten thou!ht that there is a
Mcoolin! o&&M period )hen a maAor purchase is madeC 0his isB strictly speakin!B not correctC 0he
coolin! o&& period applies only to any credit a!reement entered intoC 7o)e1erB based on the
principles o& common la) a purchaser )ill be able to apply to the courts in the e1ent o& deliberate
&raud or misrepresentation o& the &actsC Note that i!norance o& the &acts cannot and )ill not be
accepted as a 1alid de&enceC "ne is e3pected to be a)are o& )hat one si!ns or a!rees to at all
times andB as is o&ten repeatedB MI!norance is no e3cuse in the eyes o& the la)CM
0he 1ery nature o& an insurance contract re5uires that the MsellerM ;the proposer< pro1ides the
MbuyerM ;the insurer< )ith all the &acts at his or her disposalC Nondisclosure or misrepresentation o&
any o& the &act )ill !i1e the insurer the ri!ht to claim that the policy )as 1oid Bab initioB ;&rom the
be!innin!<C 0he duty o& disclosure )as hi!hli!hted in the )ell>kno)n case o& Carter 4 0oeh!
.1(##/ )here Lord .ans&ield stated the rule and the reasons &or itC
,The dut% of dis!losure is imposed b% law (e2 lege) and it is not based upon an
implied term of the !ontra!t of insuran!e. 1t does not flow from the re/uirement of
bona fides# nor from the spe!ial !ir!umstan!es of insuran!e law# being onl% an
e2ample of the appli!ation of general prin!iples# espe!iall% relating to
misrepresentation.-
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"1er the years this has led to a certain amount o& con&usion as to )hether insurance contracts
are contract o& Buberrima fidesB ;utmost !ood &aith< or contracts o& Bbona fidesB ;!ood &aith<C 0he
o&ten 5uoted case o& Mutual and )ederal In"urance Co!1an+ Ltd: 4 Oudt"hoorn
Munici1alit+ .1,3'/ &inally cleared up this con&usin! principleC 0he ,ppellate %i1ision decided
that Mutmost !ood &aithM )as an impractical concept since there can only be !ood &aith or bad
&aithC , person may be less than honest but cannot be more honest than honest and Mutmost
!ood &aithM )as thus declared to be meanin!less in South ,&rican la)C 2ith a contract Buberrima
fidesB it )as accepted that there )as an obli!ation placed on the proposer to disclose all that s?he
kno)sB and the hidin! o& any material circumstanceB )hether the proposer thou!ht it )as rele1ant
or notB )ould allo) the insurer to 1oid the contract &rom inceptionC 0he implication o& this court
rulin! resulted in the conclusion that the principle o& uberrima fides placed too hea1y a
responsibility on the proposerC Further rulin!s ha1e resulted in )hat is today kno)n as the
Mrea"ona2le !an te"tMC 0he reasonable man test is e5ually important to lon!>term as )ell as
short>term businessC 2hile the &ollo)in! section there&ore pro1ides a !eneral o1er1ie) o& its
application it )ill be dealt )ith in considerably more detail in the lon!>term and short>term units o&
the Insurance Institute8s le!al &rame)ork subAects that concentrate e3clusi1ely on these insurance
disciplinesC
6ut+ of 6i"clo"ure
Good )aith
0he duty o& disclosure &orms a central part o& South ,&rican Insurance La)C It )as al)ays stated
that insurance is a contract uberrimae fidei > o& the utmost !ood &aith > &erreira v $arine and
Trade 1nsuran!e Co Ltd ;1$/#<C 0he duty o& disclosure )as hi!hli!hted in the )ell>kno)n case o&
Carter v 3oehm ;1/((< )here Lord .ans&ield stated the rule and the reasons &or itC
H0he duty o& disclosure is imposed by la) ;e2 lege< and it is not based upon an implied term o&
the contract o& insuranceC It does not &lo) &rom the re5uirement o& bona fidesB nor &rom the
special circumstances o& insurance la)B bein! only an e3ample o& the application o& !eneral
principlesB especially relatin! to misrepresentationCI
In the case o& $utual and Federal 1nsuran!e Co Ltd v udtshoorn $uni!ipalit% ;1$*#< the
,ppellate %i1ision took a &resh look at utmost !ood &aith and concluded that it )as an impractical
concept since there can be only !ood &aith or bad &aithC , person may be less than honest but
cannot be more honest than honest and Uberrima Fides )as accordin!ly declared to be an
e3pression )ithout any particular meanin! in South ,&rican La)C
Rea"ona2le Man Te"t
2hile the basis o& uberrima fides is still applicable in principle to any proposal &or insurance it is
no) !enerally accepted that the test to the 1alidity o& the contract )ill be determined by the
reasonable man testC 0he proposer is e3pected to pro1ide an insurer )ith all the rele1ant
in&ormation re5uired that a reasonable man )ould kno) to be material to the riskC It )ill be no
e3cuse to state that &acts )ere not disclosed because it )as thou!ht that they )ere not important
or materialC
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I& a reasonable man )ould ha1e reco!nised the &acts to be materialB the proposer is e3pected to
also ha1e reco!nised thisC 0his does not mean that e1ery proposer no) needs to be an
under)riterC
0he emphasis is on )hat a Mreasonable manM )ould consider to be necessaryC Un&ortunately
there does not seem to be a clear de&inition o& )hat is considered to be a Hreasonable manIC
2here this has been put to the test the opinion o& a person )ith an a1era!e intelli!ence and
some &orm o& tertiary education is considered ade5uateC , kno)led!e o& insurance usually
dis5uali&ies the person as the opinion o& a layman is )hat is )antedC
Material )act"
0his lack o& clarity surroundin! the e3act nature o& the Hreasonable manI in no )ay a&&ects the
duty o& both insured and insurer to discloseB prior to the conclusion o& the contractB &acts )hich
are material to the risk or the premium to be char!ed but the e3tent o& that duty and the nature o&
the test &or materiality also came under re1ie)C 0he court decided that the test should be applied
obAecti1ely &rom the point o& 1ie) o& the reasonable manB so ensurin! Austice and &airness to both
partiesC
Subse5uentlyB ho)e1erB this approach has been criticised on the !rounds o& 1a!ueness and
&ailin! to pro1ide any real !uidelines &or assessin! the e3tent o& the dutyC
Test for Materiality
,nother opportunity &or the ,ppellate %i1ision to consider the nature o& the test arose in the case
o& &resident Aerse+eringsmaats+app% 3p+ v Trust 3an+ van Afri+a 3p+ ;1$*$<C 7ere the court
ruled that a &act )as material i&B in the opinion o& the reasonable man ;not the reasonable insured
or insurer<B it could in&luence the reasonable insurer in decidin! )hether or not to accept a riskB
and i& he decides to accept itB )hat premium to char!eC 0he test is not )hat the reasonable man
)ould re!ard as a material &act but )hether the reasonable man )ould belie1e that the
in&ormation must be disclosedC
Le&i"lati4e Protection
In the 1$(* case o& Cordan v 7ew Dealand 1nsuran!e Co LtdB the ans)er to a 5uestion on the
proposal &or motor insurance askin! the a!e o& the insured on his ne3t birthday )as !i1en the
&orce o& a )arrantyC ;2arranties are e3plained later in this module<C 0he insured incorrectly
ans)ered the 5uestion and stated 22 years instead o& 2 years and althou!h in court it )as
ar!ued that the ans)er )as substantially true the insurer repudiated liabilityC 0he Aud!e took the
1ie) that there )as no room &or the doctrine o& substantial per&ormance in considerin! the
truth&ulness or other)ise o& an ans)er in an insurance proposal &ormC 7e said a statement is
either true or it is notG there are no relati1e de!rees o& truthC "nce the insured has admitted that
the ans)er )as untrueB the Aud!e heldB that )as the end o& the matterC
It )as immediately ob1ious that this )as a most un&ortunate position in that the insurer could no)
in1oke any untrue statement made by the insured and repudiate liability on the basis thereo&C ,s
a result section (;< )as inserted in the &ormer Insurance ,ct by the Insurance ,mendment ,ct
$ o& 1$($B and a similar pro1ision in the ne) Short 0erm ,ctC
Section # o& the Short 0erm ,ct pro1ides that
;1< not)ithstandin! anythin! to the contrary in a short>term policy containedB )hether
entered into be&ore or a&ter the commencement o& this ,ctB but subAect to subsection
;2< >
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the policy shall not be in1alidatedG
the obli!ation o& the short>term insurer thereunder shall not be e3cluded or
limitedG and
the obli!ations o& the policyholder shall not be increasedB
on account o& any representation made to the insurer )hich is not trueB )hether or not the
representation has been )arranted to be trueB unless that representation is such as to be
likely to ha1e materially a&&ected the assessment o& the risk under the policy concerned at
the time o& its issue or at the time o& any rene)al or 1ariation thereo&C
;2< I& the a!e o& an insured under an accident and health policy has been incorrectly
stated to the short term insurerB the policy bene&its shallB not)ithstandin! subsection
;1<B be those )hich )ould ha1e been pro1ided under that policy in return &or the
premium payable had the a!e been correctly stated= pro1ided that i& the nature o& that
accident and health policy is such as to render such arran!ements ine5uitableB the
4e!istrar may direct the short>term insurer to apply such di&&erent method o&
adAustment to the policy bene&its o& that accident and health policy as the 4e!istrar
considers e5uitable in relation to the misstatement o& a!eCI
0he test in # ;1< is a subAecti1e oneB based on the under)riter8s opinionB not the Qreasonable
man8 testC 0he under)riter need only sho) that the in&ormation )ould ha1e in&luenced his
decision ;Eilingele v South Afri!an $utual Life Assuran!e So!iet% ;1$$<<C
In"urance Contract"
0he nature o& the subAect matter o& insuranceB and the circumstances pertainin! to itB are &acts
particularly )ithin the kno)led!e o& the insuredC 0he insurers are not !enerally a)are o& these
&acts unless the insured tells themC 2hile the proposer can e3amine a specimen o& the policy
be&ore acceptin! its termsB the insurer is at a disad1anta!e as he cannot e3amine all aspects o&
the proposed insurance )hich are material to himC "nly the proposer kno)sB or should kno)B all
the rele1ant &acts about the risk bein! proposedC ScruttonB LCPC put it as &ollo)s=
,As the underwriter +nows nothing and the man who !omes to him to as+ him to insure
+nows ever%thing# it is the dut% of the assured# ... to ma+e a full dis!losure to the underwriter
without being as+ed for all of the material !ir!umstan!es. This is e2pressed b% sa%ing it is a
!ontra!t of the utmost good faith.- (5oFanes v 3owen ('(G*)).
=ue"tion" in Pro1o"al )or!
0he la) is clear that the 5uestions set out in the proposal &orm do not necessarily de&ine the limits
o& )hat is material &or the insurer to kno) ;Fransba Aervoer 3eper+ v 1n!orporated @eneral
1nsuran!es Ltd ;1$/(<<C
Continuin& 6ut+
'y means o& a condition in the policy contractB disclosure o& chan!es in material particulars is
usually e3tended to the entire period o& the policyB and not only at inception or on rene)alC
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Reci1rocal 6ut+
0he duty o& &ull disclosure rests on the under)riters also ;Carter v 3oehm ;1$((<< and they must
not )ithhold in&ormation &rom the proposerB )hich leads him into a less &a1ourable contractC
Su!!ar+
Facts )hich !u"t be disclosed include=
those )hich )ould indicate that the risk is !reater than )ould be e3pected &rom its classG
those )hich )ould tend to make the amount o& the loss !reater than normalG
pre1ious loss and claim historyG
pre1ious application o& penalty terms or restricted co1er by other insurersG
the &act that the insured had absol1ed a third party &rom )hat )ould be normal le!al
liabilitiesB thus depri1in! the insurers o& potential subro!ation ri!htsC
Facts that do not need be disclosed include=
&acts o& la)G
&acts )hich lessen the riskG
&acts about )hich the insurer is put on en5uiry but does not pursueG
&acts )hich the insurer is deemed to kno) &rom his businessG
&acts )hich the insurer8s sur1eyor should ha1e seenC
Barrantie" and 0reach of Barrantie"
6efinition
, )arranty is a term o& the contractC It is an undertakin! that somethin! shall or shall not be done
or that a certain state o& a&&airs e3istsB or does not e3istC
Compliance )ith the )arranty isB in la)B &undamental to the liability o& the insurerC 0he only time
)hen such liability is not a&&ected is )here the breach )as immaterial to a loss or the assessment
o& the riskC
Rea"on" for Barrantie"
0he under)riter )ill dra&t )arranties into polices &or t)o main reasons=
2hen the insured must comply )ith some re5uirements to make the risk acceptable eC!C
remo1al o& )aste materials in &ire insurance or the use o& certain protecti1e de1ices in the&t
insuranceC
2here some ad1erse &eature )as absent or somethin! ad1anta!eous present at the time
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o& sur1ey and these &actors ha1e been reco!nised in &i3in! the rate eC!C in &ire insuranceB i&
no oils )ere stored or &ire doors di1ided the comple3 into di&&erent types o& &ire riskC
Affir!ati4e and Pro!i""or+ Barrantie"
2arranties can be di1ided into a&&irmati1e and promissory )arrantiesC 0he &irst cate!ory relatin!
to a &act in the pastB such as !ood healthB possession o& an appropriate licenceB or no history o&
insurance bein! re&usedC Promissory )arranties relate to the &uture )here in motor insurance an
e3ample )ould be to keep the 1ehicle in a road)orthy conditionC
Inter1retation of Contract"
It is only ri!ht that there are speci&ic rules applicable to the interpretation o& contractsC ContractsB
by their 1ery natureB need to be clear to all the parties in1ol1ed there)ithC ,ny interpretation that is
subAect to an obAecti1e and not a subAecti1e analysis can only lead to con&usion andB ine1itablyB
recourse to the courts &or a le!al rulin!C 2hile this module concentrates on contracts associated
)ith insurance businessB the interpretation o& contracts as included in this section applies to all
contracts entered intoC
0he cardinal rule o& all interpretation is that the intention o& the parties should pre1ail as
appears &rom the ordinary !rammatical meanin! o& the )ords usedC
0he court attempts to determine the ordinary meanin! o& the )ords used by the partiesC
0he &act that the meanin! o& clear and unambi!uous )ords operates harshly a!ainst one
partyB or that a &airer result could be arri1ed at by !i1in! them another meanin!B are not
aspects taken into accountC
2hen the )ords are not absolutely clear and unambi!uous the court )ill adopt the most
e5uitable conclusion and )ill not interpret the contract to !i1e one o& the parties an un&air
or unreasonable ad1anta!e o1er the otherC
2here )ords are susceptible to more than one meanin! the conclusion adopted )ill !i1e
e&&ect to the contract rather than a sense )hich )ill render it inoperati1eC , court )ill then
lean to)ards a conclusion )hich )ill result in the least incon1enienceC
2here a chan!e o& )ordin! is used in the contract it )ill be taken to indicate a chan!e in
the intentions o& the partiesC
0he preamble and mar!inal notes are re!arded as &ormin! part o& the conte3tual settin!
&or the purpose o& interpretin! the )ords in 5uestionB but i& they su!!est a di&&erent
meanin! to that indicated by the operati1e part o& the contract they are i!noredC
I& a )ord in the contract is deleted it is re!arded as pro non s!ripto ;as i& it had not been
)ritten< and as such the court )ill not dra) any in&erencesC
2here the contract is e3pressed in a standard or printed &orm to )hich has been added
any type)ritten or hand)ritten )ordin! thenB i& there is any con&lict bet)een the t)oB the
latter )ill pre1ail as it is construed as representin! the adaptation o& a !eneral &orm to
meet the needs o& the particular caseC
, )ritten document must be construed as a )holeB and )ords and phrases must not be
interpreted in isolationC For e3ampleB )here a )ord or phrase is !i1e a speci&ic meanin! in
one part o& a document it is deemed to ha1e the same meanin! throu!houtC
,n e3press term o1errides an implied term )here they are inconsistentC
0he ordinary rules o& !rammar are to pre1ail i& there is any ambi!uity or lack o& clarityC
9eneral )ords are construed in their plain and normal sense butB )here a technical term
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is usedB it )ill be !i1en throu!hout the technical meanin! normally assi!ned to itC
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0he si!ni&icance o& a )ord must be determined by its conte3tC 0his is )hat is kno)n as the
e>usdem generis rule - a re&erence to do!sB cats and other animals )ill be taken to re&er
to domestic animalsC
2ords must be construed literallyC I& such construction is ambi!uousB and one
interpretation )ould &a1our the party responsible &or dra)in! up the contract as a!ainst an
alternati1e 1ie) supportin! the other partyB then the meanin! )hich &a1ours the latter is
takenC 0his is kno)n as the !ontra proferentem ruleC
0he inte!ration ruleC 0his pro1ides thatB )here a contract has been put into )ritin!B it is
therea&ter re!arded as the e3clusi1e memorial o& the transactionB and no e1idence ;Hparol
e1idenceI< may be !i1en as to the meanin! o& the document )hich is inconsistent )ith the
terms o& the )ritten contractC
,ccordin! to the HPlain .eanin! 4uleIB )here the terms o& a )ritten contract are clear and
unambi!uousB no e1idence may be !i1en to alter the plain meanin!C
,s )e mentioned at the be!innin! o& this section the rules o& interpretation apply to all contractsB
and this thus includes insurance contractsC 7ere are a &e) e3amples o& )hat )e mean=
I& a policy is issued in standard printed &orm )ith a type)ritten endorsement attachedB the
)ordin! o& the endorsement o1errules that o& the policy inso&ar as the )ordin! may be
inconsistentC
0echnical termsB such as the phrase HsubAect to a1era!eI in a property policy are
construed by the courts as ha1in! the meanin! associated )ith them in the normal course
o& business dealin!sC
In a phrase such as HAe)elleryB )orks o& art and similar articlesI the e>usdem generis rule
)ould re5uire the )ords Hand similar articlesI to be con&ined to items o& hi!h monetary
1alue in comparati1ely small bulk ;althou!h it is ob1iously pre&erable to a1oid the use o&
such 1a!ue )ords entirely<C
I& a phrase in a policy is ambi!uous the meanin! more &a1ourable to the insured is taken
under the !ontra preferentem rule as it is only e5uitable that the insurer should su&&er the
conse5uences o& the uncertainty &or )hich it is responsibleC Indeed this rule is taken e1en
&urther and the meanin! is adopted )hich &a1ours the insured so as notB )ithout necessityB
to depri1e him or her o& his or her protection under the contractC
In"ura2le Intere"t
Introduction
0he e3istence o& insurable interest is an essential in!redient o& any insurance contract and is an
important and &undamental principle o& insuranceC
4emember that )hat is in &act insured is not the obAect itsel& ;eC!C a buildin!< but the intere"t o&
the insured in the subAect matterC
0his can be &urther e3plained=
(a) Sub>e!t matter of insuran!e
0his relates to the actual propertyB or e1entB !i1in! rise to the creation o& a le!al liability or
loss o& le!al ri!htC It could be a buildin!B stockB household !oodsB le!al liability &or inAuryB a
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ship or a li&e )hich is to be insuredC
(b) Sub>e!t matter of !ontra!t
0his is the interest o& the person in the obAect insuredC
(!) 1nsurable interest
In order to 1alidly insureB the proposer must ha1e an insurable interest in the subAect matter
speci&iedC
6efinition
2here the insured is so situated that the happenin! o& the e1ent on )hich the insurance money is
to become payable )ouldB as a pro3imate causeB in1ol1e the assured in the loss or diminution o&
any ri!ht reco!nised by la) or any le!al liability there is an insurable interest in the happenin! o&
that e1ent to the e3tent o& the possible loss or liabilityC
4
Essential Features
'y e3pandin! upon this de&inition )e can identi&y at least &our &eatures essential to insurable
interest=
there must be some propertyB ri!htsB interestB li&eB limb or potential liability capable o& bein!
insuredG
such propertyB ri!htsB interests and the likeB must be the subAect matter o& insuranceG
the insured must stand in a relationship )ith the subAect matter o& the insurance )hereby
he bene&its &rom its sa&etyB )ell>bein! or &reedom &rom liability and )ould be preAudiced by
its dama!e or the e3istence o& liabilityG
the relationship bet)een the insured and the subAect matter o& insurance must be
reco!nised at la)C
South African Law
In the United +in!dom insurable interest )as introduced by means o& a number o& statutesB the
most important o& )hich are the .arine Insurance ,ct 1/4#B the Li&e ,ssurance ,ct 1//4B and the
9amin! ,ct 1*4# ;sometimes re&erred to as the 9amblin! ,ct<C 0he latter rendered all contracts
o& !amblin! or )a!erin! null and 1oidB one e&&ect o& this bein! that insurances )here no insurable
interest e3isted )ere nothin! more than )a!ersC
,uthors on 4oman>%utch la) at the end o& the ei!hteenth century held the 1ie) that all !amin!
and )a!erin! contracts )ere unen&orceableB and this 1ie) )as adopted by the South ,&rican
courtsC ,s 9ordon and 9etK point outB it there&ore &ollo)s that an insurable interest is re5uired in
South ,&ricaC Insurable interest is in a sense the con1erse o& )a!erin!C
0he South ,&rican le!al system has since been amended to allo) certain &orms o& !amblin! and
)a!erin!C 7orse>racin!B casinos and the L"00" are !ood e3amples o& thisC 7o)e1erB this does
not chan!e the basic principles o& our common la)C 0he le!itimate !amblin! acti1ities permitted
are 1ery care&ully and strictly monitored by control boards set up by strin!ent le!islationC ,ny
!amin! or )a!erin! not condoned by speci&ic le!islation remains ille!al and contrary to public
interestB and there&ore unen&orceableC 7a1in! said this the 5uestion must naturally and ine1itably
arise as to )hen insurable interest must actually be present &or an insurance contract to be
acceptableC 2ith re!ards marine insurance insurable interest need only e3ist at the time o& lossC
4
.ac9illi1ray# 1nsuran!e Law.
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Bhen In"ura2le Intere"t !u"t EAi"t
In marine insurance insurable interest need only e3ist at the time o& a lossC 0his protects
merchants )ho assume an interest in car!o durin! a 1oya!e and may ha1e it included in a
&loatin! policyC
In a li&e insurance the rule is the re1erseC Insurable interest needs to e3ist )hen the policy is
e&&ectedB not necessarily at the time o& the claim ;0alb% vs The 1ndia and London Life Assuran!e
Compan% ;1*#4<<C
In the case RiAo! 4" Southern Life A""ociation of Africa G Collin" G 0ain the court decided
that - H1nsurable interest must be in e2isten!e at the beginning of the !ontra!tIC 0his decision )as
related to a li&e insurance contract and is no) !enerally accepted as applicable to all lon!>term
insurance contractsC In a lon!>term insurance contract it is thus only necessary to pro1e insurable
interest at the commencement o& the contractC 0here is no need to pro1e insurable interest at
claim sta!eC
For all other insurancesB insurable interest must be present both at the time o& e&&ectin! the policy
and )hen any claim is madeC 0he practical operation o& certain co1ers eC!C holiday insuranceB
has meant that policies are sometimes issued to commence at some &uture dateC
In the case o& Co!!ercial A""urance Co!1an+ 4" Kern the court decided that - HThe
fundamental prin!iple is that on!e the assured is deprived of his insurable interest in the insured
!ar# the poli!% !eases to have an% validit%IC 0his has no) !enerally come to be accepted as the
rulin! &or all insurances other than those o& a marine or lon!>term natureC Insurable interest thus
needs to be present at commencementB durin!B and at claim sta!e &or most insurance policiesC
Common Features
0he liability o& the insurer to pay claims !i1es him insurable interest and this allo)s him to
seek reinsuranceC
, mere e3pectation o& ac5uirin! insurable interest in the &uture may not be enou!h to
create such interest ;Coo+ v Field ;1*#0<<C
La)&ul possession normally supports insurable interestC
0he interest need not be speci&iedC
Insurable interest )ill not apply in the case o& criminal actsC
In a reasonable sense insurable interest must be capable o& &inancial 1aluationC
Ce""ion"
,s is o&ten the case )ith li&e assurance contractsB the insured may )ant to cede his contractual
ri!hts a!ainst the insurer to a third partyB either absolutely or as security &or a debtC
,lthou!h this can be done )ithout the kno)led!e o& the insurerB the cession is )ithout e&&ect
a!ainst the insurer until he has notice o& itC
Short>term insurersB ho)e1erB choose to emphasise the personal nature o& the contract by a
condition alon! the &ollo)in! lines=
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,Unless otherwise provided# nothing in this poli!% shall give an% rights to an% person other
than the insured. An% e2tension providing indemnit% to an% person other than the insured
shall not give an% rights of !laim to su!h person# the intention being that the insured shall
!laim on behalf of su!h person. The re!eipt of the insured shall in ever% !ase be a full
dis!harge to the !ompan%-.
0his also helps to ensure that the claimant )as the person actually concerned )ith matters that
mi!ht be in disputeB such as compliance or non>compliance )ith policy conditions and )arrantiesC
7o)e1erB the ori!inal o)ner o& the "u28ect !atter of in"urance mi!ht cede all or part o& his
interest to another partyB &or e3ample )here the o)ner takes out a mort!a!e bond on the security
o& his propertyC 0he mort!a!ee has a separate insurable interest to the e3tent o& the amount
o)edC For the mort!a!ee to secure the protection o& the policyB the insured mi!ht no) be sho)n
as HPC 'lank as o)nerB and P Soap as .ort!a!eeB &or their respecti1e ri!hts and interestsCI
Inde!nit+
6efinition
0he e3act amount su&&icient to place the insured in the same &inancial position a&ter a loss as he
enAoyed immediately be&ore it happenedC
Introduction
In the leadin! South ,&rican case on indemnity the &ollo)in! )as said=
,The amount re!overable under a poli!% of insuran!e in the event of a fire# must not
e2!eed the sum ne!essar% to indemnif% the insured full% against an% loss whi!h he ma%
have a!tuall% sustained in !onse/uen!e of the fire. 8e is not entitled to re!over the
amount spe!ified in the poli!% unless it represents his a!tual loss. The main purpose of
the poli!% is to fi2 the total amount of the premium and to mar+ the limit be%ond whi!h the
liabilit% of the insurers is not to e2tend. The insured is# therefore# entitled to a full
indemnit% within the limits of his poli!%# for the loss whi!h he has sustained in respe!t of
the sub>e!t;matter of the insuran!e- (7afte v Atlas Assuran!e Co Ltd ('(GH)).
Lord Pustice 'rettB in the case o& Castellain v &reston ;1**<B said that indemnity )as the
Hcontrollin! principle in insurance la)IC
, &urther 5uotation &rom Castellain v &reston emphasiKes the important position indemnity plays
in insurance=
,The ver% foundation# in m% opinion# of ever% rule whi!h has been applied to insuran!e
law is this# that the !ontra!t of insuran!e !ontained in a marine or fire poli!% is a !ontra!t
of indemnit% and of indemnit% onl% ... and if ever a proposition is brought forward whi!h is
at varian!e with it# that is to sa%# whi!h either will prevent the assured from obtaining a full
indemnit% or whi!h gives the assured more than a full indemnit%# that proposition must
!ertainl% be wrong.-
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Property insurance is a contract o& indemnityC 0he insurer8s liability is limited to the smaller o&
the real and actual 1alue o& the insured8s interest in the loss su&&ered ;the insured cannot
make a pro&it &rom his mis&ortune
the sum insuredC
In the same )ayB liability insurance co1ers dama!es )hich the insured may become le!ally liable
to pay in conse5uence o& the e1ents insured a!ainstB subAect to the indemnity limit in the policyC
Not all insurance contracts are contracts o& indemnityC It is impossible to &inancially indemni&y &or
loss o& li&e or limbB accordin!lyB personal accident?stated bene&its policies are re&erred to as
contracts o& compensationC
Mea"ure" of Inde!nit+
0he &undamental principle is that the insured be restoredB as &ar as money can do soB to the
position he occupied i!!ediatel+ 2efore the lo""C
Usually this )ill mean the market 1alue at the time and place o& the lossC
I& the property has risen in 1alue since it )as ori!inally insuredB the insured is entitled to the
bene&itB subAect al)ays to the ade5uacy o& the sum insuredC In the same )ayB market conditions
mi!ht ha1e deterioratedB or the insured may ha1e ad1ertised the property &or sale at a lesser
&i!ureB resultin! in a reduced 1alueC
Rein"tate!ent
Sometimes payment on market 1alue )ill not restore the insured to his ori!inal positionB and the
loss cannot be made !ood e3cept by reinstatementC In partial lossesB this may be the only
measure a1ailableC
0here is an important di&&erence bet)een the insurers a!reein! a payment representin! the co"t
o& reinstatementB as mi!ht be e1idenced by a repairer8s 5uotationsB and their a!reein! to
rein"tateC
"nce insurers ha1e elected to reinstateB they must per&orm as a contractual obli!ationB and
cannot )ithdra)B e1en i& this pro1es to be more di&&icult and e3pensi1e that )as anticipated and
the sum insured is e3ceededC
Valued Polic+
, 1alued policy is one )hich speci&ies the a!reed 1alue o& the subAect>matter at commencementC
0his is sometimes done &or items )here a market 1alue cannot readily be ascertainedB eC!C
collectors8 itemsB 1inta!e carsC
EAce"" and A4era&e
0hese do not alter the basic principle o& indemnityC ,n e3cess is that part o& a loss &or )hich the
insured is liableC 'y the application o& a1era!eB he is re!arded as his o)n insurer in the
proportion that the 1alue o& the property e3ceeds the sum insuredC
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Lin* with In"ura2le Intere"t
0here is a link bet)een indemnity and insurable interest as it is the insured8s interest in the
subAect matter that is co1eredC In the e1ent o& any claim the payment made cannot there&ore
e3ceed the e3tent o& such interest and there are cases )here it )ill be lessC
Su2ro&ation
Introduction
Subro!ation is a corollaryB or natural result o& indemnityC 2hen an insurer has already &ully
indemni&ied his policyholderB the policyholder cannot make a pro&it by a &urther reco1ery &rom
another sourceB such as a third party responsible &or the lossC
SimilarlyB )hen an insurer has paid a claim to his policyholderB and another ;third< party )asB in
la)B liable &or the cost o& the lossB the third party should not be able to a1oid his or her &inancial
responsibilitiesC It )ould be unAust that the !uilty party should escape his obli!ations because o&
the other8s !ood sense in arran!in! insuranceC
6efinition
Subro!ation is the ri!ht o& one person to stand in the place o& another and a1ail himsel& o& all the
ri!hts and remedies o& that otherB )hether already en&orced or notC
0he &undamental point is that the insured is entitled to indemnity but no more than thatC
Subro!ation simply means that in instances )here the insurers ha1e paid the claims o& the
insured they are entitled to take o1er his ri!hts in seekin! reco1ery o& their outlay > S!hoonwin+el
v @alatides ;1$/4<B Aviation 1nsuran!e Co Ltd v 3ates = Llo%d Aviation (&t%) Ltd ;1$*2<C
Contract" not Su28ect to Su2ro&ation
Personal ,ccident?Stated 'ene&its insurances are not subAect to the doctrine o& subro!ation as
they are not contracts o& indemnityC I& death )as causedB sayB by the ne!li!ence o& another
person then the deceased8s representati1e may be able to reco1er &rom that source in addition to
the policy moniesC
Bhen the Ri&ht Ari"e"
0he common la) ri!ht o& subro!ation does not arise until the insurers ha1e admitted the claim
and paid itC 0o ensure their position is not preAudicedB ho)e1erB insurers place a condition on the
policy !i1in! themsel1es subro!ation ri!hts 2efore the claim is paidB iCeC they are able to
commence subro!ation proceedin!s immediatelyC
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Contri2ution
Contribution is the ri!ht o& an insurer to call upon others similarlyB but not necessarily e5uallyB
liable to the same insured to share the cost o& an indemnity paymentC
7ere a!ainB the common la) position is modi&ied by the terms o& the policyB )hich pro1ides that
the insurer )ill be liable only &or its own rateable proportion o& the lossC 0o !ain a &ull indemnityB
the insured )ill then claim indi1idually &rom each o& the insurers in1ol1edC
ProAi!ate Cau"e
Introduction
In insurance contractsB the perils a!ainst )hich co1er is !i1en must be set out in such a )ay that
the intention o& the parties is clearly de&inedC
In modern contractsB these are usually called H%e&ined e1entsIB HInsured e1entsI or
HContin!enciesIC
UsuallyB the insurer is liable only &or losses pro3imately caused by an insured perilC
Pro3imate cause is important to insurers &or the &ollo)in! reasons=
they are only issuin! co1er &or certain perilsG
there may be certain causes )hich they are e3cludin!G
there may be certain results )hich they are e3cludin!G
the premium )hich has been char!ed )ill ha1e taken account o& these &actorsC
6efinition
Pro3imate cause means the acti1e e&&icient cause that sets in motion a train o& e1ents )hich
brin!s about a resultB )ithout the inter1ention o& any &orce started and )orkin! acti1ely &rom a
ne) and independent sourceC S!ottish Union and 7ational v Alfred &awse% ;1$0*<C
EAce1ted Peril"
In most policiesB ;particularly those on an Q,ll 4isks8 basis > termed Hpolicies o& e3clusionI< the list
o& e3ceptions or e3clusions is lon!er and more comprehensi1e than the insured perilsC Some o&
these mean that the e3clusion is not limited to loss or dama!e directly caused by the perilB but
any loss arisin! incidentally out o& the peril is also e3cludedC
,n e3ample is the )ar e3clusion in the .ultimark Personal ,ccident section=
,This se!tion does not !over death or in>ur% dire!tl% or indire!tl% !aused b%# related to or in
!onse/uen!e of war# invasion# a!t of foreign enem%# hostilities (whether war be de!lared or
not)# !ivil war# mutin%# insurre!tion# rebellion# revolution# militar% or usurped power.-
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Chain of E4ent"
0he pro3imate cause is neither the &irst nor the last causeB it is the dominant cause ;Le%land
Shipping Co v 7orwi!h Union ;1$1*< or the e&&icient or operati1e cause ;&. Samuel = Co Ltd v
0umas ;1$24<<C
Fre5uentlyB there is a chain o& e1ents or causes leadin! up to a loss rather than a sin!le causeC It
is necessary to e3amine this chain to determine the pro3imate cause and )hether it is e3cluded
&rom co1er or notC I& an insured peril operates and directly !i1es rise to the lossB then it )ill be
co1ered pro1ided that there )as no e3cepted peril )hich e&&ecti1ely or dominantly interrupted the
chain o& e1entsC
"n the other hand the &inal loss need not be the conse5uence o& an insured perilB pro1ided that
the cause o& loss )as pro3imately initiated by an insured perilC For e3ampleB &ire policies make no
mention o& )ater or smoke dama!eB but pro1ided that the cause o& the &ire is not an e3cepted
perilB all losses resultin! &rom )ater or smoke a&ter)ards as &re5uently &ollo)s inter1ention by the
&ire bri!adeB are deemed to be &ire dama!eC
Sequence of Events
Unbroken se5uence )ith no e3cepted peril=
Co1er applies to all losses startin! )ith the insured peril on)ards
Unbroken se5uence )ith an e3cepted peril=
I& the e3cepted peril occurs &irst there is no liabilityG i& the insured peril occurs &irst there is
co1er up to but not includin! the e3cepted perilC
'roken se5uence )ith no e3cepted peril=
Co1er &or all losses startin! )ith the insured peril
'roken se5uence )ith an e3cepted peril=
Co1er &rom the insured peril on)ards i& this occurs a&ter the e3cepted peril and the breakG
co1er up to the break i& the insured peril occurs &irst and the e3cepted peril occurs a&ter the
breakC
A New Cause
Sometimes a ne) cause starts to operate independently o& and subse5uently to the peril insured
a!ainstB and it is di&&icult to say )ith certainty )hat )ere the rele1ant roles )hich each played in
brin!in! about the lossC ,n e3amination o& t)o cases )ill illustrate this pointC
In @as+arth v Law Union 1nsuran!e Co ;1*/(< &ire had le&t a !able )all standin!B but a
subse5uent !ale ble) it do)nB and it )as held that the dama!e caused by the &allin! !able )as
not dama!e by &ireC
"n the other hand in 5oth v South Easthope Farmers ;1$1*< )here a buildin! )as &irst dama!ed
by li!htnin! and shortly a&ter)ards by a hi!h )indB it )as held that the )hole o& the dama!e )as
caused by li!htnin!C
0he crucial &actor seems to be )hether the ori!inal peril )as still operatin! and )as the dominant
cause o& the lossC In the &irst case it )as e1idently &elt that the )all )as secure a&ter the &ireB
)hereas in the second case this )as not so and the !ale operated be&ore remedial action could
be takenC In Alston v $arine and Trade 1nsuran!e Co Ltd ;1$(4< the court said that the cause
)ould be re!arded as supersedin! )here=
;a< Its inter1ention brin!s about harm di&&erent in kind &rom that )hich )ould other)ise ha1e
resulted &rom the actor8s ne!li!enceC 0he results appear a&ter the e1ent to be e3traordinary
rather than normal in the li!ht o& the circumstances at the time o& its operation.
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;b< It operates independently o& any situation created by the actor8s ne!li!ence and is not an
act done as a normal response to such a situationC
;c< It is due to a third person8s act or the 1ictim8s o)n actC
Concurrent Causes
It is possible &or more than one cause to be operatin! at the same timeC I& the e3tent o& dama!e
&rom each cause ;one insuredB the other not< can be determinedB the loss &rom the insured peril
)ill be co1ered and the other notC I& the dama!e cannot be separated and one o& the causes is
an e3cepted perilB the insured cannot reco1er since the loss is as much due to the e3ception as to
the insured perilC "n the other hand i& one peril is insured and the other notB but not e3cludedB all
losses can be reco1ered i& they cannot be separatedC
In 7elspruit Combined 3ut!heries (Edms) 3p+ v Santam Aerse+eringsmaats+app% ;1$/4< the
de&endant had undertaken under a bur!lary policy that in the e1ent o& the insured !oods bein!
lost or dama!ed as the result o& a bur!lary it )ould make !ood such loss or dama!eC 0he policy
!a1e the )ord Hbur!laryI a limited meanin!B 1iK Hthe&t o& property &rom the premises pursuant to
an unla)&ul entry to the premises by actualB 1isible and &orcible meansIC , thie& had made a hole
in a )all in the plainti&&8s butchery > the insured premises > in order to !ain entryC 0his place )as
ne3t to the re&ri!eration plant )hich chilled the meat inside the premisesC In order to !ain entry
the thie& had broken o&& a pipe o& the re&ri!eration plant resultin! in it ceasin! to operate and all
the meat became badC "n appeal the court held that in terms o& the de&inition in the policyB it
could not be said that the dama!e arose as a result o& the&t o& property pursuant to unla)&ul
bur!lary o& the premisesC 0he the&t had &ollo)ed a&ter the dama!e to the pipe durin! the breakin!
in and the court held that the policy did not co1er the putre&action o& the meat nor the
conse5uential dama!eC
0urden of Proof
0he insured must pro1e that the loss )as caused by a peril a!ainst )hich he holds insurance
)hile e5ually it is a matter &or the insurer to pro1e the operation o& an e3ception should it )ish to
dispute liabilityC 2here an insured )ishes to claim that only part o& the loss &alls )ithin the
e3ceptionB the burden o& that proo& &alls back to himC
"ccasionallyB the terms o& a policy may shi&t the normal burden o& proo&B such as )hen a certain
type o& loss is e3cluded=
,e2!ept to the e2tent that the insured shall prove to the satisfa!tion of the insurers that the
loss does not fall within the e2!eption-.
In such case the insured has to pro1e not only that he has su&&ered prima &acie a loss by an
insured perilB but also that his loss does not &all )ithin the e3ceptionC
Peril" Rele4ant to ProAi!ate Cau"e
0he perils )hich must be considered can be classi&ied under three headin!s=
1C Insured perils= those named in the policy as insuredG
2C :3cepted perils= those named in the policy as e3cludedB either as causes o& insured
perils or as results or conse5uences o& insured perilsG
C "ther perils= those )hich are not mentioned at all in the policy but )hich may &orm part
o& a chain o& e1ents leadin! to a lossC
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Rule" for the A11lication of ProAi!ate Cau"e
0he risk insured a!ainst must actually take placeC ;0he &ear o& losin! !oods by an insured
peril is not loss by that peril ;.oore v Evans ;1$1/<<C
Further dama!e to the subAect matter due to attempts to minimiKe a loss already takin!
placeB is co1eredC 0here&ore )ater dama!e &rom sprinklers or &iremen8s hoses is co1ered
;Cohnston v 4est of S!otland 1nsuran!e ;1$2*<<C
I& a ne) cause inter1enes ;novus a!tus interveniens< loss caused thereby is not co1eredC
0husB i& durin! a &ire onlookers cause dama!e to surroundin! propertyB the cause o& such
dama!e is the misdemeanor o& the cro)d and not the &ire ;$arsden v Cit% = Count%
Assuran!e Co ;1*(#<<C
In instances )here the ori!inal peril has meant that loss )as more or less ine1itableB the
ori!inal peril )ill be the pro3imate cause e1en thou!h the last stra) comes &rom another
source ;Hlast stra)I cases<C ;Le%land Shipping Co Ltd v 7orwi!h Union ;1$1*<C
Co!1ari"on with Cau"ation in the Law of 6elict
In the insurance contractB a peril is co1ered i& so stated in the policy )ith )ords linkin! the peril to
the loss ;the causation<C Normally these )ill point to Hpro3imate causeI and only i& the peril )as
the Hpro3imateI cause )ill liability attach under the policyC
:lse)here in the courseB )e ha1e discussed causation in the la) o& delictB )here the test is
)hether the loss )as su&&iciently closely or directly linkedB &or le!al liability to ensueC
So!e S1ecific Short Ter! In"urance Princi1le"
0he basic concept o& short>term insuranceB other than in lon!>term insuranceB is to compensate
an insured &or the &inancial loss s?he may ha1e under!oneC 0he purpose o& the insurance is to put
the insured back into the same positionB &inanciallyB that s?he )as in be&ore the lossC 0he insured
cannot pro&it &rom the insurance but should simply be put back in the same position s?he held
be&ore the lossC 0his act o& puttin! the insured back into the position held is called indemnityC
Follo)in! on this re5uirement o& a short>term contract that the insured should not be enriched as
a result o& the payment o& a claim comes the concept o& HcontributionIC 'asically contribution
means thatB )here t)o or more policies are in &orce each insurer )ill only pay its rateable portion
o& the loss and not the &ull sum insuredC
,s short term insurance is primarily intended as protection a!ainst the loss o& Hthin!sI there is
al)ays a possibility &or some reco1eryC ,n e3ample o& this is that stolen property can occasionally
be reco1ered butB in1ariably this only happens a&ter a claim has already been metC 0he reco1ered
property there&ore no) belon!s to the insurerC
0here is also the loss arisin! &rom a road accident )hereB e1en thou!h the insured )as the
innocent partyB his or her insurer is called upon to repair the dama!esC Short>term insurers
there&ore include a subro!ation clause in their contractsC Subro!ation means that the ri!hts o&
one person to take le!al action are taken o1er by anotherC In the case o& the&t the insured thus
!rants the insurer the ri!ht to take such le!al steps as are necessary to reco1er any portion ;or
all< o& the items that ha1e been reco1eredB and )hich the insurer )ill then be entitled to sell at
auction to recoup its &inancial outlay in the meetin! o& the claimC In the case o& a motor accident
the insured !rants the insurer the ri!ht to sue any !uilty party in the accident &or a reco1ery o& its
e3penses in makin! the necessary repairs to the insured8s 1ehicleC
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;.ost insurers )illB on the speci&ic re5uest o& the insuredB include the amount the insured )as
re5uired to pay as an e3cess on the claim as part o& their actionC<
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In"truction"
1: In order for there to 2e a 4alid in"urance contract5 certain ter!" !u"t 2e a&reed on:
Li"t the"e ter!":
: 0riefl+ eA1lain what the ter! "caveat emptor" !ean":
$: 6efine the ter! Hwarrant+H:
4: EA1lain the difference 2etween affir!ati4e and 1ro!i""or+ warrantie":
': EA1lain how the need for in"ura2le intere"t ha" re"ulted in the difference 2etween an
in"urance contract and a wa&er:
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#: 6efine H1roAi!ate cau"eH:
(: EA1lain what the ter! Hinde!nit+H !ean":
3: EA1lain what the ter! Hcontri2utionH !ean":
,: EA1lain what the ter! H"u2ro&ationH !ean":
1-: EA1lain the i!1lication" of the Mutual and Federal nsurance Company !td" v
#udst$oorn Municipality %&'()* ca"e with re&ard" "uberimma fides":
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11: There are a nu!2er of rele4ant fact" that !u"t 2e di"clo"ed in ter!" of the
Hrea"ona2le !an te"t@: Li"t the"e:
1: Li"t fi4e .'/ of the rule" of inter1retation a11lica2le to contract":
1$: Li"t and 2riefl+ eA1lain the rule" of inter1retation u"ed for contract" that a11l+
1articularl+ to in"urance contract":
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14: IohnF" in"urance 1olic+ ha" a warrant+ that all o1enin& window" are 1rotected 2+
2ur&lar 2ar"5 and there are &rille &ate" on all door": Iohn !entioned to hi" 2ro*er5
6a4e5 that there i" an u1"tair" 2athroo! window that i" not 2arred5 2ut 6a4e felt that
thi" wa" not i!1ortant 2ecau"e the window i" hi&h u1 and not readil+ acce""i2le:
Thie4e" entered 2+ forcin& o1en a &rille &ate on the &round floor5 and in"urer" ha4e
re1udiated the clai!:
6i"cu"" the in"uredF" ri&ht" a&ain"t the in"urer and a&ain"t hi" 2ro*er:
1': Iohn in"ured hi" &irlfriend Su"anF" car under hi" own in"urance 1olic+: The car wa"
da!a&ed 2+ a hail"tor!5 and Iohn clai!ed under hi" 1olic+: The in"urer refu"ed to
acce1t the clai!: 6i"cu"" the ri&ht" of Iohn and Su"an under the 1olic+5 and in
re"1ect of the 1re!iu!" 1aid:
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1#: 6urin& hea4+ rain5 Eli8ahF" car wa" "we1t off the road: The 2od+wor* wa" da!a&ed5
and all four t+re" 2ur"t: The !otor a""e""or found that althou&h the t+re" were "till
roadworth+5 the tread wa" !ore than '-J worn: In"urer" "a+ that Eli8ah !u"t
contri2ute '-J of the co"t of re1lace!ent t+re": Eli8ah o28ect"5 "a+in& that he i"
entitled to the co"t of re1air" and re1lace!ent"5 le"" the 1olic+ eAce"": Bho i" ri&ht
and wh+C
1(: Iohanne" wa" in hi" &arden at ho!e when there wa" an eA1lo"ion at a near2+ factor+:
Ke wa" "truc* in the head 2+ fl+in& de2ri" and lo"t an e+e: Ki" hou"e wa" al"o
"e4erel+ da!a&ed5 2ut i" full+ in"ured under a hou"eowner" 1olic+:
A""u!in& that the factor+ owner" are ne&li&ent5 di"cu"" "u2ro&ation a" it affect"
Iohanne"L" 2uildin& and content" in"urance" and hi" 1er"onal accident 1olic+:
BN"IN#
'2
13: Se4eral other hou"e" were da!a&ed 2+ the eA1lo"ion5 and the occu1ant" had to find
other acco!!odation: Thie4e" too* ad4anta&e of thi" to 2rea* into "o!e of the
ho!e": 6i"cu"" whether or not the"e lo""e" were 1roAi!atel+ cau"ed 2+ the
eA1lo"ion:
BN"IN#
'%
Module 2
.=ue"tion" 1 E ,< the an"wer" to the"e 7ue"tion" can 2e found in the ModuleF" teAt:/
1-: EA1lain the i!1lication" of the Mutual and Federal nsurance Company !td" vs
#udst$oorn Municipality %&'()* ca"e with re&ard" "uberimma fides":
0he 1ery nature o& an insurance contract re5uires that the MsellerM ;the proposer< pro1ides the
MbuyerM ;the insurer< )ith all the &acts at his or her disposalC Nondisclosure or
misrepresentation o& any o& the &act )ill !i1e the insurer the ri!ht to claim that the policy )as
1oid Bab initioB ;&rom the be!innin!<C "1er the years this has led to a certain amount o&
con&usion as to )hether insurance contracts are contract o& Buberrima fidesB ;utmost !ood
&aith< or contracts o& Bbona fidesB ;!ood &aith<C 0he o&t 5uoted case o& Mutual and )ederal
In"urance Co!1an+ Ltd: 4 Oudt"hoorn Munici1alit+ .1,3'/ &inally cleared up this
con&usin! principleC 0he ,ppellate %i1ision decided that Mutmost !ood &aithM )as an
impractical concept since there can only be !ood &aith or bad &aithC , person Oay be less than
honest but cannot be more honest than honest and Mutmost !ood &aithM )as thus declared to
be meanin!less in South ,&rican la)C 2ith a contract Buberrima fidesB it )as accepted that
there )as an obli!ation placed on the proposer to disclose all that s?he kno)sB and the hidin!
o& any material circumstanceB )hether the proposer thou!ht it )as rele1ant or notB )ould
allo) the insurer to 1oid the contract &rom inceptionC 0he implication o& this court rulin!
resulted in the conclusion that the principle o& uberrima fides placed too hea1y a
responsibility on the proposerC Further rulin!s ha1e resulted in )hat is today kno)n as the
Mreasonable man testMC
11: There are a nu!2er of rele4ant fact" that !u"t 2e di"clo"ed in ter!" of the
Hrea"ona2le !an te"t@: Li"t the"e:
0he nature o& the subAect matter o& insuranceB and the circumstances pertainin! theretoB are
&acts particularly )ithin the kno)led!e o& the insuredC 0he insurer is not !enerally a)are o&
these &acts unless in&ormed thereo& by the insuredC "nly the proposer kno)sB or should kno)B
the rele1ant &acts about the risk bein! proposedC "ther than the ans)ers to the 5uestions on
the proposal &orms there are thus &urther &acts that must be disclosedC 0hese include=
those )hich )ould indicate that the risk is !reater than )ould be e3pected &rom its
classG
those )hich )ould tend to make the amount o& the loss !reater than normalG
pre1ious loss and claim historyG
pre1ious application o& penalty terms ;Ioadin!s< or restricted co1er ;e3clusions<
imposed by other insurersG
the &act that the insured had absol1ed a third party &rom )hat )ould be normal le!al
liabilitiesB thus depri1in! the insurer o& potential subro!ation ri!hts ;only applicable to
short>term contracts<G
any medical in&ormation that could materially a&&ect the assessment o& the riskB
)hether the condition )as re&erred to in the medical 5uestions or not ;usually only
applicable to lon!>term contracts<C
BN"IN#
'&
Module 2 - cont
1: Li"t fi4e .'/ of the rule" of inter1retation a11lica2le to contract":
,ny &i1e ;#< o& the &ollo)in! )ould be acceptableC
0he cardinal rule o& all interpretation is that the intention o& the parties should pre1ail
as appears &rom the ordinary !rammatical meanin! o& the )ords usedC
0he court attempts to determine the ordinary meanin! o& the )ords used by the
partiesC
0he &act that the meanin! o& clear and unambi!uous )ords operates harshly a!ainst
one partyB or that a &airer result could be arri1ed at by !i1in! them another meanin!B
are not aspects taken into accountC
2hen the )ords are not absolutely clear and unambi!uous the court )ill adopt the
most e5uitable conclusion and )ill not interpret the contract to !i1e one o& the parties
an un&air or unreasonable ad1anta!e o1er the otherC
2here )ords are susceptible to more than one meanin! the conclusion adopted )ill
!i1e e&&ect to the contract rather than a sense )hich )ill render it inoperati1eC , court
)ill then lean to)ards a conclusion )hich )ill result in the least incon1enienceC
2here a chan!e o& )ordin! is used in the contract it )ill be taken to indicate a
chan!e in the intentions o& the partiesC
0he preamble and mar!inal notes are re!arded as &ormin! part o& the conte3tual
settin! &or the purpose o& interpretin! the )ords in 5uestionB but i& they su!!est a
di&&erent meanin! to that indicated by the operati1e part o& the contract they are
i!noredC
I& a )ord in the contract is deleted it is re!arded as pro non s!ripta ;as i& it had not
been )ritten< and as such the court )ill not dra) any in&erencesC
2here the contract is e3pressed in a standard or printed &orm to )hich has been
added any type)ritten or hand)ritten )ordin! thenB i& there is any con&lict bet)een
the t)oB the latter )ill pre1ail as it is construed as representin! the adaptation o& a
!eneral &orm to meet the needs o& the particular caseC
, )ritten document must be construed as a )holeB and )ords and phrases must not
be interpreted in isolationC For e3ampleB )here a )ord or phrase is !i1e a speci&ic
meanin! in one part o& a document it is deemed to ha1e the same meanin!
throu!houtC
,n e3press term o1errides an implied term )here they are inconsistentC
0he ordinary rules o& !rammar are to pre1ail i& there is any ambi!uity or lack o& clarityC
9eneral )ords are construed in their plain and normal sense butB )here a technical
term is usedB it )ill be !i1en throu!hout the technical meanin! normally assi!ned to itC
0he si!ni&icance o& a )ord must be determined by its conte3tC 0his is )hat is kno)n
as the e>usdem generis rule > a re&erence to do!sB cats and other animals )ill be
taken to re&er to domestic animalsC
2ords must be construed literallyC I& such construction is ambi!uousB and one
interpretation )ould &a1our the party responsible &or dra)in! up the contract as
a!ainst an alternati1e 1ie) supportin! the other partyB then the meanin! )hich
&a1ours the latter is takenC 0his is kno)n as the !ontra preferentem ruleC
0he inte!ration ruleC 0his pro1ides thatB )here a contract has been reduced to )ritin!B
itN is therea&ter re!arded as the e3clusi1e memorial o& the transactionB and no
e1idence ;Mparol e1idenceM< may be !i1en as to the meanin! o& the document )hich is
inconsistent )ith the terms o& the )ritten contractC
BN"IN#
''
Module 2 - cont
,ccordin! to the MPlain .eanin! 4uleMB )here the terms o& a )ritten contract are clear
and unambi!uousB no e1idence may be !i1en to alter the plain meanin!C
1$: Li"t and 2riefl+ eA1lain the rule" of inter1retation u"ed for contract" that a11l+
1articularl+ to in"urance contract":
I& a policy is issued in standard printed &orm )ith a type)ritten endorsement attachedB the
)ordin! o& the endorsement o1errules that o& the policy inso&ar as the )ordin! may be
inconsistentC
0echnical termsB such as the phrase MsubAect to a1era!eM in a property policy are
construed by the courts as ha1in! the meanin! associated )ith them in the normal
course o& business dealin!sC
In a phrase such as MAe)elleryB )orks o& art and similar articlesM the e>usdem generis rule
)ould re5uire the )ords Mand similar articlesM to be con&ined to items o& hi!h monetary
1alue in comparati1ely small bulk ;althou!h it is ob1iously pre&erable to a1oid the use o&
such 1a!ue )ords entirely<C
I& a phrase in a policy is ambi!uous the meanin! more &a1ourable to the insured is taken
under the !ontra preferentem rule as it is only e5uitable that the insurer should su&&er the
conse5uences o& the uncertainty &or )hich it is responsibleC Indeed this rule is taken
e1en &urther and the meanin! is adopted )hich &a1ours the insured so as notB )ithout
necessityB to depri1e him or her o& his or her protection under the contractC
14: IohnF" in"urance 1olic+ ha" a warrant+ that all o1enin& window" are 1rotected 2+
2ur&lar 2ar"5 and there are &rille &ate" on all door": Iohn !entioned to hi" 2ro*er5
6a4e5 that there i" an u1"tair" 2athroo! window that i" not 2arred5 2ut 6a4e felt that
thi" wa" not i!1ortant 2ecau"e the window i" hi&h u1 and not readil+ acce""i2le:
Thie4e" entered 2+ forcin& o1en a &rille &ate on the &round floor5 and in"urer" ha4e
re1udiated the clai!:
6i"cu"" the in"uredF" ri&ht" a&ain"t the in"urer and a&ain"t hi" 2ro*er:
0o success&ully dispute liabilityB the insurer must be able to sho) that this is a material &act
)hich )as not disclosed and )hich )ould ha1e materially a&&ected its assessment o& the risk
undertakenC It accepted the insurance on condition that all openin! )indo)s are protected
and so is entitled to repudiate the claimC
0he brokerB %a1eB is the a!ent o& the insuredC "ne o& the a!entNs main duties is to e3ercise
care and skill in the per&ormance o& all acts done in the course o& his dutiesC , person
pro&essin! to be an insurance broker must sho) the appropriate de!ree o& skill and
kno)led!eB hi!her than that o& a part>time a!entC 0he insured disclosed the material &acts to
his brokerB and it )as the duty o& the broker to !i1e the insurer the correct in&ormationC 0he
insured )ill ha1e a claim a!ainst his brokerC
BN"IN#
'(
Module 2 - cont
1': Iohn in"ured hi" &irlfriend Su"anF" car under hi" own in"urance 1olic+: The car wa"
da!a&ed 2+ a hail"tor!5 and Iohn clai!ed under hi" 1olic+: The in"urer refu"ed to
acce1t the clai!: 6i"cu"" the ri&ht" of Iohn and Su"an under the 1olic+5 and in
re"1ect of the 1re!iu!" 1aid:
In order to 1alidly insureB Pohn must ha1e an insurable interest in SusanNs carC Friendship is
not enou!h > there must be some connectionB reco!niKed by la)B )hereby Pohn bene&its by
the sa&ety o& the carB or is preAudiced by its dama!eC
0he policy is 1oid &or lack o& insurable interestC 0he insurer has ne1er actually been at riskB
and unless it can pro1e &raud on PohnNs partB it is obli!ed to re&und the premium to himC
Susan had an insurable interestB but )as not a party to the contract bet)een Pohn and his
insurerB so has no ri!hts under the policyC
1#: 6urin& hea4+ rain5 Eli8ahF" car wa" "we1t off the road: The 2od+wor* wa" da!a&ed5
and all four t+re" 2ur"t: The !otor a""e""or found that althou&h the t+re" were "till
roadworth+5 the tread wa" !ore than '-J worn: In"urer" "a+ that Eli8ah !u"t
contri2ute '-J of the co"t of re1lace!ent t+re": Eli8ah o28ect"5 "a+in& that he i"
entitled to the co"t of re1air" and re1lace!ent"5 le"" the 1olic+ eAce"": Bho i" ri&ht
and wh+C
0he policy is one o& indemnityC Indemnity is de&ined as the e3act amount su&&icient to place
the insured in the same &inancial position a&ter the loss as immediately be&ore it happenedC I&
the )orn tyres are replaced by ne) onesB :liAah )ill bene&itB so insurers are entitled to ask
him to pay part &or the cost o& the tyresC ;0he alternati1e )ould be to supply tyres in a
similarly )orn conditionB )hich could lead to other complications<C
1(: Iohanne" wa" in hi" &arden at ho!e when there wa" an eA1lo"ion at a near2+ factor+:
Ke wa" "truc* in the head 2+ fl+in& de2ri" and lo"t an e+e: Ki" hou"e wa" al"o
"e4erel+ da!a&ed5 2ut i" full+ in"ured under a hou"eowner" 1olic+:
A""u!in& that the factor+ owner" are ne&li&ent5 di"cu"" "u2ro&ation a" it affect"
Iohanne"L" 2uildin& and content" in"urance" and hi" 1er"onal accident 1olic+:
Pohannes )ill be indemni&ied under the buildin! and contents policiesC 7is ri!ht o& reco1ery
a!ainst the &actory o)ners )ill immediately be subro!ated to the insurersB )ho )ill pursue a
reco1ery actionC
0he personal accident insurance is a contract o& compensationB not indemnityC 7e is entitled
to the policy compensation &or the loss o& his eyeB but also has !rounds &or an action in delict
a!ainst the o)ners o& the &actoryC Subro!ation does not applyC
BN"IN#
')
Module 2 - cont
13: Se4eral other hou"e" were da!a&ed 2+ the eA1lo"ion5 and the occu1ant" had to find
other acco!!odation: Thie4e" too* ad4anta&e of thi" to 2rea* into "o!e of the
ho!e": 6i"cu"" whether or not the"e lo""e" were 1roAi!atel+ cau"ed 2+ the
eA1lo"ion:
Sometimes a ne) cause starts to operate independently and subse5uent to the peril insured
a!ainstC In ,lston 1 .arine and 0rade Insurance Co Ltd ;1$(4< the court said that the cause
)ould be re!arded as supersedin! )here=
a< its inter1ention brin!s about a harm di&&erent in kind &rom that )hich )ould other)ise ha1e
resulted &rom the actorNs ;in this case the &actory o)nerNs< ne!li!enceG
b< the results appear a&ter the e1ent to be e3traordinaryB rather than normal in the
circumstancesG
c< it operates independently o& any situation created by the actorNs ne!li!enceB and is not an
act done as a normal response to such a situationG
d< it is due to a third personNs act ;the thie1es< or the 1ictimNs o)n actC
0he losses result &rom a ne) perilB the&tB and are not directly linked to the e3plosionC
BN"IN#
'*
Module $< Practice of %nderwritin&
Learnin& Outco!e"
identi&y some main perils co1ered by insurance policiesG
indicate )ays in )hich the risk o& these perils can be minimisedG
describe the duties o& the sur1eyorB and ho) sur1eys are carried outG
e3plain ho) the insured8s duty o& disclosureB and the insurer8s ri!htsB are a&&ected by the
sur1eyC
BN"IN#
'+
Peril"
6efinition > )ire
Fire is an e3tremely rapidB sel&>sustainin!B ener!y con1ersion systemB )hereby the ener!y stored
in the &uel is released as heatB and ;usually< 1isible as li!htC
There !u"t 2e actual i&nition=
Something must be burning# and there will usuall% be some sort of flame.
A" far a" the in"ured i" concerned5 the fire !u"t 2e accidental=
$an% fires are started on purpose# but if the insured had nothing to do with this# it is still
a!!idental as far as he is !on!erned.
There !u"t 2e "o!ethin& on fire that ou&ht not to 2e on fire=
4ood or !oal in a stove or grate is meant to be burnt and to give off heat# but when the
insured hid her valuables in the firepla!e# forgot this and lit the fire# this was something
that was not meant to be on fire. 1f the fire a!!identall% gets be%ond the firepla!e# and
ignites other propert%# this damage is !overed.
+ow T$in,s -urn
Four things are needed"
)uel=
.ost thin!s can burnB but some burn more easily than othersC ;Some e1en contain their
o)n supply o& o3y!enC<
OA+&en=
,ir contains about 21 F o3y!enC
Keat=
I& somethin! burns easilyB a spark may be all that is neededG other substances need
enou!h heat to !et the &ire !oin!C
Chain reaction=
0his really means that the burnin! is able to continueG the heat &rom one part sets &ire to
the ne3tC
!oss .revention
Eou can pre1ent or limit the &ire by inter&erin! )ith any one o& the abo1eC
.ost &ires happen because combustibles ;&uel< are sittin! in harmless contact )ith air ;o3y!en<B
and some &orm o& heat is introduced. 0he idea is to spot these situationsB and remo1e the heat
source &rom the combustibles or the combustibles &rom the heatR
Fires usually start &rom small be!innin!sC 2ith prompt use o& the ri!ht kind o& &ire e3tin!uisherB
the &ire can be put out be&ore it !ets too lar!e and hot to controlC
4emember the dan!er o& arson ;&ires deliberately started by others<C .alicious dama!eB e3cept
by thie1esB is also co1ered as an e3tension to most &ire insurancesC For these reasonsB )e mi!ht
also ha1e to think about keepin! the premises secure a!ainst such peopleC
BN"IN#
(,
6efinition > EA1lo"ion
, sudden and 1iolent release o& lar!e amounts o& !as and or 1apourC
+ow t$in,s E/plode
:3plosion can be similar to a &ireG the di&&erence is that the reaction is so rapid and 1iolent that
the !asses cannot escape &ast enou!hC 0he speed o& the reaction is e5ual to or more than the
speed o& sound and a shock )a1e is producedC ;0he heat !enerated by the reaction also
increases the 1olume o& the !ases produced<C
H:3plosi1esI as suchB need special under)ritin!B but e3plosions can also happen in 5uite
ordinary )aysB &or e3ample=
!as 1apourB such as &rom petrol or other &lammable li5uidsB in the airG
the ri!ht concentration o& dust suspended in the airG
o1erheatin! and burstin! o& !as cylindersG
too much steam pressure in a )ater boilerC

0he e3plosion mi!ht not e1en be on the insured8s premisesC , s)eet &actory lost an entire day8s
production )hen a nearby e3plosion shattered the )indo)sB and e1erythin! )as co1ered in tiny
pieces o& !lassC
!oss .revention
Care in usin! or storin! &lammable li5uids and !as stora!e cylindersC :3tractor &ans to suck
!asses and dust into the open airC
6efinition > Li&htnin&
,n electrical dischar!e )ithin cloudsB or bet)een clouds and earthC
+ow 0ama,e #ccurs
0he electrical char!e is e3tremely po)er&ulC 0he heat can also start &iresC ,part &rom direct
HstrikesIB li!htnin! can cause dama!e to electrical e5uipment up to a kilometre a)ayB and set up
po)er sur!es that are carried alon! po)er lines and telephone connectionsC
!oss .revention
UsuallyB li!htnin! strikes at the hi!hest pointC Eou )ill ha1e seen the tall masts put up )here there
are thatched buildin!sC 0hese are meant so that electrical dischar!es can &lo) sa&ely to the
!round be&ore they build up to a li!htnin! strikeB and any actual strike )ill also be di1ertedC
Special e5uipment can be installed to !uard a!ainst the e&&ects o& po)er sur!esC
Stor!5 Bind5 Bater5 Kail or Snow
0hese e3plain themsel1esC No structure abo1e !round is entirely sa&e &rom storm and )indB but
solidly constructed buildin!s are less likely to be dama!edC
Not all )ater dama!e is co1eredC ,mon! othersB there are e3clusions &or=
)ear and tearB and lack o& maintenanceG
any process in1ol1in! the application o& )aterG
subsidence or landslipG
leaka!e &rom sprinkler systems > a special e3tension is a1ailable to co1er thisC
BN"IN#
($
Some areas are kno)n &or their hailstormsB and stocks o& 1ehicles ha1e to be protected by netsC
7ail also blocks !uttersB so that )ater o1er&lo)s to the inside o& the buildin!C
0he )ei!ht o& sno) on the roo& can dama!e buildin!sB especially those that ha1e a &airly &lat roo&C
2ater channels must be kept clear and there must be !ood draina!eC 2e try to protect !oods
inside the buildin! by raisin! them a &e) centimetres &rom the &loor on shel1es or )ooden palletsC
Earth7ua*e
So &arB these ha1e not been common in South ,&ricaB and ha1e happened in remote areasC ,n
earth5uake in a built>up area )ould cause immense dama!eC Solid buildin!s )ith !ood
&oundations stand a better chance o& sur1i1in! minor shocksC Usually there are special e3cesses
or e3clusions &or Htremors arisin! &rom minin! operationsIC ;, tremor is a kind o& minor
earth5uake<C
6efinition > Theft
0he )ron!&ul takin! or handlin! o& property )ith the intention o& depri1in! the o)ner or la)&ul
possessor o& his o)nership or ri!hts in the propertyC
Some policies co1er this )ide de&inition o& the&tB but most limit this to the&t &ollo)in! &orcible and
1iolent entry or e3itC
,lmost anythin! can be stolenC I& it is too bi! to mo1eB it may still be dama!ed by thie1esC
.alicious dama!e by thie1es &alls under the the&t sectionB and mi!ht cost more than the actual
the&tC 0he policy also !i1es limited co1er a!ainst dama!e to the buildin! in the course o& breakin!
in or outC
Property most at risk is=
easy to dispose o&G
1aluableG
easy to transportG and
)here the real o)ner cannot be easily tracedC
Some e3amples are moneyB ci!arettesB li5uorB metals such as brassB copperB and aluminiumB
radiosB tele1ision setsB po)er toolsB and clothin!C
!oss .revention
For security reasonsB )e should like to stop the H)ron!I people &rom !ettin! any)here near the
buildin!B but usually )e cannot do thisC
Ima!ine that you are a thie& plannin! to break into the buildin!C 7o) best could you !et inS 2hat
could be done to pre1ent thisS 4emember that thie1es do not care ho) much dama!e they
causeB and mi!ht also be prepared to do thin!s you or I )ould consider too dan!erousC ;Like
climbin! roo&sB or balancin! on a drain pipeB three or &our storeys upB to knock a hole in the )all<C
,s )e all kno)B pri1ate houses are also a tar!et &or thie1esC 0he doors and locks &itted by the
builders do not !i1e much protectionB and most insurers )ill no) ask &or e3ternal !rille !atesC
Some o& these are also cheaply madeB and can be opened by a &e) !ood kicksB or le1ered )ith a
!arden spadeC
BN"IN#
(2
0eter1 0elay
0he )hole idea is to make thin!s harder &or the thie&C 0he lon!er it takes him to break inB the
better chance that he )ill !i1e up tryin! rather than risk bein! cau!htC
0etect
'usiness used to rely on ni!ht )atchmenB but this is no) a dan!erous AobC , security team )ith
do!s )ould stand a better chanceB but this is too e3pensi1e &or the smaller businessC .ostly )e
use automatic security alarm systemsC

Security alarms may be &itted to co1er=
the perimeterB iCeC doorsB )indo)sB roo& spaceG
the interior Hspace protectionIC
ProbablyB )e should like both o& the abo1eB but perimeter protections tend to set o&& &alse alarmsC
0he system must also be cost>e&&ecti1e ;economic to install and maintain<C
2e shall not describe the di&&erent kinds o& detectorsG ne) ideas are bein! de1eloped all the timeB
but all o& these systems are only as !ood as the responseC 0he alarm can call &or helpB but )ho
)ill comeB ho) lon! )ill this takeB and ho) much can be stolen be&ore anyone !ets thereS 2e
mi!ht ask &or=
an armed response ser1iceG
some kind o& ser1ice contractB so that the alarm is tested re!ularly and kept in !ood
)orkin! orderG
alarm monitorin!B so that )e kno) that the alarm is s)itched on bet)een the ri!ht timesC
Other )or!" of Theft
Mone+ Ri"*"
2e protect money on the premises )ith suitable sa&es and alarm systemsB althou!h there is
al)ays the possibility o& an armed hold>upC .oney on the mo1e is an e1en bi!!er riskC 4isk
reduction includes=
reducin! the amount o& actual cash ;pay sta&& directly into their bank or sa1in!s accountB
encoura!e customers to pay by credit card or bank trans&er<G
1aryin! the method and timin! o& money mo1ementsG
bankin! more o&tenB so that the amounts are smallerG
special containers that dye>spray the notes i& the&t is attemptedG
usin! specialist cash>in>transit ser1icesC

Cash re!isters are e3pensi1eB and )e don8t )ant them to be stolenB or )recked by the thie1esC 0o
pre1ent thisB cash re!isters must be le&t empty a&ter business hoursB and )ith the cash dra)er
openC
BN"IN#
(%
)idelit+ Ri"*
%e&inition= Loss o& money and?or other property stolen by an insured8s employeeB or &inancial loss
as a result o& employee &raud or dishonestyC ;"rdinary 0he&t policies do not co1er thisC<
0here are many )ays o& doin! thisG stealin! e5uipment &rom the company storeB alterin! records
to sho) non>e3istent customers and salesB issuin! &alse receipts &or moneyB and stealin! and
cashin! company che5ues are Aust a &e) o& theseC
UsuallyB this is re!arded as an e3ample o& a moral haKardB and the 5uality o& sta&& is importantC
7o)e1erB poor systems o& control o1er stock and money in1ite dishonestyB and are an un&air
temptation to the sta&&C "&tenB the&t starts )ith small amountsB but i& this is not detected the sums
)ill !et bi!!er as time !oes byB and the employee be!ins to rely on this as e3tra incomeC
Lia2ilit+
6efinition= ,mounts you are le!ally liable to pay because o& inAury to other peopleB or dama!e to
their propertyC
2e all ha1e to li1eB )orkB and do business )ith one anotherB :1ery person and e1ery business
must take proper care that they are not a dan!er to others because o& the )hat they are doin!B or
because they ha1e not taken proper precautions to pre1ent loss or inAuryC
0his is important &or a 4isk .ana!er to kno) aboutB but &or this course you are not e3pected to be
an e3pertC Common sense can o&ten a1oid a dan!erous situationC SometimesB a look around the
client8s premises can sho) dan!ers that they ha1e become used toB and simply do not notice any
moreC
0rades usin! po)er>dri1en machineryB especially cuttin! machinesB are more haKardous thanB
sayB o&&ice AobsC :mployees become used to the dan!er and become carelessC
4oad accidents are a maAor cause o& death and inAuryC Some occupations in1ol1e more road
tra1el than othersB but most policies are issued on a H24 hourI basisB so that they )ill co1er road
accidents and spare>time hobbiesB and acti1itiesB e3cept those speci&ically e3cluded by the policyC
Sur4e+"
Introduction
Eou mi!ht !et details o& the risk &rom the proposal &orm or &rom in&ormation supplied by the
intermediaryB but today insurance companies sur1ey most o& the risks on their booksC :1en
pri1ate homesB )ith their hi!h sums insuredB are bein! sur1eyed )ith the idea o& reducin! lossesC
H0he sur1eyor is the eyes and ears o& the under)riterCI 0his may seem an e3a!!erationB but in
&act is 1ery trueC 2hen the sur1eyor 1isits an insured8sB or a potential insured8s premisesB he is
actin! on behal& o& the under)riterC
0here are t)o 1ery important points that )e )ill look at hereC 0hey are=
BN"IN#
(&
1C 0he sur1eyor must supply the under)riter )ith &ull &actsB so that the policy can be correctly
under)rittenC
2C 0he under)riter must be able to interpret these &acts and use them to under)rite the policyC
In"urer"F Ri&ht"
I& the sur1eyor carries out a sur1eyB he a&&ects the ri!hts o& insurersC I& there should be a loss and
an ad1erse &eature is disco1eredB )hich the sur1eyor sa)B or should ha1e seen )hen he
conducted his sur1eyB the insurer cannot use the ad1erse &eature to repudiate liabilityC
0his is demonstrated )ith the use o& an e3ample=
E/ample
1C 0he ,'C Insurance Company sends out FredB their sur1eyorB to Smith 'rothers SupermarketG
2C 0he supermarket carries lar!e stocks o& &lammable li5uidsB such as para&&inG
C 0here is a &ire at the premises and the lar!e 5uantity o& para&&in causes an e3plosionB )hich in
turn causes a total loss &or insurersG
4C 0he amount o& para&&in carried )as not normal &or this type o& riskB but the sur1eyor )as
a)are o& itG
#C 0he &act that he omitted it &rom his report cannot preAudice the clientC
0ro*in&
0oday lar!er brokers also complete sur1eys and risk control reportsB )ith copies bein! !i1en to
the client and the potential insurerC 0hese are normally carried out on the lar!eB corporate type o&
businessC I& the insurer accepts thisB it is the same as i& it had been done by its o)n sur1eyorC
2e mention here that brokers )ill sometimes ha1e sur1eys carried out by their o)n sur1eyors
and )ill !i1e these to insurersC ,n important point is that the broker )ill then be )orkin! as an
a!ent o& the insurer and i& material &acts are not disclosed the insurer )ould a!ain be unable to
repudiate liabilityC
0his is one reason )hy insurers are not happy to accept broker8s sur1eysC It is not because they
do not trust the brokerB but rather that the insurer8s le!al position is preAudicedC
The Sur4e+ Re7ue"t
Introduction
2hen a ne) business is o&&ered to an under)riterB i& the sum insured )arrants itB he )ill re5uest a
sur1ey &rom the company sur1eyorC
In practice today the sur1eyor may be a pro&essional sur1eyor or the company inspector?marketer
responsible &or the accountC It is normal practice &or the pro&essional sur1eyor to sur1ey the lar!er
more comple3 risksB )ith the company inspector sur1eyin! the smallerB retail type riskC
BN"IN#
('
The Re7ue"t )or!
.ost companies ha1e a sur1ey re5uest &orm )hich they complete )ith &ull details o& the risk to be
sur1eyedC In&ormation that it calls &or includes=
0he insured8s name and occupationG
0he risk addressG
0he sums insured re5uired &or the di&&erent sections o& the policyG
, contact name and numberG
%etails o& the current co1erG
4ene)al ? inception dateG
0he loss historyG
4eason &or the sur1eyC
Note= an e3ample o& a re5uest &orm is included on the ne3t pa!eC
BN"IN#
((
Illu"tration of the Sur4e+ Re7ue"t )or!
BN"IN#
()
0he table belo) e3plains the in&ormation that needs to be completed on the sur1ey re5uest &ormC
BN"IN#
)ield M M and the rea"on for a"*in& M
M and the i!1act it can
ha4e
9a!e and occu1ation
0he name is important so the
sur1eyor &inds the ri!ht
company?insuredC
the occupation o& the insured is 1ery
importantB as this )ill a&&ect the
retention limits and risk protectionsC
0he le1el o& co1er !rantedC
0he protections re5uired by
the under)riterC
The ri"* addre""
0he area )here a risk is located is
1ery importantC
2hether the sur1eyor can
&ind it or notC
0he le1el o& co1er !rantedC
0he protections re5uiredC
The "u!" in"ured for
each "ection
,!ain the sur1eyor )ill Aud!e risks
di&&erently i& they ha1e hi!her sums
insuredC 0he e3posure &or his
company is !reaterC
0he protections re5uiredC
0he limits &or reinsurance
purposesC
A contact nu!2er and
na!e
0his allo)s the sur1eyor to make
an appointmentC
0he insured )ill be
re5uired to !i1e
in&ormation and )ill be
unhappy i& the sur1eyor
Aust Hdrops inIC
Renewal L ince1tion date
0his is important as most chan!es
in co1er take place at rene)alC
It is easier to impose
terms and conditions at
inception rather than mid>
termC
6etil" of current co4er
0he sur1eyor needs to kno) i& the
company is already on riskC
7e needs to kno) i& the co1er is
chan!in! substantially or i& the
chan!e is minorC
I& the company has had a
lar!e e3posure and
suddently asks &or risk
impor1ementsB &or a
minor chan!eB the client
could be upsetC
0he sur1eyor needs to
kno) H)hat has been
acceptableI up to no)C
Lo"" hi"tor+
0he sur1eyor can pick up problem
areas &rom this and assess the
possible e3posure )hile carryin! out
the sur1eyC
0he type o& risk
impro1ements re5uired
can be a&&ected by
pre1ious lossesC
Co1er may not be !ranted
&or problem areasC
Rea"on for the "ur4e+
Is this a ne) businessS
Is this an e3istin! accountS
Is this a post>loss sur1eyS
Is there an increase in co1er
re5uiredS
Is this to check on impro1ements
pre1iously re5uestedS
I& this is a ne) businessB
then )e )ill not ha1e
asked &or risk
impro1ements pre1iouslyC
I& this is an e3istin!
accountB )hat protections
ha1e )e re5uested
pre1iouslyS
I& there is a lar!e increase
in co1er re5uiredB )hyS
2hat )ere the
impro1ements )e
re5uested and ha1e they
been carried outS
(*
The Sur4e+ Re7ue"t
I& an old sur1ey is a1ailable this should also be included as it allo)s the sur1eyor to see i& the risk
has chan!edC
, )ord o& &riendly ad1ice to a sur1eyor that a claim is outstandin! and may be problematic can
also be help&ulC It )ould not be the &irst time that the client has taken his an!er out on a sur1eyorB
)ho innocently )alks into a &i!ht he kne) nothin! aboutR
Confidential
0here is a 1ery important point to note here and that is that the sur1eyor8s report is pri1ate and
con&identialC 2hilst his recommendations can be &or)arded to the broker it is not ad1isable to !i1e
them a copy o& the reportC 0he reasons &or this are=
0here are con&idential details contained in itB perhaps relatin! to moral haKardB et ceteraG
It )ill probably also contain &ull details o& the premisesB protectionsB et ceteraB )hich are
1ery help&ul to a bur!larG
0he client may be upset or may e1en sue i& he belie1es the statements to be &alse or
de&amatoryG
Eour company paid &or the report to be completed and it is there&ore your company8s
propertyC
The 9eAt Ste1
I& e1erythin! )ere per&ect the sur1ey )ould be done the ne3t day and a report !i1en to the
under)riter )ithin sayB 4* hoursC 0his is the best possible scenarioB but in real li&eB sur1eysB
particularly o& the lar!er risksB can take a number o& )eeks to be completedC ,ccordin!ly the
under)riter must diarise his re5uest and &ollo) it upC
Effect of 6ela+
I& the client re5uests an increase in co1erB o&ten the under)riter )ill not !rant it until a sur1ey has
been completedC 0he client is not 1ery happy about this and i& the sur1ey takes si3 months to
complete he is liable to consider mo1in! his businessC ,t the 1ery least he is !oin! to ask &or the
co1er to be !rantedC

E/ample
0he ,'C Shoe store re5uests an increase in the&t co1er &rom 410 000 to 4#0 000C
0he under)riter ad1ises the broker that he is unable to increase co1er )ithout a sur1eyG
0he sur1eyor sends his report only ( )eeks laterG
In the meantime the client has a the&t and 440 000 )orth o& stock is takenG
0he under)riter says Hsorry but the limit is 410 000MG
7o) happy is the client !oin! to beS
BN"IN#
(+
The Sur4e+or
0he sur1eyor has the re5uest &rom the under)riterC ,t this sta!e o& your studies )e are concerned
)ith the simpler type o& sur1eyC 0he &ollo)in! process )ill normally be &ollo)edB althou!h your
or!anisation may be sli!htly di&&erentC
Ste1 Bhen M and then M
1 Sur1ey re5uest recei1edC
0he sur1eyor makes an appointment )ith the
clientC
Sur1eyor 1isits the client8s premisesC
Completes a sur1ey report &orm and takes
picturesC
$
0he sur1eyor has the pictures de1eloped and
makes recommendations &or risk
impro1ementsC
0he report is returned to the under)riterC
4
0he under)riter e3tracts the necessary
in&ormation &rom the reportC
,d1ises the marketer and the broker o& the
sur1eyor8s &indin!sC
'
0he &indin!s are sent to the client or broker in
)ritin!C
NormallyB 0 days are !i1en &or the risk
impro1ements or no co1er !ranted until risk
impro1ements are implementedC
BN"IN#
),
The Co!1leted Sur4e+
0RA9CK= Smith Street
POLICN 9O= 224#(
S%RVEN 6ATE= 2?10?2002
I9S%RE6= 0he Small Street Supermarket and 0ake ,)ay ccC
RISK A66RESS= 22 2est StreetB :lands&ontein
9AT%RE O) OCC%PA9CN= Supermarket and &ast &ood outlet
0ROKERLAGE9T= SmedleyB 2hite and Partners
Plea"e note= Sections IB 6B 6I and plan must be completedC
SECTIO9 I E TKE PREMISES
1: Con"truction of 2uildin& ;a< 2alls= part brick and metal
;b< 4oo&= )ood trusses )ith I'4 Sheetin!
#

;c< Floors= concrete )ith ceramic tiles o1er
;d< 7ei!ht= one lo&ty storey
: Co!2u"ti2le linin&" and
1artition"5 "tairca"e" and
other floor o1enin&"
4oo& has &lammable )ool type linin!C
0here are no staircases as the buildin! is split into t)o sections )ith bulk
stora!e to)ards the back o& the premisesC
0he t)o areas are separated by a dry )all that does not !o all the )ay up to the
roo&C
$: A&e and condition of
2uildin&
0he buildin! is appro3imately 20 years oldC
0here are a number o& holes in the roo&B )hich the o)ner insists )ill be repaired
be&ore the rainy seasonC
4: Portion occu1ied 2+ the
in"ured
0he insured occupies the main buildin! )ith a petrol station appro3imately 10
metres &rom the buildin!B )ith under!round tanks )ithin # metres o& the &ront o& the
supermarketC
': Occu1ation of re!ainder of
2uildin&
Not applicableC
#: Se1aration fro! L
co!!unication with
ad8oinin& tenancie"
Petrol station appro3imately #0 metres a)ayC
Under!round tanks under the supermarketC
(: EA1o"ure fro! ad8oinin& L
ad8acent tenancie"
'usy petrol stationC
0ruckers stop &or &ood re!ularlyC
:3posure &rom petrolC
3: T+1e of nei&h2ourhood
Industrial areaC
Unoccupied at ni!htB e3cept &or !ara!eB )hich is open 24 hoursC
,: Securit+ fencin&5 li&htin&
and "ecurit+ 1atrol"
No security patrolsC
Isolated at ni!htC
9ara!e has attendants 24 hoursC
Police station 1# minutes a)ayC
5
I'4 is a kind o& corru!ated iron roo&in! materialC
BN"IN#
)$
SECTIO9 II E )IRE G ALLIE6 PERILS
1: Proce"" and 1roduct"
1roduced
Fast &ood outlet )ith deep &at &ryers at &ront o& premisesC
'akery section to)ards rear o& premises has t)o o1ens &or bakin! breadC
'utchery department has sa)s &or the cuttin! up o& meatB mincin! machines and
other normal butchery e5uipmentC
: Machiner+ u"ed
%eep &at &ryersC
'akin! o1ensC
'utchery e5uipmentC
$: Raw !aterial"
Foodstu&&s such as &ishB chickenB &lourB etcC
Supermarket section buys in bulk &rom )holesalerC
4: Pac*in& !aterial" u"ed and
7uantitie" *e1t
Plastic carrier ba!sC
Plastic packetsC
'o3es &rom )holesaler are stored outside the rear o& the premises in a lar!e mesh
ca!eB )here customers can collect themC
': Stora&e 1ractice" and
"tora&e hei&ht
Standard supermarket type shel1in! appro3imately metres hi!hC
'ulk stocks o& products stored on top shel1esC
#: Kou"e*ee1in& "tandard"
7ousekeepin! needs impro1in!C
:3tractor hood o1er deep &at &ryer is hea1ily co1ered )ith &at depositsC %oubt i&
cleaned in the last yearC
Floors in the store are cleanB but are slippery &rom polishin!C
.aintenance appears to be on an Had hocI basis )ith no plannin!C
Note= roo& mentioned pre1iouslyC
(: Ince1tion KaOard"
;a< haKardous commoditiesB
&lammable li5uids and !ases >
5uantities kept and ho) they
are stored
Lar!e stock o& para&&in kept ;#00 litres<C
,lso petrol in the tanks under!roundC
Fire)orks )ere also on premises at time o& 1isitC
Smokin! is &reely allo)edC
Inception haKard hi!hC
;b< space and process heatin!
Space heatin! is electrical
%eep &at &ryers are LP9 po)eredB )ith 3 #0 k! tanks outside the premisesB not
protected &rom the )eatherC
"1ens are electrically po)eredC
;c< condition o& electrical system
:lectrical system appears to be o1erloadedB particularly in the butchery )here
there )ere a number o& # plu! e3tension cordsC
,t the &reeKer section cables )ere lyin! across the alley)aysB )ith customers
ha1in! to )alk o1er themC
;d< smokin! controls
NoneC
3: )ire Protection
;a< &ire e3tin!uishin!
appliances
"ne $ k! )ater e3tin!uisher by deep &at &ryerC
7ose reel system installedC
;b< bri!ade and )ater supplies
.unicipal )ater supplyC
'ri!ade 1# minutes a)ay in PrimroseC
No booster connectionsC
;c< accessibility o& premises
,rea is easily accessedC
,: EA1o"ure fro! other
1eril"
0hese are detailed under the di&&erent sectionsC
1-: EML
Include comment on ade5uacy o&
sum insuredC
100 FC
Sum insured appears to be on the lo) sideC 2ould estimate it at 4/#0 000 rather
than
4#00 000C
Insured also o)ns buildin!B but no sum insured includedC
7e ad1ised that there )ere no bond holdersC
Ri"* Cla""ification= P ;due to petrol station< Area= '
;e< )eldin! controls
Not applicableC
BN"IN#
)2
SECTIO9 III E 0%RGLARN
1: 9ature of content"
Food stu&&sC
Para&&inC
0obacco productsC
2ineC
Saucepans and cookin! utensilsC
Cleanin! a!entsC
Charcoal and &ire li!htersC
FroKen &oodstu&&sC
Fresh produceC
Small electrical !oodsC
Small selection o& stationery and toysC
: MaAi!u! Rand Value
Ci!arettesB tobacco and the like=
420 000C
Li5uor= 41# 000
Precious metal=
nil
4adiosB record players 06 sets and similar
e5uipment= 420 000
2atches and Ae)ellery=
nil
Furs=
nil
.otorised tools=
nil
$: Value in di"1la+ window
No display )indo)C
4: Total Value at Ri"*
4/#0 000C
': )ir"t Lo"" Su! In"ured
41# 000C
#: Alar! Ma*e=
Ultra Sensiti1e ,larms
A&e=
2 years
T+1e=
Siren ,larm
Area Protected=
Perimeter only
I" there a !aintenance contractC
No
(: Protection"
;a< )indo)s and ho) they
are secured
.ainly lar!e plate !lass )indo)s )hich do not openC
,t the rear o& the premises there are three small casement )indo)s )hich ha1e
bur!lar bars and are secured )ith stay bar and pe!C
;b< doors and ho) they are
securedB types o& locks
etcC
.ain entrance is lar!e plate !lass slidin! doorC
4ear door is a solid )ood )ith security !ateC
2ood door has 2L.%L
(
C
Security !ate has #L.%LC
;c< roo& > are the premises
accessible &rom the roo&S
EesC
;d< is a )atchman employedS
If +e"5 1rofe""ional or own e!1lo+eeC
N" 2,0C7.,N
;e< )ho is responsible &or the
lockin! o& the premises
and are the keys
remo1edS
")ner opens the premises at 04=0C
")ner locks premises at 21=1#C
+eys are le&t at !ara!e in case o& any troubleC
6
See abbre1iations under Section 6I o& the reportC
BN"IN#
)%
SECTIO9 IV E MO9EN
1: 6etail" of tran"it and 1recaution" ta*en: Kow often i" !one+
2an*edC
"n a busy day takin!s o& 4100 000 not unusualC
Security &irm collects money &irst thin! e1ery
mornin!C
"1er the )eekend there could be
400 000 on premises by Sunday ni!htC
: Bhere i" !one+ *e1tC
;a< durin! business hours
In cash re!isters ;# o& them<C
.oney collected &rom them on an Had hocI basisC
;b< a&ter business hours
'ulk o& cash in a cate!ory II sa&eC
:ach cash re!ister has 4#00 &loat le&t in itC
Cash re!ister dra)ers are closedC
$: Kow and where are wa&e" !ade u1C
2a!es are made up in the o&&ice on a )eekly
basisC
2a!es normally taken &rom takin!sC
2a!e bill appro3imately 410 000 per )eek ;/ sta&&
members<C
4: Are collector" u"edC If "o &i4e detail" M
0here is a deli1ery boy )ho deli1ers !roceries on
a push bikeC
.a3imum order about 4#00C
Cash on deli1ery basisC
': If the ri"* i" a trade &ara&e5 what 1recaution" are ta*en
re&ardin& !one+ with 1etrol attendant"C
Not applicableC
#: 6etail" of Safe
Ma*e=
Chubb
Model=
%(#4
I" it "ecured to the floorC
No
SA0S cate&or+=
II
9u!2er of "et" of *e+" and *e+ holder."/ na!e"=
1 setB )ith .r %akary ;o)ner<
(C MaAi!u! a!ount" In "afe=
400 000
On 1re!i"e"5 out"ide "afe=
4100 000
In tran"it=
400 000
SECTIO9 V E CLAIMS KISTORN
1: Pro4ide detail" of 1re4iou" lo""e" o4er la"t ' +ear" &i4in&
date"5 a!ount5 circu!"tance" et cetera:
0he insured has had three bur!laries in &our years=
1$$# thie1es came in throu!h roo&B loss )as 4#0
000G
1$$( thie1es held up o)ner at !un point )hen he
)as lockin! up > 4200 000 cash stolen and 4#0
000 !oodsG
1$$( thie1es stole 4#0 000 cash in an armed
hold>upC
: Bhat !ea"ure" ha4e 2een ta*en to 1re4ent recurrenceC
,larm )as installed &ollo)in! bur!laryB but no
space protectionC
0he insured employed security &irm to collect
money dailyC
BN"IN#
)&
SECTIO9 VI E S%RVENORS OPI9IO9S A96 RECOMME96ATIO9S
thi" i" a 1oor ri"* > "hould 2e 4iewed a" acco!!odation 2u"ine"" onl+
&ire &i!htin! e5uipment is totally inade5uate and the )ron! type > chan!e to dry po)der
need &ire e3tin!uishers at a rate o& 1 &or e1ery 100 s5uare metres
electrical cables must be remo1ed &rom )alk areas
slippery polish must be remo1ed &rom &loor and non slip coatin! put do)n
electrician should check out )irin! and problem areas &i3ed
area is 1ery busy )ith number o& industrial type plant around
&ast &oods is hi!h turno1er
the insured has not dealt )ith the problem o& lar!e amounts o& cash at the premises
the sa&e is inade5uate &or this amount o& money
cate!ory I6 sa&e at leastB )ith &ull space and perimeter alarm protectionB )ith armed response
money must not be le&t in cash re!isters o1erni!ht
money should be collected t)ice a day - mornin! and e1enin! > to reduce e3posure
hea1y e3posure at openin! and closin! timesB su!!est armedB independent security !uard
lock on rear door is inade5uate - chan!e to minimum o& &our le1er
the alarm )hich )as installed is inade5uate and is a make I81e not come across be&ore
the&t limit o& 41# 000 is !oin! to be Hused upI i& there is any break in
keys must not be le&t at !ara!e as hi!h temptation &or the&t
housekeepin! needs to be impro1ed
there is a risk o& PL claim &rom slippery &loor
deep &at &ryer e3tractor hood must be cleaned on a re!ular basis
check i& client has &ood poisonin! co1er
roo& must be repaired or )ater dama!e e3cluded
Sur4e+ed 2+= D Sithenson 6ate< L1-L-$
%"e the followin& "+!2ol"<
Con"truction< Alar!<
2alls >>>>>>>>>>>>>>>>>>>>>> %oor contacts T In&ra red beams LLLLLLCC
%oors % 6ibrator s)itches ;1< Passi1e in&ra red detectors U
2indo)s 2
Sonic detectors
Control panel CP
A22re4iation"
L.%L - L:6:4 ."40IS: %:,%L"C+ F' - FLUS7 '"L0
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%nderwritin& the Ri"*
Acco!!odation 0u"ine""
0he sur1eyor says that the risk should be treated as Haccommodation businessIC 0his means
that the company should only take the risk i& the connection is )orth itC :3amples o& this )ould
be=
the broker is a 1alued broker to the company and !i1es the company most o& his
businessB )hich is normally e3cellentG
the client has other lar!e accounts )ith the company )hich ha1e 1ery !ood claims
e3perienceC
I& the connection is not a 1alued oneB then the risk should be cancelledC 0his )ould be the
easiest solutionB but &or the purposes o& this module )e )ill assume that )e ha1e to keep the
riskC
Section I E The Pre!i"e"
Con"truction
It is 1irtually impossible to ask the client to chan!e the structure o& the premisesC 0here&ore the
construction is either acceptable or notC
0hree important points in this sur1ey ho)e1er are=
there are repairs that are needed and these must be carried outG
there is a &lammable linin! in the roo&G
location o& the petrol stationC
Area Pro2le! O1tion"
Kole" in roof I& it rains there )ill be )ater dama!e to
stock and contentsC
2rite askin! &or repairs to be
carried outB )ithin a certain
period o& timeC
:3clude dama!e arisin! &rom
these holesB by endorsin! the
policyC
4esur1ey )hen repairs
completedC
)la!!a2le roof linin& 0his )ill help spread &ire 1ery 5uickly
as the buildin! is basically one lar!e
roomC
7a1e insulation replaced by a
non>&lammable linin!C
Location of 1etrol "tation 0his is an ob1ious &ire haKardB ho)e1er
it could also be a liability haKardC
People ob1iously )alk bet)een the
petrol station and supermarketC
0here must be ade5uate &ire
protectionC
0he area bet)een the petrol
station and supermarket must
be restricted so that 1ehicles
cannot dri1e into the areaC
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Conclu"ion
0he buildin! is either acceptable or notC "nly limited risk impro1ements can be carried outC 2hilst
)e ha1e stated that )e are !oin! to under)rite the riskB the best option )ould be to !i1e notice o&
cancellationC
Section II E )ire and Allied Peril"
Proce""e" and Content"
In the second section the type o& contentsB the machineryB housekeepin! standards and inception
haKards are detailedC Let8s look at each indi1iduallyC
Proce"" and 1roduct"
1roduced5 !achiner+
and raw !aterial"
Fast &ood outlet )ith deep &at
&ryers can easily i!nite i& &at
builds up on them and the
e3tractor hoodsC
I& liability co1er is !i1enB do they
ha1e &ood poisonin! co1erS
Is there personal accident co1er
&or sta&& )ho use butchery
e5uipment et ceteraS Is the rate
ade5uateS
Clean &ilterB et ceteraB on a re!ular
basisC
Install dry po)der e3tin!uisher
ne3t to deep &at &ryerG ensure sta&&
kno) ho) to use itC
:nsure that hy!iene standards
are complied )ithC
7ousekeepin! must be o& a 1ery
hi!h le1elC
Check rates and reinsurance
retention is ade5uateC
Pac*in& !aterial"
0he customers ha1e access to
the back o& the premisesG this
could be haKardous &rom a the&t
and?or liability point o& 1ie)C
Cardboard bo3es are stored
ne3t to the !as cylinders )hich
could increase the inception
haKard and the &ire loadC
0he insured must restrict accessG
i& customers )ant bo3es sta&&
must &etch themC
.o1e materials a)ay &rom
cylindersC
.ount &ire e3tin!uisher on )all
ne3t to !as cylindersC
Stora&e Practice"
0here appears to be no problem
hereC
Kou"e*ee1in&
0he insured needs to carry out
repairs and the 5uestion has to
be asked )hy ha1e they not
been doneS
7is turno1er is &airly lar!e so
there should be money &or itC Is
he perhaps a moral haKardS
Floor is slippery - this could
cause a customer to be hurtC
4e5uest that the premises be
cleaned upC
Polish must be stripped &rom the
&loor and a non>slip cleaner usedC
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Ince1tion haOard"
Lar!e stock o& para&&inC
Fire)orks also keptC
No smokin! controls in placeC
Petrol
/
close byC
.any household chemicals are
e3plosi1e )hen combinedC
4estrict stock o& para&&in to a
lo)er le1elB or re!ulate )here it
can be stored and ho)C
4estrict the stora!e o& &ire)orks
to a special area a)ay &rom
i!nition sourcesC
Prohibit smokin! on the premisesC
Insist on 1 portable &ire
e3tin!uisher per 100 mV &loor
areaC
S1ace and 1roce""
heatin&
0he sur1eyor has only stated
that the heatin! is electricalB but
has not told you typeC Eou )ould
need to check )ith the sur1eyorC
0he tanks outside should be
shielded &rom the )eatherC
0here should be no radiators
around )hich could burn
customersC
, ca!e should be put around the
!as cylinders to protect them &rom
the )eatherC
0he ca!e should be locked so
that no unauthorised person can
tamper )ith themC
Condition of electrical
"+"te!
"1erloadin!C
Cables lyin! in alley)ay )hich
could be the cause o& inAuries to
customersC
Cables )ill become 1ery )orn i&
)alked on and this could cause
a &ireC
HCerti&icate o& complianceI must
be obtained &or electrical
installation &rom a 5uali&ied
electricianC
:3tra po)er points to be installedB
by 5uali&ied electricianC
,ll cablin! to be contained in
channels alon! the perimeter
)allB under the &loorB or 1ia the
roo&C
7
Petrol is a Class , li5uidB )hich means it )ill easily i!nite at 22W C and abo1eC
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)ire eAtin&ui"hin&
a11liance"
0here is a )ater &illed
e3tin!uisher by the deep &at
&ryerC I& you put )ater onto an oil
&ire it is 1ery dan!erousC 0he
li5uid )ill spread out and the &ire
)ill there&ore spreadC It could
e1en e3plodeC
0here is only a municipal )ater
supplyC Sometimes Hbooster
systemsI are re5uiredC 0his
increases the )ater pressureB
)hich increases the amount o&
)ater that can be deli1ered by
the &ire tendersB )hen there is a
&ireC
0here is no sprinkler system at
the premisesC
0he &ire bri!ade is 20 minutes
a)ayC 0his )ould mean that a
&ire could become )ell
established be&ore the &ire
bri!ade arri1edC
0here is no mention o& any
e1acuation procedures or &ire
e3itsC 4emember the deep &at
&ryers are in the &ront area o& the
storeC I& the &ire started in this
area the e3it )ould be blockedB
or at least 1ery dan!erousC
0he correct appliances must be
installed ;see abo1e<C
Sta&& must be trained ho) to use
the e5uipmentC
:1acuation procedures must be
implementedC
, sprinkler system may be an
optionB but remember )ater
should not be applied to oil &ires
and the sprinklers could leak and
dama!e stockC
Foodstu&&s are easily dama!ed
and health re!ulations can mean
that i& e3posed to )ater or smoke
they ha1e to be destroyedC
S1ace and 1roce""
heatin&
0he sur1eyor has only stated
that the heatin! is electricalB but
has not told you typeC Eou )ould
need to check )ith the sur1eyorC
0he tanks outside should be
shielded &rom the )eatherC
0here should be no radiators
around )hich could burn
customersC
, ca!e should be put around the
!as cylinders to protect them &rom
the )eatherC
0he ca!e should be locked so
that no unauthorised person can
tamper )ith themC
Condition of electrical
"+"te!
"1erloadin!C
Cables lyin! in alley)ay )hich
could be the cause o& inAuries to
customersC
Cables )ill become 1ery )orn i&
)alked on and this could cause
a &ireC
HCerti&icate o& complianceI must
be obtained &or electrical
installation &rom a 5uali&ied
electricianC
:3tra po)er points to be installedB
by 5uali&ied electricianC
,ll cablin! to be contained in
channels alon! the perimeter
)allB under the &loorB or 1ia the
roo&C
BN"IN#
)+
)ire eAtin&ui"hin&
a11liance"
0here is a )ater &illed
e3tin!uisher by the deep &at
&ryerC I& you put )ater onto an oil
&ire it is 1ery dan!erousC 0he
li5uid )ill spread out and the &ire
)ill there&ore spreadC It could
e1en e3plodeC
0here is only a municipal )ater
supplyC Sometimes Hbooster
systemsI are re5uiredC 0his
increases the )ater pressureB
)hich increases the amount o&
)ater that can be deli1ered by
the &ire tendersB )hen there is a
&ireC
0here is no sprinkler system at
the premisesC
0he &ire bri!ade is 20 minutes
a)ayC 0his )ould mean that a
&ire could become )ell
established be&ore the &ire
bri!ade arri1edC
0here is no mention o& any
e1acuation procedures or &ire
e3itsC 4emember the deep &at
&ryers are in the &ront area o& the
storeC I& the &ire started in this
area the e3it )ould be blockedB
or at least 1ery dan!erousC
0he correct appliances must be
installed ;see abo1e<C
Sta&& must be trained ho) to use
the e5uipmentC
:1acuation procedures must be
implementedC
, sprinkler system may be an
optionB but remember )ater
should not be applied to oil &ires
and the sprinklers could leak and
dama!e stockC
Foodstu&&s are easily dama!ed
and health re!ulations can mean
that i& e3posed to )ater or smoke
they ha1e to be destroyedC
EML
3
0he sur1eyor belie1es that the
ma3imum loss is 100FC 0his is
because there is no separation o&
any o& the riskC 0he store is split
into t)oB but the )all does not !o
throu!h the roo&C 0his means that
it is not a Hper&ect party )all
$
IC
4etention and reinsurance limits
must take this into accountC
0he risk classi&ication )ould also
be needed to calculate retention
limitsC
8
:stimated .a3imum LossC
9
, per&ect party )all is a solid brick )allB )hich !oes &rom !round le1el ri!ht up to and throu!h the roo&C 0his pre1ents the spread o&
&ire alon! the interior o& the roo&C
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Section III E 0ur&lar+
Introduction
2hile )e ha1e looked at the premises &rom a &ire and allied perils point o& 1ie)B )e need to no)
shi&t our attention to the bur!lary sur1eyC 2e need to look at &our areas under this section and
they are=
0he location o& the premisesG
0he protections at the premisesG
0he type o& contents - ho) attracti1e the contents are to thie1esG
0he &irst loss sum insured and the total 1alue at riskC
2e )ill look at each o& these in turnC
South African Law
2hen askin! &or protections under the the&t sectionB under)riters should also e3amine ho)
susceptible the buildin!s and contents are to malicious dama!e and arson insured under the &ire
sectionC
In South ,&rican la) there is no such crime as that o& bur!laryC In South ,&rica )e re&er to the&tB
but the de&inition o& the&t is 1ery )ideC It meansB in South ,&rican terms=
-to deprive a person of their propert% permanentl%-
0here is no mention o& &orcible and 1iolent entry or e3it and there&ore shopli&tin!B une3plained
losses and the like )ould be co1eredB i& insurers used this de&initionC Policies there&ore restrict
co1er to losses &ollo)in! H&orcible and 1iolent entry or e3itI onlyC 0his does not mean that &ull the&t
co1er is ne1er !i1enB but it is rareC 0he only )ay to kno) is to check the policy )ordin!C
Area Sur4e+ Co!!ent" O1tion"
Location of the
1re!i"e"
0he premises are in an industrial
areaB )hich is deserted at ni!ht and
)eekendsC
In its &a1our is the &act that the
!ara!e is open 24 hours per dayB so
there are people aroundC
Eou either ha1e to accept
the risk in this area or
decline itC Eou cannot ask
the o)ner to mo1e his
premisesC
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Area Sur4e+ Co!!ent" O1tion"
Protection" at the
1re!i"e"
In the sur1ey the sur1eyor does not
tell us ho) the &ront door is securedC
7e does not tell us )hat siKe bar has
been used to bur!lar proo& the
)indo)sC
, 2L.%L is not a !ood 5uality lockC
0here is a ran!e o& ele1en keys &or
this type o& lockC , thie& only needs a
set o& keys and one o& them )ill open
this doorC
0he #L.%L is a much better type o&
lockB but i& it is )elded onto the
security !ate an an!le !rinder can be
used to cut it outC
0he premises are accessible &rom
the roo& and it is a metal roo&B )hich
is considered a Hso&t roo&I in other
)ords access is easily !ainedC
0here is no )atchmanC
0he alarm system is perimeter
protection only and is only a siren
alarmC
0he o)ner opens 1ery early and
closes &airly lateC 0hese are ob1ious
times &or a hold>upC
0he o)ner lea1es the premise keys
at the !ara!eC
,sk the sur1eyor &or &ull
details o& the locksC
7e needs to tell usB but the
bar should be at least
1(mm &lat steel barB spaced
no more than 12#mm
apartB )ith tie bars at
4#0mm apart ;see bottom
o& pa!e<C 0he bars also
should be set into the
brick)ork or the buildin!B i&
possibleC
0he lock on the )ooden
door should be at least a
4L.%L and there should
be some &orm o& lockin!
bar
10
on the inside o& the
doorC
0he alarm system should
be chan!ed to a radio siren
alarm )ith space and
perimeter protectionC
,rmed response should
also be used and the alarm
must ha1e a ser1ice
contractC ;See belo)<
10
, lockin! bar is a horiKontal metal barB )hich !oes across the door and drops into mountin!s on the )allB on each side o& the doorC
It is then padlocked into this mountin!C
BN"IN#
0ie barG the solid bar
!oes throu!h holes
drilled in the tie barC
Solid steel o& at least 1(mmB no more than
12# mm apartC
*2
Radio Siren
, radio siren alarm not only makes a noise at the premisesB )hen tri!!eredB but it sends a radio
si!nal to a control room at the alarm company8s premisesC 0hey are there&ore alerted to the &act
that there is a break>inC
S1ace and Peri!eter Protection
0he roo& at the premises is a Hso&t roo&I - thie1es can enter throu!h it by remo1in! the I'4
sheetin!C 0here&ore i& the alarm only co1ers the perimeter it )ill not detect anyone comin! in
throu!h the roo&C 0here&ore sensors are re5uired )hich )ill pick up mo1ementB noise or body
temperature i& any one breaks inC
Ar!ed Barden 0ac*u1
2e said that )hen the radio alarm is tri!!ered a si!nal !oes to a control roomB and then the
alarm company can dispatch armed security !uards to in1esti!ateC 0his means that the robbers
)ill ha1e less time at the premisesB so the loss should be smallerC
It also !i1es the client some protection )hen openin! and closin! the premisesC
Ser4ice Contract
0his is 1ery important because the alarm is no !ood i& it is not maintained and kept in !ood
)orkin! orderC , reputable alarm company )ill make sure the alarm is )orkin!C I& &or some reason
it &ails the o)ner )ill ha1e some ri!ht o& recourse i& it is due to the alarm company8s ne!li!enceC
The Co!1an+
0he alarm that is installed should be &rom a company that has a !ood reputation and is a
reco!nised company - reco!nised by insurersC Insurers normally ha1e details o& the companies
they acceptC
T+1e of Content"
0he type o& contents at the premises a&&ects the likelihood o& a bur!laryC 0hie1es )ill normally
steal !oods that are easily resoldC 0here&ore electrical !oods are 1ery attracti1eC Un&ortunately it
is becomin! harder to say )hat thie1es )on8t stealB but belo) is a list o& attracti1e types o& stockC
It is not the complete listB as )e could ne1er list e1erythin!B but it is a !uide &or youC
Pe)ellery Furs 0ele1isions 4adios
6ideo 4ecorders Clothin! Li5uor 0obacco products
Po)er tools Cellular phones Computers Fa3 machines
Printers ;computer< Precious metals %iamonds Food stu&&s
7i>&i8s 0ools Photo>copiers .oney
BN"IN#
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.oney is not co1ered in terms o& the bur!lary policyB ho)e1er the other items )ould be as lon! as
they )ere items contained in the premises and belon!ed to the insuredC
The Content" at the Pre!i"e"
0he premises )hich ha1e been sur1eyed ha1e=
0obacco productsG
Li5uorG
4adiosB record playersB 06 setsB et ceteraC
0hey are attracti1e to thie1es and there&ore the protections need to be 1ery !oodC
The Su! In"ured
0he client has a 41# 000 &irst loss sum insuredB )hich is not a lar!e amountC I& ho)e1er you look
at the total 1alue o& the contents and the limits &or the more attracti1e stockB it is ob1ious that i&
there is a bur!lary then the &irst loss limit )ill probably be e3ceededC
4emember losses add up and 4 losses o& 41# 000 are the same as one 4(0 000 loss and the
claims history stated that there had been a number o& lossesC
Section IV E Mone+
Mone+ at the Pre!i"e"
0he details are as &ollo)s=
0he insured takes 4100 000 on a busy dayG
0he money limit is 4100 000G
400 000 o1er the )eekend sometimesG
Cash is collected by a security &irm e1ery mornin!G
:ach cash re!ister has 4#00 in itG
Cash is kept in a cate!ory II sa&e o1erni!htG
2a!es made up in the o&&iceG
410 000 )a!es paid out e1ery )eekG
%eli1ery man collects money up to an amount o& 4#00C
7o) do )e under)rite itS 2e need to separate it into three sta!esC 0hese are=
.oney at the premises durin! business hoursG
.oney at the premises outside business hoursG
.oney in transitC
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*&
Mone+ at the Pre!i"e" durin& 0u"ine"" Kour"
It is &airly di&&icult to under)rite thisC 0he only precautions that can really be taken are to ha1e a
drop sa&e )ith no keys at the premisesC 0he security company then comes alon! )ith the sa&e
keys and opens up to remo1e the cashC
I& money is kept in a sa&e and the keys are on the premisesB any armed robber )ill insist on the
insured openin! the sa&eC I& your li&e is in dan!er you )ould open the sa&eC
Mone+ at the Pre!i"e" out"ide 0u"ine"" Kour"
7ere more can be done to sa&e!uard the moneyC 0he client has a Cate!ory II sa&eC 0his is a sa&eB
)hich complies )ith the standards set by 0he South ,&rican 'ureau o& StandardsC 0here are
1arious cate!ories and they are acceptable &or di&&erent money limitsC 0hese are=
No S,'S !radin! 4 2 #00
S,'S Cate!ory I 4 # 000
S,'S Cate!ory II 4 12 #00
S,'S Cate!ory II 7% !radin! 4 2# 000
S,'S Cate!ory II ,%. 4 #0 000
S,'S Cate!ory II ,%. 9radin! % 4 /# 000
S,'S Cate!ory III !radin! 4100 000
S,'S Cate!ory I6 !radin! 4200 000
"ur client has a S,'S Cate!ory II sa&eB )hich means he should only ha1e a limit o& 412 #00 in
the sa&eC "b1iously the protections need to be up!radedC
Protection"
0here are a couple o& options open to the under)riter hereC 0he under)riter can ask that=
0he Insured installs a S,'S Cate!ory I6 sa&eG
0he sa&e must be contained in a stron! roomG
0he premises must ha1e a radio siren alarmB )ith armed )arden responseC
.any companies )ill !i1e a hi!her limit on a sa&e i& it is protected by a radio siren alarm )ith
armed )arden responseC
0he other option is to insist that the security &irm collect the money t)ice a day or else in the
a&ternoonC 0his )ill reduce the amount o& money at the premises o1erni!htC I& the collection is
made t)ice a day it )ill also !i1e the insured more protectionC 0here is less likelihood o& an armed
robberyC
Ba&e"
0he insured makes the )a!es up at the premisesC It )ould be much sa&er i& the sta&& had bank
accounts and the money )as trans&erred electronicallyC 0his !i1es the sta&& more protection alsoB
as they do not ha1e to carry their )a!es around )ith themC
BN"IN#
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Mone+ in Tran"it
.oney in transit is co1ered under the money sectionC
In some casesB )a!es are still paid out in cashB and could also be transported to contract sitesB
increasin! the risk o& attack alon! the )ayC I& this is soB these contract sites must be mentioned in
the scheduleC
Insurers impose conditions on the escort o& persons to the bankB 1aryin! accordin! to the amount
bein! carriedB and mi!ht also speci&y that the transit must be direct and unbrokenC
Conclu"ion
.oney is an e3tremely attracti1e risk &rom the thie&8s point o& 1ie)C Insurance companies ha1e
taken se1ere losses in recent yearsC Clients tend to ha1e a poor attitude to the sa&e!uardin! o&
moneyC Limits ha1e been increasin! because o& the e&&ects o& in&lationC 0hin!s cost more so
companies ha1e more money comin! inC
0he insured may ha1e co1er o& 4100 000 &or Hcrossed che5uesI at no e3tra premiumB but there is
o&ten a 2#F e3cess i& the che5ue is not marked Hnot trans&erableIC .any companies are unhappy
to accept che5ues todayB because o& the lar!e amount o& che5ue &raud that is takin! placeC
Section V E Clai!" Ki"tor+
Clai!" Ki"tor+
0he sur1eyor has &ound out the details &or usC Eou must remember ho)e1er that these are
material &actsC I& the insured has not !i1en &ull details o& pre1ious losses then the policy could be
1oidableB at the option o& the insurerC
Indicator of Pro2le! Area"
0he claims e3perience sho)s you the problems there ha1e been in the past and )hat measures
ha1e been taken to impro1e the riskC Sometimes a client can install the best security and
protectionsB but &or some reason the problem does not !o a)ayC 0hey still su&&er lossesC 0his is
not the type o& risk you should be in1ol1ed inC
BN"IN#
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Sur4e+orF" Co!!ent"
E+e" and Ear"
0he sur1eyor has seen the riskC 7e hasB or should ha1eB inspected it thorou!hlyC 7is
recommendations are there&ore importantC 0hey are only recommendations ho)e1er and it is the
under)riter8s responsibility to decide i& they !o too &arB or perhaps are not strict enou!hC
'e)are ho)e1er that i& you chan!e the re5uirementsB you ha1e to be prepared to stand up and
&ace the conse5uences i& anythin! !oes )ron!C 0his is not a threatB but i& there is a loss and the
sur1eyor had recommended a risk impro1ement that may ha1e pre1ented the lossB you )ill be
held accountable by the mana!ementC
9e&otiation
2hen the risk impro1ements ha1e been decided uponB it is normal &or the under)riter to discuss
them )ith the marketin! person concernedC 0his is not al)ays the caseB and there is nothin!
)orse than bein! a marketer arri1in! at a brokerB kno)in! nothin! about risk impro1ementB )hich
the under)riter re5uestedC
0here is a need &or communication and ne!otiation at this sta!eC
Kea4+ Kanded
0here appears to be times )hen under)riters )ant to e3ercise po)er and insist on certain
protectionsC Ees the under)riter is lookin! a&ter the company8s interestsB but he should also be
&le3ible to a certain e3tentC 0he problem is kno)in! )hat is e3tremely important and )hat can be
ne!otiatedC 0his is )here e3perience and skill comes inC
4emember that the client can mo1e his business and in some instances this may be pre&erableB
but you cannot stay in business i& you ha1e no clientsC
Conclu"ion
2e ha1e spoken about ne!otiation and askin! &or the best risk impro1ements possibleC
4emember ho)e1er that they must also be economicalC 0he client is not !oin! to install a
4/# 000 alarm system to protect 4# 000 )orth o& !oodsC
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A"*in& for I!1ro4e!ent"
)or!al Re7ue"t
0he re5uest &or risk impro1ements should al)ays be in )ritin!C 0his does not mean that the
broker and under)riter cannot discuss itB but simply that any ne!otiations must be &ollo)ed up
)ith a &ormal re5uestC
EAi"tin& Polic+
I& the policy is an e3istin! policy and it is not due &or rene)alB the insured must be !i1en at least
0 days to implement risk impro1ementsC
I& the policy is due &or rene)al then you may be able to insist on the protections as part o& the
rene)al termsB but it is likely that the broker )ill not be 1ery happy and )ill ask &or the 0 days at
leastC
Lon&er than $- 6a+"C
Can you !i1e lon!er than 0 days &or risk impro1ementsS 0he simple ans)er is that you can !i1e
as lon! as you likeB but ho) lon! )ould it be ad1isable to !i1eS
0he risk impro1ements are necessary to pre1ent losses or minimise lossesG
I& they are not ur!ent then you can !i1e e3tra timeB but the insured )ill keep puttin! o&&B i&
there is no &i3ed periodG
,t the end o& the period you must be prepared to suspend or cancel co1erB or else the
insured )ill not bother to do the impro1ementsG
Eour Aob could be on the line i& there is a loss and impro1ements ha1e not been
re5uestedC
Conclu"ion
4isk impro1ements are 1ery importantB they can take a 1ery poor risk and make it acceptableC
0he )orse the riskB the more insistent you must be on the risk impro1ementsC I& the risk has been
taken on as accommodation businessB the broker has probably been unable to place else)hereC
0here&ore you can insist on risk impro1ements as a condition o& acceptanceC
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In"truction"
0his kno)led!e sel& assessment consists o& multiple true and &alse 5uestions as )ell as one
lon!er )ritten 5uestionC ,ns)er all o& the 5uestions to assess )hether you ha1e mastered the
kno)led!e componentC .odel ans)ers ha1e been pro1ided )hich you can use to assess your
ans)ersC
Stor!5 wind and water da!a&e include" co4er for< True )al"e
1C %ama!e by )ater leakin! &rom a burst pipe
2C Clothes shrinkin! )hen you )ash them
C %ama!e due to lack o& maintenance
Ordinar+ Theft 1olicie" co4er< True )al"e
4C 0he&t by the insured8s sta&&
#C Financial loss due to dishonesty by the insured8s sta&&
(C %ama!e done by thie1es to the buildin!
/C Property your nei!hbour borro)edB and &or!ot to return
)or a ?fire@ in ter!" of the 1olic+5 it !u"t in4ol4e< True )al"e
*C ,ctual i!nition
$C ,n accidental cause
10C Somethin! that ou!ht to be on &ire
11C , deliberate act by the insured
12C Usually a &lame
1C Somethin! not meant to be on &ire
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14: The "ur4e+ re7ue"t for! i" an i!1ortant docu!ent in that it "u11lie" detail" of the
ri"* for the "ur4e+or: 6i"cu"" thi" "tate!ent with "1ecific reference to wh+ the
re1ort for! "hould 2e full+ co!1leted: Reference "hould al"o 2e !ade to the t+1e
of infor!ation contained within the re7ue"t for!:
OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
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Module 3
Stor!5 wind and water da!a&e include" co4er for< True )al"e
1C %ama!e by )ater leakin! &rom a burst pipe P
2C Clothes shrinkin! )hen you )ash them P
C %ama!e due to lack o& maintenance P
Ordinar+ Theft 1olicie" co4er< True )al"e
4C 0he&t by the insured8s sta&& P
#C Financial loss due to dishonesty by the insured8s sta&& P
(C %ama!e done by thie1es to the buildin! P
/C Property your nei!hbour borro)edB and &or!ot to return P
)or a ?fire@ in ter!" of the 1olic+5 it !u"t in4ol4e< True )al"e
*C ,ctual i!nition P
$C ,n accidental cause P
10C Somethin! that ou!ht to be on &ire P
11C , deliberate act by the insured P
12C Usually a &lame P
1C Somethin! not meant to be on &ire P
14: The "ur4e+ re7ue"t for! i" an i!1ortant docu!ent in that it "u11lie" detail" of the
ri"* for the "ur4e+or: 6i"cu"" thi" "tate!ent with "1ecific reference to wh+ the
re1ort for! "hould 2e full+ co!1leted: Reference "hould al"o 2e !ade to the t+1e
of infor!ation contained within the re7ue"t for!:
, sur1ey re5uest &orm supplies &ull details o& the risk to the sur1eyorC Incomplete &orms
can cause a !reat deal o& problemsB some o& )hich are=
i& the insured8s name and address are omitted the sur1eyor )ill not kno) )here to
sur1eyG
the sums insured are important as the sur1eyor )ill base the protections on the le1el
o& co1erG
a contact name and number enable the sur1eyor to make an appointmentG
rene)al or inception date help the sur1eyor to kno) ho) ur!ent the sur1ey is as
impro1ements )ill normally be &rom that dateC ,lso i& it is an increase in co1erB the
sur1eyor )ill need to sur1ey be&ore increased co1er is implementedG
loss history tells the sur1eyor )here there ha1e been problem areasC
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Module 4< Standard )eature" of the
Multi!ar* Polic+
Learnin& Outco!e"
:3plain ho) the t)o parties to the insurance contract are identi&ied in the policyG
'rie&ly discuss the other basic in&ormation you )ould &ind in a policyG
Identi&y the insurer8s undertakin! to the insuredB as set out in the operati1e clauseG
%istin!uish bet)een the !eneral eAce1tion"B !eneral condition"B and !eneral
1ro4i"ion" o& the policyB and state the e&&ect o& each o& theseC
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Introduction
,spects common to all sections o& the .ultimark policy are !rouped to!etherB to a1oid repetitionC
0he indi1idual sections then ha1e their o)n Hde&ined e1entsI a!ainst )hich co1er is !i1enB and
their speci&ic e3tensions and e3ceptionsC 0here is a mainB typed schedule !i1in! the details that
apply to the indi1idual insuredB and &urther schedules )ith the speci&ic descriptions and sums
insured?limits &or the separate sections o& co1erC
The Main Schedule
UsuallyB this includes the &ollo)in! important detailsC
;i< In"urerF" identification= 0he name o& the insurerB and a physical address to )hich
correspondence can be deli1ered and le!al notices can be ser1edC "nly re!istered
insurers ;includin! Lloyd8s under)riters< are allo)ed to carry on insurance businessC
;ii< In"uredF" na!e5 title and addre""= 0he policy is a le!al documentB and these details
must be correctC 0he insured mi!ht be an indi1idualB a partnershipB a close corporationB or
a companyB and there mi!ht be insurable interest other than as o)nerB eC!C as trustee or
bondholderC
;iii< Territorial li!it"= 0he area in )hich the co1er )ill applyC ;0he 1arious sections also ha1e
their o)n territorial limits<C
;i1< The 2u"ine"" of the in"ured= 0his must be correctly and &ully statedB because it a&&ects
the nature o& the insured risk > manu&acturerB distributorB retailerB property o)nerB and so
onC
;1< Period of in"urance and renewalLanni4er"ar+ dateC
;1i< Atte"tation= 7ereB or else)here in the documentB the policy is si!ned by authority o& the
insurerC
The O1erati4e Clau"e
0he insurer a!rees=
i& the premium has been paid )hen it )as dueB ;late payments are accepted at the option
o& the insurer<
subAect to the termsB e3ceptions and conditions o& the policy
to indemni&y or compensate the insured ;there must be some kind o& loss<
i& the e1ents insured a!ainst occur
durin! the period o& insurance ;some sections like Fidelity and LiabilityB ha1e special
pro1isions<
but not e3ceedin! the sum insured or policy limitC
,t the option o& the insurer ;not at the insured8s choice< inde!nit+ can be by paymentB
replacementB reinstatementB or repairC Co!1en"ationB applicable to personal accident
insuranceB is by payment onlyC
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General EAce1tion"
9roupin! to!ether the e3ceptions and conditions applicable to most sections o& the policy sa1es
repetitionB but you must remember these )hen studyin! the rest o& the policy )ordin!C
1 .A/ The Riot
0his re&ers to loss or dama!e to 1ro1ert+ related to or caused by any o& a lon! list o& e1entsB
mainly related to riotB strikeB public disorderB and )arlike operations o& any kindC 2ar is a national
concernB )here 9o1ernment becomes in1ol1edB but &or other kinds o& disorderB political or non>
politicalB co1er is usually a1ailable &rom S,S4I, ;South ,&rica< or N,S4I, ;Namibia<B and in other
)aysC
1 .0/ Bar 6a!a&e
0he policy also e3cludes loss or dama!e caused directly or indirectly by any occurrence &or )hich
a &und has been established in terms o& the South ,&rican 2ar %ama!e and Compensation ,ctB
or similar ,cts in other territoriesC
The 9uclear EAclu"ion
0he policy does not co1er any loss o&B or destruction or dama!e to propertyB any conse5uential
lossB or any le!al liability arisin! &rom radiation contamination by nuclear &uelB nuclear )aste &rom
the combustion o& nuclear &uelB or nuclear )eapons materialC 0his is because no one insurer
could carry such a lar!e riskC
4emember that other sources o& radiationB such as radioisotopesB particle acceleratorsB X>ray
apparatus and lasersB are in use in industryB medicine and researchC 0he e3clusion does not
apply to theseC Such risks must be care&ully consideredB but can be under)ritten in the ordinary
material dama!e and liability policiesC
General Condition"
.any o& these modi&y or rein&orce the position at common la)B so that there is less chance o&
disputes de1elopin!C
1C Mi"re1re"entationB misdescription and non>disclosure o& material particulars renders the
particular section or item 4oida2le at the insurer8s discretionC
2C Other in"urance > the policy )ill pay only its rateable share o& the lossB in other )ordsB
the insured himsel& must also claim &rom each o& the other policiesB ;rather than claim &rom
only oneB and then lea1e the insurers to sort out contribution bet)een themsel1es<C ,lso
pro1ides &or the HimportationI o& a1era!eB )here this does not already apply to both
policiesC
2 ;a< Cancellation > immediatelyB by the insured ;normal short period or minimum
premium may be char!ed< or on 0 days8 notice by the insurerB subAect to a pro
rata re&undC
2 ;b< Continuation of co4er > i& premium is paid by debit orderB the insurance
automatically lapses i& the debit order is not metB unless it can be sho)n that this
)as due to an error by the bankC 0he condition makes pro1ision &or monthlyB
5uarterlyB hal&>yearly or annual premium paymentsC
C Pre!iu! ad8u"t!ent > annual adAustment o& premium on some sections o& the policyB
based on the insured8s declarationsC
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4C Pre4ention of lo""C 0he insured cannot be e3pected to pre1ent all losses ;there )ould
be no point in ha1in! the insurance<B but the precautions and action taken must be
reasonable in the circumstancesC
#C Clai!"C
;a< ,s soon as reasonably possibleB the insured must !i1e notice o& any e1ent that
may result in a claimC 0his is especially important in connection )ith liability risksB
or )here the insurer mi!ht )ant to insist on e3tra precautionsC

I& a clai! then resultsB the insured mustB as soon as possible=
submit &ull details in )ritin!
pro1ide the re5uired proo& and documentationB and immediately &or)ard any third
party claim or summons to the insurer to deal )ith
in case o& the&tB noti&y the policeB and cooperate in tryin! to reco1er the stolen propertyC
;b< Insurers cannot allo) a unlimited time bet)een the e1entB and a claim bein! madeC
Unless they a!ree speciallyB the ma3imum allo)ed is 24 monthsC 0his limit does not
apply to business interruptionB &idelityB personal accident? stated bene&itsB third party
liability and )here there is pendin! le!al actionB but some sections o& the policy ha1e
their o)n special re5uirementsC
;c< I& the claim is reAectedB the insured has only si3 monthsB &rom the date o& repudiationB
to start le!al action a!ainst the insurerC It is not enou!h to !i1e notice o& le!al actionB
the insured must also pursue this to &inalityC
;d< InsuredB i& asked to do soB has to assist the insurer in the reco1ery o& lost or stolen
propertyC I& he does not do soB he must re&und the claim settlementC
(C Co!1an+F" ri&ht" after an e4entC
;a< ;i< Insured cannot abandon property to the insurerB but insurer can take possession o&
dama!ed propertyC 0hey must deal )ith the property in a reasonable mannerB
other)ise they can be liable &or any &urther dama!e that results &rom their actionsC

;a< ;ii< Subro!ationC Insurer can take o1er the ri!hts o& the insured immediatelyB and
commence reco1ery a!ainst third partiesC ;In common la)B they could do this only
a&ter payment o& the insured8s claim<C
;b< Subro!ation proceedin!s )ill be at the insurer8s e3penseB but the insured
must cooperateC
;c< Liability to third partiesC 0his mi!ht e3ceed the limit under the policyB so the
insurer has the option o& payin! the insured the limit o& indemnity and
)ithdra)in! &rom the claimC
/C )raudulent clai!"C ,ny &raudulent claim is &or&eitedC 0his includes those insured )hoB
&or e3ampleB intentionally set &ire to their o)n propertyB or arran!e to ha1e it set &ire to or
stolenC
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*C Rein"tate!ent after lo""C InsuredsB and e1en some brokersB do not al)ays understand
that payment o& a loss !enerally reduces the a1ailable co1erB &or e3ampleB i& contents are
insured &or 4(0 000 and 420 000 is then lostB only 440 000 is le&t &or later claims durin!
the same period o& insuranceC I& replacement property is bou!htB the ori!inal sum needs
to be reinstatedC 0his condition makes this plainB and pro1ides &or reinstatement to take
place automaticallyB so that the client is not le&t )ith insu&&icient co1erC NormallyB an
additional premium is dueB but insurers o&ten reinstate small losses &ree o& char!eC
Note" this !ondition does not appl% to &ersonal A!!ident.Stated 3enefits. Sto!+
de!laration !onditions under the Fire se!tion# and the Fidelit% insuran!e se!tion have
spe!ial provisions for reinstatement.
$C 0reach of condition"C , breach o& conditions a&&ects only the
particular sectionB not the policy as a )holeC
10C 9o ri&ht" to other 1er"on"C :mphasises that the contract o& insurance is bet)een the
insurer and the insuredC No ri!hts are !i1en to any third partiesC
11C Collecti4e in"urance"C Some lar!e policies are issued by a panel o& insurersB each o&
them named in the policy to!ether )ith their percenta!eC "ne insurer takes responsibility
&or the issue and administration o& the policyB and is called the Hleadin! insurerI 0he
condition makes pro1ision &or thisC
General Pro4i"ion"
Claims preparation costs
,utomatically pro1ides 10F o& claimB )ith a ma3imum o& 41 000B &or claims preparation costsC
0his is in addition to any amounts speci&ically sho)n in the 1arious sectionsC
.ayments on account
,t the insurer8s discretionB interim payments may be made to the insuredB pendin! &inalisation o& a
claimC
First amount payable
0he policy e3cessB as it &eatures in some sections o& the policyC
Members
I& the insured is a close corporationB rather than a companyB HmemberI is used instead o&
HdirectorIC
!iability under more t$an one section
0his is to !uard a!ainst accumulation o& co1er under the di&&erent than liability sectionsB but is not
meant to penalise an insured )ho may ha1e insured the same risk under t)o policy sectionsB eC!C
rent under Fire as )ell as under 'usiness InterruptionC
Meanin, of words
Policy )ordin!sB schedules and endorsements must be read to!ether )ith one anotherB and any
speci&ic meanin! applied throu!houtC ;People )ho dra) up policies ha1e to take care that this
does not result in a meanin! they did not intend<C
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.remium payment
Premium is payable on or be&ore the inception date or rene)al dateC Insurers do not ha1e to
accept late paymentsB this is at their choiceC
+oldin, covered
0o &orm a 1alid contractB the terms includin! the premium must be a!reedC I& insurers are holdin!
co1eredB they )ill not reAect a claim merely because the premium has not yet been a!reedC
Sc$edule sums insured blan2
0his makes it 1ery clear that i& the sum insured?limit o& indemnity is le&t blankB or sho)n as Qnil8 or
Qnot applicable8B this means no co1erB not Hno limit to the co1erIC
Security firms
0his does not mean that the policy no) co1ers the security &irmB but that=
the insured8s ri!hts under the policy are not preAudiced by enterin! into the contract
re5uired by the security ser1iceB and
i& this contract pre1ents the insured &rom claimin! a!ainst the security &irm &or loss or
dama!e caused by its employeesB the insurers )illB like)iseB not e3ercise their ri!hts o&
recourse a!ainst this &irmC

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In"truction"
0his kno)led!e sel& assessment consists o& lon!er )ritten 5uestionsC ,ns)er all o& the 5uestions
1: EA1lain wh+ it i" i!1ortant to "tate the in"uredF" na!e and addre"" correctl+ on the
1ro1o"al for!:
OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
: Indicate the 1o""i2le effect of a wron& or inco!1lete de"cri1tion of the in"uredF"
2u"ine"" on the 1ro1o"al:
$: Bhat i" !eant 2+ ?atte"tation@ of the 1olic+C
4: 0riefl+ eA1lain the effect of the Riot eAclu"ion:
': An en&ineerin& co!1an+ ha" an P>ra+ !achine for chec*in& weldin& 8oint":
EA1lain whether or not thi" fall" under the General eAce1tion" of the 1olic+:
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#: The in"uredF" 2uildin& wa" 2urnin&5 2ut he did not call the fire 2ri&ade: %nder
which 1olic+ condition are the in"urer" entitled to re1udiate the clai!C
(: A "tea*hou"e had a "!all fire on )rida+ ni&ht:
(:1 State when the in"ured !u"t notif+ the in"urer" that thi" ha" ha11ened
(: State when the in"ured !u"t draw u1 a li"t of the da!a&ed ite!" and their co"t5
and "u2!it it to in"urer"
3: The in"urer re8ect" a clai!5 and the in"ured "a+" he will ta*e the !atter to court:
State how lon& he ha" in which to "tart le&al 1roceedin&":
,: On in4e"ti&ation5 an in"ured i" found to ha4e deli2eratel+ fal"ified "o!e of the
clai!" fi&ure"5 "o a" to &et a 2i&&er "ettle!ent: EA1lain whether the in"urer" are
entitled to re8ect the whole of the clai!5 or onl+ thi" 1art of it:
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1-: )ar!er 0rown want" to renew hi" 1olic+5 2ut ha" not +et 1aid 2ecau"e he "a+" the
renewal 1re!iu! i" incorrect: EA1lain what ha11en" if there i" a fire 2efore the
1artie" ha4e reached a&ree!ent on the 1re!iu!:
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Module 4
1: EA1lain wh+ it i" i!1ortant to "tate the in"uredF" na!e and addre"" correctl+ on the
1ro1o"al for!:
0he policy is a le!al contractB and the person insured must also ha1e an insurable
interestB so it is important to insure in the ri!ht nameC , policy issued in the name o&
HLeonard LambI )ill not co1er property that actually belon!s to HLamb8s 2inter 2oollies
LtdIC ,lsoB to be le!ally e&&ecti1eB a notice o& proposed alteration or cancellation o& the
policy must be sent to the ri!ht insured at the correct addressB and any claims dischar!e
must be si!ned by the insured entitled to the moneyC
: Indicate the 1o""i2le effect of a wron& or inco!1lete de"cri1tion of the in"uredF"
2u"ine"" on the 1ro1o"al:
0he kind o& business carried on is a material &act that in&luences under)riters in their
acceptance o& the riskB and in &i3in! termsC ,n incorrect description can render the policy
1oidableC
$: Bhat i" !eant 2+ ?atte"tation@ of the 1olic+C
0he policy is si!ned by someone entitled to do so on behal& o& the insurerC
4: 0riefl+ eA1lain the effect of the Riot eAclu"ion:
:3cludes loss or dama!e to propertyB related to or caused by riot and other kinds o& public
disorder ;politically or non>politically moti1atedra+ !achine for chec*in& weldin& 8oint":
EA1lain whether or not thi" fall" under the General eAce1tion" of the 1olic+:
0he nuclear e3clusion re&ers to contamination by nuclear &uel and )aste productsB or
nuclear )eapons materialC It does not apply to X>ray radiationC
#: The in"uredF" 2uildin& wa" 2urnin&5 2ut he did not call the fire 2ri&ade: %nder
which 1olic+ condition are the in"urer" entitled to re1udiate the clai!C
9eneral condition #B pre1ention o& lossC 4easonable personsB actin! in !ood &aithB )ould
be e3pected to call the bri!adeB i& they )ere able to do soC
(: A "tea*hou"e had a "!all fire on )rida+ ni&ht:
(:1 State when the in"ured !u"t notif+ the in"urer" that thi" ha" ha11ened
,s soon as reasonably possible a&ter the &ireC ProbablyB this )ould be on .onday
mornin!B )hen the insurers8 o&&ice openedB but it mi!ht happen that the o)ner or mana!er
himsel& )as a)ay at the timeB and there )as no one else )ho kne) about the insurance
and could do this on his behal&C
(: State when the in"ured !u"t draw u1 a li"t of the da!a&ed ite!" and their co"t5
and "u2!it it to in"urer"
,s soon as possibleC 0he more complicated the lossB the lon!er it may take to put
to!ether the re5uired particularsC 0his is )hy claims preparation costs are insuredC :1en
i& an adAuster is appointed to deal )ith the matterB his?her duty is to in1esti!ate and check
the insured8s claimB not to dra) it upC
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Module 4 - cont
3: The in"urer re8ect" a clai!5 and the in"ured "a+" he will ta*e the !atter to court:
State how lon& he ha" in which to "tart le&al 1roceedin&":
Si3 months &rom the date o& repudiationC It is not merely threatenin! to do thisB or startin!
and stoppin! le!al actionB the insured must be prepared to see the matter throu!h to
&inalityC
,: On in4e"ti&ation5 an in"ured i" found to ha4e deli2eratel+ fal"ified "o!e of the
clai!" fi&ure"5 "o a" to &et a 2i&&er "ettle!ent: EA1lain whether the in"urer" are
entitled to re8ect the whole of the clai!5 or onl+ thi" 1art of it:
I& the claim is in any respect &raudulentB all bene&it is &or&eitedC
1-: )ar!er 0rown want" to renew hi" 1olic+5 2ut ha" not +et 1aid 2ecau"e he "a+" the
renewal 1re!iu! i" incorrect: EA1lain what ha11en" if there i" a fire 2efore the
1artie" ha4e reached a&ree!ent on the 1re!iu!:
Strictly speakin!B there is no contract because the terms ha1e not been a!reed uponC 0he
.ultimark policy pro1ides that i& the insurers ha1e a!reed to hold co1ered in the interimB
they )ill not reAect a claim purely on the basis that the premium has not been a!reed
uponC ;,lthou!h this is part o& the .ultimark )ordin!B take note that not all other policies
contain this pro1isionC<
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Module '< )ire and Peril" .Multi!ar*/
Learnin& Outco!e"
0+ the end of thi" Module5 +ou will 2e a2le to=
List and brie&ly describe the Hde&ined e1entsI under the Fire section o& the .ultimark
policyB to!ether )ith their e3tensions and special e3ceptionsG
4eproduce the &ormulas &or pro rata a1era!eB &irst loss a1era!eB and a1era!e applied to
the reinstatement 1alue conditionsB and be able to apply these in practical e3amplesG
%escribe the purpose o& each o& the standard clauses and e3tensions under the Fire
sectionG
Calculate a Stock %eclaration premium adAustmentG
'rie&ly describe the purpose and operation o& %ay "ne a1era!eG
4elate S,S4I, co1er to Fire insuranceC
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Introduction
For many yearsB the &ire insurance account )as the main contributor to the pro&itability o& short>
term insurersC Competition &or business has since eroded ratesB )hile there is a trend to)ard
lar!er lossesC "n a1era!eB claimsB includin! storm and other perils insured in the Fire accountB
no) e3ceed 4B*m a dayC ;0his does not include the &loods in February 2000<C 0he under)ritin!
pro&it has disappearedC
0he Fire section o& the .ultimark is desi!ned &or ordinary risksB and has a minimum o&
restrictionsC 0here are o&ten special problemsB like the dan!er o& spontaneous combustion
;materials that sel& heat<B disposal o& combustible )asteB stora!e o& &lammable li5uidsB and
e3posure to 1eld and bush &iresC 0he under)riter cannot rely only on the insured8s duty to take
reasonable precautionsB e1en thou!h risk reduction measures bene&it the insured as )ellC
,dditional )arranties or restrictions must be applied )here neededC
It is not &easible to reproduce the )hole o& the )ordin!C It )ill be help&ul to study this and &ollo)in!
sections in conAunction )ith a specimen policyB althou!h this is not essential &or e3amination
purposesC
6efined E4ent"
:ach section o& the policy has its o)n de&ined e1ents > the e1ents insured a!ainstC H%ama!e to
the )hole or part o& the property described in the scheduleB o)ned by the insured ;a!ain see ho)
important it is to sho) the ri!ht name< or &or )hich they are responsibleB ;there must be an
insurable interest but there is no need to make special mention o& 9oods in 0rust<B includin!
alterations made by the insured as tenants to the buildin!s and structuresB by=

1: )ire
0here must be=
actual i!nition
somethin! on &ire that ou!ht not to be on &ire
an accidental or &ortuitous causeB at least as &ar as the insured is concernedC
:nsuin! dama!eB such as smokeB scorchin! and heatB &allin! &loorsB roo&s and )allsB and
by the &ire bri!adeB is automatically includedC 0he actual &ire mi!ht not e1en be at the
insured8s o)n premisesB eC!C heat &rom another burnin! buildin! could scorch the paint
and crack the )indo)s o& the insured8s buildin!C
2C Li&htnin& or thunder2olt
Electrical "tor!" are common in many parts o& South ,&rica and nei!hbourin! territoriesC In
de1eloped areas )ith a !reat deal o& electrical and electronic e5uipment there are lar!e
e3posuresB particularly as circuitry becomes more compact and easily dama!edC ,part &rom
direct strikesB current sur!es are carried alon! the po)er distribution and telephone net)orksC
C EA1lo"ion
Some e3plosions are the result o& internal pressureB as in a boilerC "thers are a chemical
reaction similar to a &ireB but happenin! much more rapidlyC In some older policiesB e3plosion
)as e3cluded unless specially mentionedB but &ull co1er is no) !i1enC
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4C Additional 1eril"5 a" "tated in the "chedule
,ll the e3ceptions and conditions also apply to these perilsB as thou!h the dama!e had been
by &ireC
S1ecific EAce1tion"
:arth5uake ;)hether arisin! &rom minin! operations or other)ise<C Can be added as an
Hadditional perilIC
6olcanic eruption or other con1ulsion o& natureB ;but subterranean &ire is not e3cluded<C
0here is a reverse onus of proofB in other )ordsB i& the insurers say that the dama!e is
e3cluded by these e3ceptionsB the insured must pro1e that the e3ception does not applyC
%ama!e to property by its under!oin! any heatin! or dryin! processC 0his applies only to
the property bein! heated or driedC I& a &ire then started and spreadB &ire dama!e to other
property )ould be co1eredC
9ote= Some materials increase in temperature )ithout the application o& an e3ternal heat
source and can catch &ire by themsel1esC 0his is called "1ontaneou"
co!2u"tionB and is not automatically e3cludedB e3cept sometimes in policies
specially desi!ned &or &armin! risksB )here haystacks can be e3pectedC Usually it
is up to the under)riter to apply special terms )here the risk o& spontaneous
combustion is presentC
%ama!e to property insured by any .arine policyC "&tenB .arine policies co1er stora!e
risks incidental to the transitC 0he Fire policy cannot be brou!ht into contributionB but can
be used to make up the di&&erenceB i& the .arine co1er is insu&&icientC
S1ecific Condition > A4era&e
0his is kno)n as the Pro rata condition o& a1era!eC It states that i&B at the time o& dama!eB the
property is o& !reater 1alue than the sum insured thereonB the insured shall be considered as their
o)n insurer &or the di&&erenceB and shall bear a rateable share o& the lossC It &ollo)s that the
insured is also entitled to a rateable share o& any subse5uent reco1eryC In terms o& an a!reement
si!ned by the maAority o& South ,&rican insurersB most material dama!e policies must be issued
subAect to a1era!eC
0he &ormula is= sum insured 3 loss
1alue at risk
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Additional Peril" .If "tated in the "chedule to 2e included/
:arth5uakeB e3cludin! dama!e to property in the under!round )orkin!s o& any mineC
S1ecial Peril"
%ama!e caused by=
1C StormB )indB )aterB hail or sno) e3cludin! dama!e to property=
;a< arisin! &rom its under!oin! any process necessarily in1ol1in! the
use or application o& )ater
;b< caused by a tidal )a1e ori!inatin! &rom earth5uake or 1olcanic
eruption ;storm )a1es and sprin!?autumn tides are not e3cluded<
;c< in the under!round )orkin!s o& any mine
;d< in the open ;other than buildin!s structures and plant desi!ned to
e3ist or operate in the open<
;e< in any structure not completely roo&ed
;&< bein! retainin! )alls ;)alls that support or hold back earth or
)ater<
Items dB eB and & abo1e can be includedB usually at special termsB i& speci&ically insured as a
separate itemC
No structure abo1e!round is completely sa&e a!ainst )ind and stormB but solid buildin!s
ob1iously resist better than those o& li!ht constructionC 0here are localised areas )here it is not
ad1isable to !i1e co1er a!ainst &lood riskB and others )here hail is a problemC Special care is
needed in the case o& motor manu&acturers and dealersC It is usual to re5uire hail netsB and an
e3cess per 1ehicleC
2C ,ircra&t and other aerial de1ices or articles dropped there&romC I& the aircra&t can be identi&iedB
the o)ner is liableC 0his is not a &re5uent occurrenceB but there ha1e also been instances o&
hea1y blocks o& ice &ormin! on aircra&t at hi!h altitudesB and &allin! o&& as the aircra&t
descendsC
C Impact by animalsB treesB aerialsB satellite dishes or 1ehiclesB e3cludin! dama!e to these
items themsel1esB or property in or on 1ehiclesC 0his is ,NE 1ehicleB animalB treeB etcC
includin! those belon!in! to the insuredC
E/ceptions to t$e special perils cover
0his e3tension does not co1er=
1C )ear and tear and !radual deteriorationC 0he idea is to e3clude repairs that should &all under
!eneral maintenanceC
2C dama!e caused or a!!ra1ated by=
leaka!e or dischar!e &rom any sprinkler or drencher system or other &ire e3tin!uishin!
installation or appliances in the buildin!s insured hereby or in buildin!s containin!
property insured herebyC
The intention is that water from a fire hose;reel or portable e2tinguisher# lea+ing or
perhaps turned on in error# is !overed under the spe!ial perils e2tension. Sprin+lers#
dren!hers and other fi2ed s%stems are e2!luded# and need spe!ial !over.
subsidence or landslipC ;, separate e3tension is pro1idedB but the risk mi!ht not be
acceptable to insurers<C
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the insured8s &ailure to take all reasonable precautions &or the maintenance and sa&ety o&
the property insured and &or the minimisation o& any dama!eC
1t is again stated that reasonable pre!autions must be ta+en. The insured should ta+e at
least as mu!h !are as if uninsured.
!ea2a,e e/tension
%ama!e caused by dischar!e or leaka!e &rom &ire e3tin!uishin! installations?appliancesC
I& a sprinkler system is tri!!ered by a &ireB the resultant )ater dama!e is treated as part o& the &ireC
0he leaka!e e3tension is concerned )ith destruction or dama!e by )ater accidentall+
dischar!edC Possible causes include=
dama!e to a sprinkler head or other part o& the installation by impactB eC!C by a 1ehicle
passin! under itB or by someone carryin! a ladderC
heat other than by a &ireB eC!C portable heatin! appliancesB portable plant )ith heatB
e3cessi1e heat &rom a boiler &lueC
mechanical de&ect in the installationB eC!C a leakin! pipe AointC ;2ear and tear is not
e3cludedB but the insured must still take reasonable precautions<C
burst pipes due to the )ater &reeKin!B earth5uake?tremorC ;For the purposes o& this
e3tensionB the policy does not need to be specially e3tended to co1er earth5uake<C
, leaka!e that remains undetected &or a number o& hoursB especially o1er a )eekend or public
holidayB can cause e3tensi1e dama!e to stock and other contentsC 0his type o& insurance is
sometimes o1erlookedB particularly )here the insured is a tenant and does not think about the
presence o& the sprinklersB but it is important and relati1ely ine3pensi1eC
0)o &orms o& co1er are a1ailable=
Full 1alueB subAect to pro rata a1era!e in the normal )ay
First loss basisB )here the sum insured represents the ma3imum amount o& dama!e thatB in
the insured8s opinionB is likely to be caused by sprinkler leaka!eC 0his becomes the limit o&
the insurer8s liability &or any one e1entB and the HFirst Loss H a1era!e clause set out belo)B
comes into e&&ectC
HI& the property insured isB at the commencement o& any dama!e to such property by
dischar!e or leaka!eB collecti1ely o& !reater 1alue than the sum insured a!ainst &ire
dama!eB then the company shall be liable under this e3tension only &or that proportion o&
the &irst loss limit as the sum insured a!ainst &ire bears to the total 1alue o& such property
and the insured shall be considered as bein! their o)n insurer &or the di&&erence and shall
bear a rateable share o& the loss accordin!lyC :1ery itemB i& more than oneB to )hich this
e3tension applies shall be separately subAect to this clauseCI
0his is a 1ery speci&ic )ay o& sayin! that i& the &ire sum insured is insu&&icientB so that a1era!e
)ould ha1e appliedB the &irst loss limit is reduced in the same proportionC
Formula= Fire sum insured 3 First loss limit
6alue at risk
0he rate o& premium &or the &irst loss is based on the relationship bet)een the &irst loss sum
insured and the &ull 1alueC ,s the total 1alue at risk risesB so should the &irst loss premiumB
;althou!h not necessarily in the same proportion<C
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Subsidence and landslip e/tension
0his co1er is relati1ely e3pensi1eB bein! subAect to a market a!reement to )hich most insurance
companies subscribeB )ith a minimum rateC 0here is usually an e3cess > in the .ultimark policy
this is 1F o& the "u! in"uredB )ith a minimum o& 4#00C
, common cause o& subsidence is dolomiteB a &orm o& calcium ma!nesium carbonateC 0his rock
&ormation is !radually dissol1ed by )aterB lea1in! an under!round ca1ityC "ther causes include
leachin! by )ater &rom under!round pipes and drainsB and tree rootsC
0he usual cause o& landslip is clay soilB particularly black clayB )hich can absorb a lar!e amount
o& )aterB addin! !reatly to its )ei!htC 0he soil is then imper1ious to any &urther )aterB and the
entire mass tends to slide !radually do)n hillB takin! parts o& the sur&ace structure )ith itC ;,
&urther problem is that the soil contracts )hen dry and e3pands )hen )etB e3ertin! pressure on
buildin! &oundations<C
Insurers approach the subsidence e3tension )ith cautionB and may re5uire a certi&icate &rom the
local authority that the land is considered sa&e to build onC
Malicious dama,e e/tension
0he )ordin! has been amended to make it 5uite clear that this does not co1er mo1eable or
immo1able property that is=
Stolen
remo1ed or dama!ed in an attempt to steal itB or part o& it
dama!ed )hile breakin! in or out o& the premises
0here is co1er &or )il&ul dama!e other than by the&t or attempted the&tC
"ther e3clusions are=
&ire and e3plosionC ;0his is already co1ered else)here in the policy<
conse5uential loss o& any kind ;other than rentB i& speci&ically insured<C ,n e3ample mi!ht
be a business competitor )ho enters the insured8s premises and de&aces dies used in the
production processC 0he cost o& replacin! the dies is co1eredB but not the lost productionC
interruption o& )orkC
dispossession by la)&ul authorityC
the riot and )ar e3clusionC
%ue to the problem o& 1andalism o& unoccupied buildin!sB malicious dama!e co1er is suspended
i& the property becomes unoccupied &or 0 con"ecuti4e daysB and durin! this 0 day period the
insured is responsible &or 20F o& any claim be&ore deduction o& any e3cessC
3iot and stri2e e/tension
S,S4I, is a section 21 ;not &or !ain< company established to deal )ith riot and ci1il commotion
risks in the 4epublic o& South ,&ricaC "b1iouslyB this does not include risks in nei!hbourin!
territories such as S)aKilandB 'ots)anaB and NamibiaC Namibia has its o)n associationB called
N,S4I, )hich deals )ith risks in that territoryC :lse)here than in 4S, and NamibiaB the policy
can be e3tended to co1er property a!ainst riot and ci1il commotionC 2ar risks are still e3cludedC
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Clau"e" and EAten"ion"
:3cept &or=
:scalator clause
Stock declaration conditions
%isposal o& sal1a!e clause
,ll o& the &ollo)in! clauses and e3tensions that &ollo) are automatically included in the &ire
sectionC It is up to the under)riter to delete any that should not apply in any particular caseC For
e3ampleB it )ould be bad practice to include reinstatement 1alue conditions &or an old buildin! in
a run>do)n areaC
Rent Clau"e .if in"ured i" under colu!n /
4ent mi!ht be payableB ;tenants< recei1ableB ;o)ners< or rental 1alue ;o)ner occupant<C 0he
proper description and the number o& months insured must be !i1enC Note that this pays only
until the premises are a!ain tenantableC 0his does not mean that the premises are letB only that
they are able to be letC 2ider co1er is a1ailable under the 'usiness Interruption sectionC
6e"i&nation of 1ro1ert+ clau"e
Insurers a!ree to accept the classi&ication ;buildin!B plantB &i3turesB stock< o& property in the
insured8s books o& accountC
Other content" clau"e
Some minor itemsB not speci&ically insured else)hereB are !rouped to!ether under this headin!C
0his must be read to!ether )ith the limitations clauseB )hich &ollo)sC
Li!itation" clau"e
"ther contentsB and limitations must be read to!etherC 'oth re&er to column o& the scheduleB
the last part o& )hich reads Hall other contents e3cludin! property more speci&ically insured IC
Co1er is limited to=
4# 000 &or any one indi1idualB &or personal property
4# 000 &or money and stamps
&or desi!nsB patternsB models and mouldsB and &or documents and business recordsB
includin! computer mediaB the cost o& materials and labourC
Alteration" and !i"de"cri1tion clau"e
9i1es temporary co1er &or chan!esC 0he insured must noti&y insurers o& theseB as soon as
possibleC
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Architect"F and other 1rofe""ional fee" clau"e
4einstatin! or replacin! buildin!s or plant may in1ol1e payment o& &ees &or plansB super1ision and
so onC 0his does not &orm part o& Hclaims preparation costsIB but is automatically co1ered under
columns 1 and o& the scheduleB up to 1# F o& the sum insuredC 0his is not &ree additional co1er
> the sum insured by the item must be enou!h to co1er the &ees as )ell as the actual propertyC
Ca1ital addition"
9i1es temporary co1erB up to an e3tra 1# F o& the sum insuredB &or ne)ly ac5uired propertyB
;other than stock<C 0he insured must ad1ise then ad1ise the insurers each 5uarterB and pay the
additional premiumC
Co"t of de!olition and clearin& and erection of
0he sums insured on buildin!sB plant and stockB must be su&&icient to co1er these costsC
Note that=
Koardin&" clau"e
this includes remo1al o& stock debris
co1er is limited to the site o& the property dama!ed or destroyed and the area immediately
ne3t to itC
there is no co1er a!ainst pollution or contamination o& property that is not insured by the
policy sectionC
)ire eAtin&ui"hin& char&e" clau"e
,ny costsB such as &ire bri!ade char!es and the cost o& rechar!in! e3tin!uishersB related to
puttin! out or &i!htin! a &ireB are co1ered in addition to the sum insuredC 0he insured must be
le!ally liable &or the costsB and the insured property must be in dan!er &rom the &ireC
Mort&a&ee clau"e
0he mort!a!ee is the lender and the mort!a!or is the borro)erC 2hen property is used as the
security &or a loanB the mort!a!e bond re5uires that the property has to be kept &ully insuredC 0he
mort!a!or mi!ht do somethin! on the property that normally )ould render the insurance 1oid or
1oidableC 0his clause protects the mort!a!ee to the e3tent o& his &inancial in1ol1ementB but only i&
he is not a)are o& the actions o& the mort!a!orC
Munici1al 1lan" clau"e
.unicipalities char!e &or scrutinisin! and appro1in! buildin! plansC 0he sum insured under
Column 1B 'uildin!sB must be su&&icient to include the costC
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Pu2lic authoritie" re7uire!ent" clau"e
.any buildin!s )ere erected be&ore modern buildin! re!ulations and to)n plannin! came into
bein!C
For e3ampleB rebuildin! a&ter a &ire mi!ht be allo)ed only subAect to additional &ire )alls and &ire
escapesB or e3tra )ashrooms &or sta&&C
0he sum insured must not be e3ceededB but these necessary chan!es )ill not be considered as
bettermentB pro1ided that the insured had not already had notice ser1ed on him to do theseB
be&ore the loss or dama!e took placeC
Railwa+ and other "u2ro&ation clau"e
,!reements entered into bet)een the insured and 0ransnetB or other similar bodies are
conditional upon the )ai1er o& some o& the insured8s common la) ri!htsC NormallyB insurers
)ould obAectB because this then a&&ects their ri!hts in subro!ationC 0his clause allo)s the insured
to enter into these particular a!reements )ithout preAudice to the policy co1erC
Rein"tate!ent 4alue condition" clau"e
0he amount payable is the cost o& replacin! or reinstatin! property o& the same kind or typeB but
not superior to or more e3tensi1e than the insured property )hen ne)C UsuallyB buildin!s are
reinstated )ith ne) materialsB but machinery replacements can be )ith !ood second>hand
machinery in like conditionB or similar ne) e5uipmentB )ithout deduction &or )ear and tearC
;4einstatement conditions do not apply to stock<C
0he cost is based on reinstatement at the same siteB but insurers may a!ree to another
site pro1ided that this does not increase their liabilityC
0he insurers must be ad1ised promptly o& the intention to reinstateB ;)ithin si3 monthsB or
i& lon!erB by special )ritten a!reement<B and the )ork must be carried out )ithout undue
delayC
0he insured must ha1e actually incurred e3penditure in reinstatementC
0he sum insured must represent the cost o& replacement or reinstatement o& the )hole o&
the property insuredB ;other than stock<B other)ise a1era!e )ill applyC
Formula=
Sum insuredOOOOOOOOOOOOO 3 reinstatement cost o& dama!ed property
4einstatement cost o& the )hole o& the property
Alternati4e re1lace!ent condition" .de"i&n ca1acit+/ clau"e
2ith chan!in! methodsB and ad1ances in technolo!yB similar machinery and e5uipment may no
lon!er be obtainableC I& the property insured has a measurable &unctionB capacity or output the
insurers )ill pay the cost o& replacin! )ith property as near as possibleB but not in&erior to the
5ualityB capacityB &unction or output o& the ori!inalC
0he pro1isos are similar to the abo1eB but &or purposes o& a1era!eB the sum insured must no) be
enou!h to pro1ide &or replacement )ith the modern e5uipmentC
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Te!1orar+ re!o4al clau"e
Insurance should cater &or the normal acti1ities o& the insuredC It is common &or machinery and
other property to be sent a)ay &or repair or reno1ationC 0he temporary remo1al clause pro1ides
co1er a!ainst the same perils as at the insured8s premisesB includin! transit by roadB railB or inland
)ater)ayB any)here in 4S,B NamibiaB 'ots)anaB LesothoB S)aKilandB Yimbab)eB and .ala)iC
I& the temporary remo1al is not &or cleanin!B reno1ationB repair or similar processB the insurer8s
liability is restricted to 1#F o& the sum insured on the itemC
Tenant" clau"e
Pust as the mort!a!ee clause protects the mort!a!eeB the tenants clause protects the o)ner in
case the tenant does or omits anythin! to in1alidate the insuranceB pro1ided that the o)ner )as
not a)are o& thisC In the same )ayB i& the tenant is the insuredB he is protected in respect o&
similar thin!s done by the o)ner )ithout the tenant8s kno)led!eC
Stoc* declaration condition" .if "tated in the "chedule to a11l+/
0he 1alue o& stock may 1ary considerably throu!hout the yearC I& the insured takes out co1er &or
the ma3imum amountB this sum insured )ill o&ten be more than neededC "n the other handB
insurin! &or the a1era!e 1alue at risk )ill mean there are times o& under insuranceB and a1era!e
)ill be applicable in the e1ent o& lossC 0he stock declaration conditions can take care o& thisC
, pro1isional premium is char!edB calculated on /# F o& the sum insuredC
,t the end o& each month?5uarter ;as stated in the schedule< the insured !i1es the insurer
a )ritten declaration o& the market 1alue o& stock and materials in tradeC 0his must be
done )ithin 0 days &rom the month?5uarter endB other)ise the insured is deemed to ha1e
declared the &ull sum insuredC
Claims are settled on the basis o& the market 1alue immediately prior to the dama!eC
,t the end o& each period o& insuranceB the &inal premium is calculated on the a1era!e
sum insuredB iCeC the total o& the 1alues declared or deemed declaredB di1ided by the
number o& declarations that should ha1e been madeB resultin! in an additional or a re&und
premiumC
Up to #0 F o& the pro1isional premium is re&undableB so the insured is 1ery unlikely to pay
more premium than necessary ;unless the re5uired declarations )ere not made<C
0he sum insured is the limit o& the insurer8s liabilityB and premium is not recei1able on
1alues in e3cess o& thisC ,ny additional premium under the adAustment cannot be more
than 1? o& the pro1isional premiumC
0hese speci&ic conditions apply separately to each item to )hich stock declaration
conditions applyC
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E/ample of stoc2 declaration ad4ustment
Sum Insured ;ma3imum at risk< 4*00 000
4ateB 00F
Pro1isional premium 4*00 000 3 00F 3 /#F 4 1 *00
Monthl+ declaration"=
Panuary 4*00 000
February 4/00 000
.arch 4(#0 000
,pril No declarationB so sum insured used 4*00 000
.ay 4#00 000
Pune 4400 000
Puly 4##0 000
,u!ust 4##0 000
September 4(00 000
"ctober 4/00 000
No1ember 4*00 000
%ecember 4$00 000 but limited to R3-- ---
Total R( 3'- ---
A4era&e R#'4 1#(
Premium on 4(#4 1(/ Z 00F 41 $(2B#0
Pro1isional premium paid 41 *00B00
,dditional premium due 4 1(2B#0
0he premium calculation is simpleB but there are some additional aspectsC
"utstandin! declarations should be &ollo)ed up by insurers and intermediariesB and i& any
declaration e3ceeds the sum insured they should su!!est that this be increased
immediatelyC
Losses are automatically reinstatedC 0he additional premium &or this is separately
char!edB and does not &orm part o& the declaration adAustmentC
I& a&ter the occurrence o& dama!e it is &ound that the last declaration is less than it should
ha1e beenB the amount reco1erable under the claim is reduced in such proportion as the
amount o& the declaration bears to the amount that ou!ht to ha1e been declared or to the
sum insuredB )hiche1er is the lesser amountC 0his operates cumulati1ely )ith a1era!eC
0he operation o& this is best sho)n by an e3ampleC
0he calculation is made in t)o sta!es=
Last declarationCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC 4 $ 000 000
Should beCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC4 12 000 000
LossCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC 4 # 000 000
Sum insuredCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC C4 10 000 000
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0he speci&ic sum insured is 410 000 000B so this is the ma3imum accordin! to the conditionsC ,
declaration o& 4 $ 000 000 is $0F o& this ma3imumB so the amount payable is $0F o& the lossC
0his amountB 4 4 #00 000B is taken &or the calculation o& a1era!eC
Sum insured= 4 10 000 000 3 4 4 #00 000
0rue 1alue= 4 12 000 000
0otal claim payment 4 /#0 000
Insured is o)n insurer &or 4 1 2#0 000
2e can see that this is correctB because the declaration )as only ?4 o& the ri!ht amountC
Pu2lic "u11l+ connection" clau"e
0his !i1es co1er a!ainst accidental dama!e ;not Aust &ire and perils<B to )aterB se)era!eB !asB
electricity and telecommunication connectionsB the property o& the insured or &or )hich they are
le!ally responsibleC It does not co1er installations in or on the buildin!C
E"calator clau"e eAten"ion .if "tated in the "chedule to 2e included/
%urin! the year o& insuranceB in&lation can increase the replacement 1alue o& buildin!s and
machinery to a point )here there is under insuranceC 0he escalator clause allo)s the insured to
co1er the anticipated increase at #0F o& the normal rateB rather than ha1e to re1ise the sum
insured se1eral times a yearC
:ach rene)al dateB the insured must noti&y the insurers o& the ne) sum insured &or the
comin! period o& insuranceB and the percenta!e re5uired to allo) &or in&lationC I& this is not
doneB the clause ceases to applyC 0his point is o&ten o1erlookedC
0he clause does not apply to StockB because Stock can be insured under the declaration
conditionsC
6i"1o"al of "al4a&e clau"e .if "tated in the "chedule to 2e included/
9eneral condition /;a<;i< !i1es the insurer the ri!ht to take possession o& dama!ed property and
deal )ith it in any reasonable mannerC 2hen the sal1a!e includes branded !oodsB the
manu&acturer mi!ht not )ant these to be resold in a dama!ed stateB because this could harm the
manu&acturer8s reputationC 0his clause !i1es the insured &irst option to buy back the dama!ed
!oods at a &air 1aluationC
0his completes the list o& standard clauses normally o&&eredC Eou may also come across H%ay
one a1era!eIB )hich is brie&ly e3plained belo)C
0ay one avera,e
0here mi!ht be &urther in&lationary increases durin! the period o& rebuildin! a&ter a loss > &or
e3tensi1e premises this could be t)o or three yearsC It is di&&icult &or the insured to estimate this
so &ar in ad1anceB and a1oid o1er> or under>insuranceC
0he day>one basis o& reinstatement co1er )as introduced to o1ercome this di&&icultyC 0he sum
insured is calculated in t)o partsC 0he &irst partB called the Hdeclared 1alueI is the cost o&
reinstatement at the be!innin! o& the period o& insurance ;day one<B includin! cost o& public
authorities re5uirementsB pro&essional &eesB and debris remo1alB but )ithout allo)ance &or
subse5uent in&lationC
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0his Hdeclared 1alueI is noti&ied to the insurers at commencementB and at each subse5uent
rene)alC ,1era!e applies only to this Hdeclared 1alueIC
0he second part o& the sum insured is an added pro1ision &or in&lationB not usually e3ceedin! #0F
o& the declared 1alueC
0he premium is based on the Hdeclared 1alueI and can be=
;a< non>adAustableB applyin! the normal rate plus 1#F loadin!B or
;b< adAustableB usin! a 10F loadin! at commencementB and an adAustment based on #0F o&
the di&&erence bet)een this pro1isional premium and the pro1isional premium &or the
&ollo)in! period o& insuranceC
In&lation &or the &ollo)in! period )ill be more than &or the pre1ious oneB and this adAustment
should result in an additional premiumC I& the ne) Hdeclared 1alue H is not noti&ied to insurers
;because o& cancellation or non>rene)al< an additional premiumB based on a percenta!e o& the
pre1ious premiumB is char!edC
In"urance" on a ?da+ one@ 2a"i" are not allowed to 2e "u28ect to the e"calator clau"e a"
well:
Farmin, insurance
9enerallyB &ire insurance &or &arms is restricted to buildin!s and contentsB and &armin! implements
in the openC 4una)ay bush &ires are a maAor problemC Li1estock is sometimes insured a!ainst
death by &ireB li!htnin!B and perhaps &loodB all )ith a limit &or any one animalC
Some insurers specialiKe in a!ricultural risksB includin! !ro)in! cropsB and there is a limited
specialist market &or the insurance o& !ro)in! timberC
Other )ire Cla""e"
0uildin&" Co!2ined
0his section also includes co1er &or the&t o& parts o& the buildin!B and property o)ner8s liabilityC
'uildin!s combined is meant &or buildin!s in less haKardous occupationB such as &latsB o&&icesB
schoolsB pro&essional roomsB hospitals and medical suitesB museumsB art !alleriesB and librariesC
Sometimes a special &orm o& policy is used &or sectional title de1elopmentsC
Insurers )ill ha1e an under)ritin! !uide speci&yin! the &ull list o& occupations &or )hich they are
prepared to !i1e Combined co1erC Some buildin!s are occupied partly as shops and partly as
&lats or o&&icesC IdeallyB the commercial section should &orm a separate &ire risk ;see the section
on S,S4I, co1erB )hich &ollo)s<B but this is no lon!er !enerally trueC , sur1ey should be done to
determine the de!ree o& commercial e3posure and the terms on )hich the insurer is prepared to
)rite the businessC
0he &ire perils insured are similar to the &ire sectionB but simpli&ied due to the type o& property &or
)hich the policy is meantC 0he section has a similar e3tension &or accidental dama!e to public
supply connectionsC ,ccidental dama!e to sanitary )are is co1ered subAect to a 42#0 e3cessC
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Co1er is subAect to the pro rata condition o& a1era!eC
2ater dama!e does not e3clude sprinklersB so there is no need &or a sprinkler leaka!e
e3tensionC
0here is automatic co1er a!ainst loss o& rent due to any o& the H&ireI perilsC 4ent is
calculated on the rent payable or the rental 1alueB immediately be&ore the dama!eB and is
limited to 2#F o& the sum insuredC ;Sub>section C<C
I& stated in the policyB this includes loss or dama!e to property )ithin a 10 km radius that
pre1ents or hinders access to the property insuredC
0od+ Cor1orate Bordin&
'ody CorporateB or Sectional 0itle de1elopments are increasin! in number and the pro1isions o&
the Sectional 0itles ,ct need special considerationC :ach o)ner has an interest in his o)n unit
and there is usually a bond in &a1our o& a &inancial institutionC ,ll share in the common property
such as boundary )allsB entrance de1elopment and &acilities such as laundromat and s)immin!
poolC It is pre&erable that one policy be issuedB in &a1our o& the 'ody CorporateC , schedule is
attached sho)in! the sums insured &or the separate unitsB and &or the common propertyC
7o)e1erB there is nothin! to pre1ent an indi1idual o)ner &rom takin! out separate insurance on
his unitC 0he )ordin! does not &orm part o& .ultimarkB and di&&ers &rom the usual HCombinedI
section in se1eral important respectsC
6efined e4ent"
0here must be actual physical loss or dama!e to the insured propertyC ,ny special pro1isions o&
the Sectional 0itles ,ct do not a&&ect the interpretation o& the policyC
Su2>"ection A Pro1ert+
0he policy includes some additional co1er and pro1isos=
1< 'urstin! or o1er&lo)in! o& )ater pipes apparatus or pipes includin! dama!e to such
apparatus or pipesC 0his co1er is !i1en under domestic H7ouseo)nersI policiesB so is
included hereC
2< 0he&t o& buildin! &i3tures and &ittin!s is co1eredB e3cept &rom 1acant units or )hen the
entire property is 1acantC
< ,ccidental breaka!e or collapse o& radio or tele1ision aerials or masts is includedC 0hisB
tooB &ollo)s the H7ouseo)nersI practiceC
4< ,ccidental breaka!e o& &i3ed !lass or sanitary )areB but e3cludin! dama!e o& a cosmetic
natureC
#< ,ccidental dama!eB not e3ceedin! 4#00B to s)immin! pool machinery or borehole motors
by=
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a< crushin! or stress &rom pressure
b< sudden electrical or mechanical breakdo)n
c< accidental outside causesB but e3cludin!=
i< the &irst 4#0 o& any claim
ii< repair or replacement necessitated by !radually operatin! causesB or &or
cosmetic reasonsC
Similar to co1er a1ailable in domestic policiesC
(< :scape o& oil &rom any &i3ed oil>&ired heatin! installation or connected apparatusC
4emember that )e are only concerned )ith dama!e to the buildin!B )hich normally
includes &itted carpetsC 0he oil itsel& is not insured > only the resultant dama!eC
Su2>"ection C Rent
1< Loss o& rent recei1able &rom 0enantC 0his is similar to sub>section C o& the Combined
)ordin!C
2< ")ners ? occupiers )ill recei1e reimbursement &or alternati1e accommodation up to 2#F
o& the sum insured &or the a&&ected unit in respect o& the reasonable cost o& e5ui1alent
alternati1e accommodation ;not &ull board at a smart hotel<C
Similar pro1isions e3ist in domestic policiesC I& the o)ner ? occupant already has this co1er under
contents insuranceB the 'ody Corporate policy )ill not contributeB e3cept in respect o& any
short&allC
Mort,a,ee Clause
0he usual )ordin! is considerably e3tendedC Instead o& one o)ner or .ort!a!orB and a
.ort!a!ee )e ha1e to pro1ide &or the o)ners o& all the indi1idual unitsB the 'ody Corporate > the
controllin! bodyB and the interests o& 1arious mort!a!eesC 0his results in a much lon!er )ordin!B
althou!h the end result is similar to the usual clauseC
, &urther pro1ision is madeC Under a Hsin!le o)nershipI policyB the Insurance Company )ould
repair or reinstate dama!eC I& a payment is made in lieu o& repairsB the insurer usually consults
)ith the mort!a!eeB since this a&&ects his interest in the propertyC
2ith a sectional title schemeB the interest o& other unit holders must also be consideredC
Unrepaired dama!e to any unit a&&ects the property o& allC 0he proceeds o& the insurance must be
applied to reinstatementC I& &or some reason this cannot be doneB the proceeds o& any claim must
be paid to the mort!a!ee;s<B up to the amount still o)in!C
#wners Clause
0he act or omission o& an indi1idual o)ners a&&ects the insurance on his part o& the property onlyC
0he interests o& the 'ody Corporate are protected to the e3tent that they )ere una)are o& these
circumstancesC
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Office content"
Practice amon! insurers di&&ersB but !enerally o&&ice contents insurance is suitable &or the
contents o& o&&ices and consultin! roomsB but not &or those &ormin! part o& trade premisesC In this
moduleB )e are concerned )ith the &ire perilsB but the "&&ice contents section also includes some
accident and liability co1erC
Pro rata a1era!e appliesC
0here is a simpli&ied list o& &ire perilsB and sprinkler leaka!e is not e3cludedC
4ent co1er is automaticB restricted to the period necessary to make the premises
habitableB and to a ma3imum o& 2# F o& the sum insuredC Co1er a!ainst pre1ention o&
access applies to any premises in the 1icinityB dama!e to )hich pre1ents or limits access
to the o&&ice premisesC
0here are sections to co1er loss or dama!e to documentsB ;,ll risks basis< and increased cost o&
)orkin!C
SASRIA > South African S1ecial Ri"*" In"urance A""ociation
:3cept &or motorB there must al)ays be an underlyin! policy co1erin! the property &or risks other
than riotC Fire insurances are permissible underlyin! policies &or the issue o& S,S4I, co1erC
Lo)er S,S4I, rates apply to residentialB culturalB educationalB reli!ious and medical
occupationB pro1ided that this is per&ectly separated &or &ire insurance purposes &rom any
commercial operationC ;Full details o& the separation re5uired are contained in the
S,S4I, re!ulations<C
2here this separation e3istsB the S,S4I, policy can be issued )ith t)o separate sums
insured and ratesB other)ise the hi!her rate applies o1erallC
I& the underlyin! policy includes &ree rent co1erB the S,S4I, co1er )ill also do soB but
limited to=
o 2# F o& the sum insuredG
o the period needed to make the premises tenantableG and
o property occupied &or residential purposesC
In all other cases the S,S4I, sum insured must be increased by the total amount o&
the rent co1erC
2hen stock declaration conditions applyB 100F deposit premium is char!edB o& )hich a
ma3imum o& 2#F is re&undable on year>end adAustmentC
2here %ay "ne ,1era!e appliesB the total sum insured and ;in brackets< the total
declared 1alue must be sho)n in the S,S4I, couponC
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In"truction"
1: Li"t the three re7uire!ent" for a lo"" to 2e re&arded a" ?fire@:
: EA1lain the difference 2etween "1ontaneou" co!2u"tion5 and a heatin& or dr+in&
1roce"":
$: 0riefl+ "tate what *ind of da!a&e i" co4ered 2+ the !aliciou" da!a&e eAten"ion:
4: Su&&e"t two rea"on" wh+ it i" i!1ortant that in"urer" and inter!ediarie" follow u1
out"tandin& "toc* declaration":
': Show how a total lo"" i" dealt with in ter!" of the 1ro rata condition of a4era&e:
BN"IN#
$2,
#: A !otor traderF" e!1lo+ee dro4e into the e!1lo+erF" +ard too fa"t5 and *noc*ed
down a wall: EA1lain whether the e!1lo+er can clai! under the "1ecial 1eril"
eAten"ion to their fire 1olic+ for the da!a&e to their wall and to their 4ehicle5 if thi"
for!ed 1art of their "toc*:
(: Mo"t of the additional char&e"5 "uch a" architect"F fee"5 !entioned in the clau"e"
and eAten"ion" !u"t 2e 1ro4ided for in the "u! in"ured5 2ut there i" one eAce1tion:
Gi4e the na!e of thi" clau"e:
3: Su&&e"t what t+1e of client would need to ha4e the 6i"1o"al of Sal4a&e clau"e
included in their 1olic+:
,: EA1lain how the calculation of the 1ro4i"ional and refund 1re!iu! for "toc*
declaration 1olicie" under the SASRIA in"urance i" different fro! that under the fire
in"urance 1olic+:

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Module 5
1: Li"t the three re7uire!ent" for a lo"" to 2e re&arded a" ?fire@:
0here must be actual i!nitionB somethin! on &ire that ou!ht not to be on &ireB and an
accidental or &ortuitous causeC Pro1ided that the dama!e is a conse5uence o& &ireB the
actual &ire need not be at the insuredNs o)n premisesC
: EA1lain the difference 2etween "1ontaneou" co!2u"tion5 and a heatin& or dr+in&
1roce"":
Some materials increase in temperature without the application o& an e3ternal heat
sourceB and can catch &ire by themsel1esC 0his is called spontaneous combustionC 7eatin!
or dryin! processes !enerally in1ol1e e3ternal heat sourcesC
$: 0riefl+ "tate what *ind of da!a&e i" co4ered 2+ the !aliciou" da!a&e eAten"ion:
2ill&ul dama!eB other than by the&t or attempted the&tC
4: Su&&e"t two rea"on" wh+ it i" i!1ortant that in"urer" and inter!ediarie" follow u1
out"tandin& "toc* declaration":
I& declarations are not madeB premium is char!ed on the &ull sum insuredC 0he additional
premium may be di&&icult to collectB especially i& there )as a lon! period )ithout
declarationsC SecondlyB the sum insured mi!ht no lon!er be enou!hC 2ithout prompt
declarations this )ill not be detected in time to increase the sum insured and a1oid
a1era!e applyin! to a lossC
': Show how a total lo"" i" dealt with in ter!" of the 1ro rata condition of a4era&e:
For sprinkler leaka!e co1erB it is likely that only one or t)o heads )ill be dama!edB or a
pipe leak at a particular placeC 0he sum insured is the ma3imum amount o& dama!e thatB
in the insuredNs opinionB is likely to be caused by sprinkler leaka!eC 0he premium char!ed
is based on the relationship bet)een the &irst loss sum insured and the &ull 1alue - the
lar!er the premises and the !reater the 1alue o& contentsB the hi!her the chance o& lossC I&
the &ire insurance is &or less than &ull 1alueB the &irst loss limit is reduced in the same
proportionC
First sum insured 3 &irst loss limit
6alue at risk
#: A !otor traderF" e!1lo+ee dro4e into the e!1lo+erF" +ard too fa"t5 and *noc*ed
down a wall: EA1lain whether the e!1lo+er can clai! under the "1ecial 1eril"
eAten"ion to their fire 1olic+ for the da!a&e to their wall and to their 4ehicle5 if thi"
for!ed 1art of their "toc*:
0he employer can claim &or the dama!e to the )allB because the special perils e3tension
co1ers impact by any 1ehicleC %ama!e to the 1ehicle itsel& is speci&ically e3cludedC
(: Mo"t of the additional char&e"5 "uch a" architect"F fee"5 !entioned in the clau"e"
and eAten"ion" !u"t 2e 1ro4ided for in the "u! in"ured5 2ut there i" one eAce1tion:
Gi4e the na!e of thi" clau"e:
Fire e3tin!uishin! char!es clauseC
3: Su&&e"t what t+1e of client would need to ha4e the 6i"1o"al of Sal4a&e clau"e
included in their 1olic+:
.anu&acturers and distributors o& branded !oodsB &or e3ampleB pharmaceuticals and
toiletriesB or hi!h class clothin!B )here sale o& these as sal1a!ed in a dama!ed condition
could harm the manu&acturer8s reputationC
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Module 5 - cont
,: EA1lain how the calculation of the 1ro4i"ional and refund 1re!iu! for "toc*
declaration 1olicie" under the SASRIA in"urance i" different fro! that under the fire
in"urance 1olic+:
0he pro1isional premium &or the stock declaration item on the &ire policy is calculated on
/#F o& the sum insuredB and a ma3imum o& #0F o& this is re&undable in the declaration
adAustmentC
For S,S4I, co1erB the pro1isional premium is based on 100F o& the sum insuredB and a
ma3imum o& 2#F is re&undableC
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Module #< 0u"ine"" Interru1tion
Learnin& Outco!e"
%escribe the purpose o& the 'usiness interruption section o& the .ultimark policyG
Identi&y the relationship bet)een the material dama!e co1er and the interruption
insuranceG
%escribe the operation o& the ,dditions basis and %i&&erence basis and the di&&erent basis
o& calculationG
:3plain the other items and de&initions in the sectionG
4elate S,S4I, co1er to business interruption insuranceC
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Introduction
'usiness InterruptionB also kno)n Conse5uential Loss or Loss o& Pro&its InsuranceB takes o1er
)here the material dama!e policy lea1es o&&C It is easy to see ho) physical property is dama!ed
by the perils insured under a &ire policyB and ho) this is repaired by the operation o& the policyB but
this is not the only problem &acin! a businessC
%urin! repairs and rebuildin!B the premises may need to be closed and temporary premises
rentedC :1en )ithout closureB there can be a loss o& production or salesB iCeC Hreduction in
turno1er IC 0he income &rom the business is lessB pro&it is reduced or disappearsB yet many o& the
costs continue at their usual le1elB and there may e1en be e3tra e3pensesC 'usiness interruption
insurance is desi!ned to pro1ide &or thisC

The Co4er
SubAect to a su&&icient sum insured and indemnity period ;e3plained later<B the policy )ill=
pay &or char!es that continue re!ardless o& reduction in turno1erG
pay net pro&it that )ould other)ise ha1e been earnedG
meet additional costs i& these )ill help the business reco1er more 5uickly and reduce the
lossC
E/ample &
9uiseppe operates a piKKa parlourC Follo)in! a &ireB he can use only one o& his t)o o1ens and
hal& the &loor spaceC Ser1ice su&&ersB and customers start !oin! else)hereC For three months he
sells only hal& the number o& piKKasB until repairs are completed and the business reco1ersC
9uiseppe buys only hal& as much &lour and other in!redientsB and uses less &uelB so these are
sa1in!s or 1ariable char!es that do not need to be insuredC 7e still has to pay his rentB interest
on the bank loan he took out to start the businessB )a!esB ad1ertisin!B and insurance premiumsC
0hese are &i3ed or standin! char!esC 7e also needs his pro&itB &or his o)n li1in! e3pensesC In the
policyB all this is called !ross pro&itG the sum o& the net pro&it and the standin! char!esC
:ach piKKa sold represents one hal& in!redientsB one 5uarter &i3ed o1erheads and one 5uarter net
pro&it iCeC hal& consists o& variable c$ar,esB and hal& is !ross pro&itC 2e can say that the rate o&
!ross pro&it is #0FC 0his is the percenta!e that 9uiseppe loses on e1ery piKKa he cannot
produce and sell as a result o& the &ire dama!eC
Standard turno1er= 10 #00 piKKas at 4 1( each [ 4 1(* 000
0urno1er a&ter &ire= # #00 piKKas at 4 1( each [ 4 ** 000
4eduction in turno1er= [ 4 *0 000
4eduction times rate o& !ross pro&it ;#0F< R 4- ---
9uiseppe has a 1ery simple operationB makin! only one standard itemC In real li&eB )e )ould not
count numbers o& piKKasB but )ould !et the &i!ures )e need &rom the accounts o& the businessC
2ith the basic principle in mindB )e can look at the )ordin! o& the policy sectionC
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6efined E4ent"
Loss &ollo)in! interruption o& or inter&erence )ith the business in conse5uence o& dama!e
occurrin!=
durin! the period o& insurance
at the premises
in respect o& )hich payment has been made or liability admitted under=
;i< the &ire section o& this policy
;ii< the buildin!s combined section o& this policy
;iii< the o&&ice contents section o& this policy
;i1< any other material dama!e insurance co1erin! the interest o& the insuredB
but only in respect o& perils insured under the &ire section hereo& ;hereina&ter termed H%ama!eI<C
For business interruptionB the insured can elect to omit some o& the insured &ire perilsB but cannot
include perils not included in the &ire insuranceC
A business interruption insurer insists on t$ere bein, material dama,e cover in force
because5
1C the insurer is protected by all the terms and conditions o& the material dama!e policy and
these do not ha1e to be repeated in the business interruption co1erC I& the material dama!e is
not co1eredB the business interruption claim &alls a)ay

2C throu!h ha1in! material dama!e co1erB the dama!e can be reinstated promptlyB so reducin!
the period o& interruptionC "ther)iseB the necessary &unds mi!ht not be a1ailableC 0he t)o
policies do not ha1e to be )ith the same insurerB but this is better because there mi!ht
other)ise be a con&lict o& interestC ;, prudent business interruption under)riter )ould )ant to
kno) the e3tent o& the material dama!e co1er and sum insuredB i& this is not )ith his o)n
company<C
S1ecific Condition"
0u"ine"" clo"ed
I& the business )ere )ound upB instead o& continuin!B there )ould be no costs or pro&it and the
policy &alls a)ayC I& instead it )as put into li5uidation or under Audicial mana!ementB this )ould
normally be because o& &inancial problemsC Insurers )ould need to consider &ull details be&ore
continuin!C
In"uredF" re"1on"i2ilitie" in a clai!
0here is the usual re5uirement to do e1erythin! reasonably practicable to reduce the lossB and
the insured is !i1en 0 days a&ter the e3piry o& the indemnity period to submit )ritten details o&
their claimC 0his period may be e3tended at the insurer8s discretionC
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Ite! 1< Gro"" Profit
0here are t)o )ays o& arri1in! at thisC , choice must be made )hen the co1er is taken outC
Addition" 2a"i"
0he net pro&it plus the standin! char!es that )ill not reduce proportionately to reduced
turno1erB as in the piKKa parlour e3ampleC
6ifference 2a"i"
0he sales?turno1er and closin! stock
le""
the openin! stockB purchases and other uninsured costs ;those that )ill reduce in
proportion to turno1er<C In the di&&erence )ordin!B there is no need to mention net pro&itC
I& the &i!ures are correctly e3tracted &rom the insured8s booksB either basis )ill !i1e the same
resultC
E/ample 6
Stock at be!innin! o& year 41 000 Sales 4100 000
;openin! stock<
Purchases 4(0 000 Stock at end o& year 4 1* 000
6ariable char!es 41# 000
;other than purchases<
iCeC uninsured costs
Standin! char!es 420 000
Net pro&it 410 000

R113 --- R113 ---
Addition" 2a"i"< Net Pro&it \ Standin! Char!es [ 4 0 000 9ross Pro&it
6ifference 2a"i"< Sales \ closin! stock 411* 000
le""
"penin! stockB purchases and
Uninsured costs
41 000 \ 4(0 000 \ 41# 000 4 ** 000
[ 4 0 000 9ross Pro&it
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Ite! < Gro"" Rental"
0he business mi!ht not ha1e a turno1er &i!ureB but be a property o)nin! company deri1in! its
income &rom rentC
Ite! $< Re4enue
Some businesses deri1e their income &rom pro1idin! ser1icesB rather than &rom tradeC
Increa"e in co"t of wor*in&
:ach o& the abo1e items also pro1ides &or e3tra e3penses incurred solely in order to a1oid or
lessen the reduction in turno1erB pro1ided that these e3penses are not more than the reduction
they a1oidC
In 9uiseppe8s e3ampleB suppose that he persuades a relati1e to produce piKKas at home )hich
he then sells at his shopC 7e supplies the in!redientsB and pays 4# each &or labourC :3tra
transport costs a1era!e 41 per piKKaC In this )ayB 1 #00 e3tra piKKas are made and soldB and the
&i!ures in e3ample one chan!eC
E/ample 7

Standard turno1er 10 #00 Z 41( [ 4 1(* 000
0urno1er a&ter &ire / 000 Z 41( [ 4 112 000
0he reduction in turno1er is no) 4 #( 000
.ultiplied by the rate o& !ross pro&itB #0F [ 4 2* 000
,dd increased cost o& )orkin! ;1 #00 3 4 (< 4 $ 000
0he 1 #00 e3tra piKKas )ere sold &or 424 000C I& the rate o& !ross pro&it is applied to thisB )e !et
412 000B so there is clearly a sa1in!C
0he policy pays a total o& R $( ---
Ite! 4< Additional Increa"e in Co"t of Bor*in&
0his is a separateB optional item )ith its o)n sum insuredB not subAect to a1era!eC It is &or cases
)here the indemnity payable in respect o& increase in cost o& )orkin! )ould not be enou!h to
maintain the operation o& the businessC 0he indemnity is payable in addition to the main itemB
9ross pro&it and increased cost o& )orkin!C
For e3ampleB ne)spaper proprietors must continue printin! e1en i& this is done else)here and at
a lossB because they are committed to their ad1ertisers and must maintain their circulation
&i!uresC 'akeries mi!ht )ant to continue production so as not to lose re!ular ordersC
BN"IN#
$2*
0he e3penditure must be=
not reco1erable under other items
&or the purpose o& maintainin! the normal operation o& the business
reasonableB and )ith the consent o& the insurerC
;0here can be rare circumstances )here an enterprise needs co1er &or additional increase in cost
o& )orkin! onl+C 0his is a special case that need not )orry us in this course<C

Ite! '< Ba&e" .9u!2er of Bee*" 0a"i"/
0his pro1ides &or a separate item co1erin! one or more )eek8s actual )a!es o& employees )hose
ser1ices cannot be used at allB &ollo)in! the dama!eB and a proportionate share o& )a!es &or
employees )ho cannot be &ully utilisedC , hi!her rate is usually char!ed &or this itemB because it
is the &irst and most likely to be used in the case o& a claimC
In the pastB salaries re&erred to permanent sta&&B usually paid monthlyB in administrati1e or
e3ecuti1e positionsC 0hey )ere considered essential to the runnin! o& the businessB so salaries
)ere included in the !ross pro&it itemC
2a!es )ere re!arded as a 1ariable char!eB because labourers could be hired or &iredB lar!ely as
neededC T$is is no lon,er t$e case"
2a!e earners may be more important to the ordinary runnin! o& the businessB than salary
earnersB because administrati1e &unctions can be out>sourcedC
"&tenB modern &actory production lines call &or the same number o& )ork stationsB )hether
)orkin! at 100F capacity or lessC StoresB canteens and maintenance departments still
need to be mannedC
Labour le!islation and trade unions make it more di&&icult and e3pensi1e to lay o&& )orkersC
In many businessesB and especially in smaller concernsB there is a special relationship
bet)een employer and employeeB and dismissals arise only )hen &orced by a maAor
stoppa!eC
In many casesB and especially &or small businessesB it may be best to treat all )a!es as a
standin! char!eC
Ite! #< )ine" and Penaltie" for 0reach of Contract
%ama!e could result in the non>completion or late completion o& ordersB and the insured may
become le!ally liable to pay &ines and penalties under contractC
BN"IN#
$2+
6efinition"
Inde!nit+ 1eriod
0he period be!innin! )ith the commencement o& the %ama!e and endin! not later than the
number o& months stated in the scheduleB durin! )hich the results o& the business are a&&ectedC
0he insured must decide ho) lon! it )ill take &or the business to &ully reco1er &rom e1en the most
serious &ire or other lossC 0his could be anythin! &rom a &e) months to se1eral yearsB and is o&ten
underestimatedC 0here are delays in the supply o& machineryB and it takes time to re!ain lost
customersC
5emember that the indemnit% period is separate from the period of insuran!e. The original
damage must o!!ur during the !urren!% of the poli!%# but the results of the business !an be
affe!ted for a long time afterward# even if the poli!% has sin!e been dis!ontinued.
'usiness interruption is rated on the a1era!e rateB &or &ire and other insured perilsB that applies to
the correspondin! material dama!e insuranceC 0his is called the base rateC
For indemnity periods up to 12 months the sum insured is the annual turno1er multiplied by the
rate o& !ross pro&itC 0his is the limit o& the insurer8s e3posureB and the premium is calculated on
this &i!ureC
Suppose no) that )e ha1e a 1ery short indemnity period o& monthsC It is unlikely that the )hole
year8s turno1er )ill be made or lost in monthsB so it )ould be un&air to char!e the &ull base rateC
It )ould also be unrealistic to char!e only a 5uarter o& the premiumC I& dama!e occurred durin! a
1ery busy timeB more than a 5uarter o& the year8s turno1er )ould be a&&ectedC
,ccordin!lyB rates &or short indemnity periods are ;e&&ecti1ely< loadedB )hile those &or lon!er
periods are discountedC Loss o& turno1er )ill be more se1ere in the initial )eeks a&ter dama!eB
but the position should !radually impro1e a&ter)ardsC
For these reasonsB a percenta!e o& the base rate is applied accordin! to the indemnity period
chosenC Insurers each ha1e their o)n scalesB but the &ollo)in! are possible e3amplesC
months indemnity #0 F o& the base rate
( months (0 F
$ months *0 F
12 months $0 F
2hen the indemnity period is more than 12 months the sum insured is a multiple o& the annual
&i!ureB iCeC &or 1* months it )ill be one and a hal& times the annual amountB &or 24 months t)iceB
and so onC
7o)e1erB the rate applied is proportionately less > one mi!ht char!e about /0 F o& the base rate
&or an 1*>month indemnity periodC
BN"IN#
$%,
Turno4er
H.oney paid or payable to the insured &or !oods sold and deli1ered and &or ser1ices rendered in
the course o& the business at the premisesIC 9oods sold but not yet deli1ered do not a&&ect the
turno1er &i!ureC
Re4enue
H.oney paid or payable &or !oods sold and ser1ices rendered in the course o& the business at the
premisesIC For some operationsB this is more suitable than the turno1er basisC
Gro"" rental"
H.oney paid or payable to the insured by tenants in respect o& rental o& the premises and &or
ser1ices renderedIC 0his !i1es )ider co1er than a correspondin! insurance under the material
dama!e sectionC I& the indemnity period is su&&icientB co1er continues until the rentals reach their
pre1ious le1el iCeC the premises are not only tenantableB but are re>letC
Gro"" 1rofit .6ifference 2a"i"/
2e ha1e e3plained ho) this is calculatedC
%nin"ured co"t" .6ifference 2a"i"/
0hese should be care&ully consideredC Items not listed as uninsured are automatically includedC
For e3ampleB i& )a!es are not listed as an uninsured costB they are insuredB and the insured may
not ha1e allo)ed &or this in his !ross pro&it &i!ureC I& the )hole )a!e roll is not to be insuredB the
uninsured costs could ha1e an itemB sayB H/0F o& the annual )a!e rollIC "nly the remainin! 0F
)ill be insured as !ross pro&itC 0here are other itemsB like electricity and )aterB that diminish to
some e3tentB but not in proportion to the turno1erC
Gro"" 1rofit .Addition" 2a"i"/
0his is not the same as the H!ross pro&itI that mi!ht be sho)n in the balance sheet o& a businessC
For the purposes o& the policyB !ross pro&it is net pro&it plus insured standin! char!es ;or standin!
char!es less net loss<C
9et 1rofit
Net tradin! pro&it ;e3cludin! items o& a capital nature< a&ter pro1ision &or standin! char!esB but
be&ore pro&its ta3C
BN"IN#
$%$
In"ured "tandin& char&e" .Addition" 2a"i"/
0he popular !eneralisation H,ll standin! char!es o& the insured8s businessI is not really in the
insured8s best interestsB because neither the insurerB the insuredB or the insured8s accountantB
really kno)s )hat is meant to be included and )hat is notC Incorrect !ross pro&it declarations and
claims disputes can ariseC
0he standin! char!esB includin! those that are only semi>1ariable ;like the electricity char!es
mentioned abo1e< should be care&ully considered and indi1idually listedC
Standard turno4er .Addition" 2a"i"/
2e compare the turno1er?re1enue?!ross rentals a&ter the dama!e )ith the results &or the
correspondin! period in the t)el1e months immediately be&ore the date o& the dama!e ;not the
last &inancial year<C .ost businesses ha1e their busier and 5uieter periodsB so )e must compare
Happles )ith apples8C
Annual turno4er
0he &i!ure &or the ;)hole< t)el1e months immediately be&ore the date o& the dama!eC
Rate of &ro"" 1rofit
0he rate o& !ross pro&it earned on the turno1er durin! the &inancial year immediately be&ore the
date o& the dama!eC For either the di&&erence basis or the additions basisB the sum insured on
!ross pro&it is the rate o& !ross pro&it times the turno1er durin! the past &inancial yearC In our
ori!inal e3ampleB i& 9uiseppe8s turno1er )as 400 000 a yearB and his rate o& !ross pro&it #0FB
his sum insured should be 41#0 000C
,1era!e is applied=
9ross pro&it sum insured 3 loss
4ate o& !ross pro&it 3 annual turno1er
Pro4i"ion for ad8u"t!ent
0he Standard turno1erB ,nnual turno1erB and 4ate o& !ross pro&itB can all be adAusted in the actual
loss settlementB to pro1ide &or up)ard and do)n)ard trends in the business and other special
circumstancesB be&ore or a&ter the %ama!eB that )ould ha1e a&&ected the results o& the businessB
so that the &inal result is as close as possible to )hat it )ould ha1e been i& the %ama!e had not
occurredC
Me!o
NormallyB turno1er is deri1ed &rom business at the premisesC %urin! the indemnity periodB the
insured mi!ht make temporary use o& other premisesB or someone could help him by sellin!
!oods on his behal&C 0his )ould !o to)ard reducin! the lossC
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EAten"ion" and Clau"e"
Accountant" clau"e
It is up to the insured to pro1ide proo& o& his claimC 0his clause pro1ides that &i!ures produced
and certi&ied by the insured8s o)n auditors or pro&essional accountants )ill be accepted as prima
&acie e1idenceB )ithout outsiders !oin! throu!h the insured8s business booksC
Accu!ulated "toc*" clau"e
0he insured has a duty to miti!ate the lossC "ne )ay o& doin! this mi!ht be by usin! up
accumulated stockB to temporarily maintain turno1er durin! the indemnity periodC 0his clause
ensures that the insured does not e1entually lose by doin! thisC
6e1art!ental clau"e
4ates o& !ross pro&it?rentals?re1enue may 1ary bet)een di&&erent departments and
branches o& a businessC I& the independent tradin! results can be ascertainedB a more
accurate indemnity is achie1edC
Follo)in! dama!eB it then becomes simpler to e3tract the &i!uresB because only the
branches or departments a&&ected need to be e3aminedC
6e1o"it 1re!iu! clau"e
0he insuredB at the be!innin! o& the yearB does not kno) )hat the results o& the business )ill be
at the end o& the year > this can only be an estimateC 0he premium &or !ross
pro&it?re1enue?rentals is calculated on /#F o& the sum insured and there can be an additional or
re&und o& BF o& thisB based on the year>end declarationC 0he insurer and the intermediary
should make sure this declaration is actually madeB other)ise they risk losin! premium and
commissionB and the rene)al )ill be on out o& date &i!uresC
Out1ut .alternati4e 2a"i"/ clau"e
,t the option o& the insuredB output ;the sale or trans&er 1alue o& !oods manu&actured or
processed< can be used instead o& turno1erC 0his is sometimes used )here there is a 1ery short
indemnity periodB or the nature o& the product suits thisC
Sal4a&e "ale clau"e
Sal1a!e sales mainly bene&it the material dama!e insurerB because they reduce the amount o&
the lossC 0he clause allo)s the turno1er &rom the sale to be disre!ardedB pro1ided that the !ross
pro&it earned &rom the sale is deducted &rom the &inal claim settlementC
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$%%
EAten"ion" to other 1re!i"e"
,part &rom its o)n premisesB the business depends on supplies and ser1ices at other premisesB
not under its controlC It mi!ht also ha1e !oods on the mo1eC %ama!e ;as de&ined in the policy< at
these premises is co1ered in the same )ay as i& it resulted &rom loss or dama!e used by the
insured at the premisesC
;a< S1ecified "u11lier"L "u2contractor" .if "tated in the "chedule to 2e included/
0his is not an automatic e3tensionC I& it is re5uested by the insuredB the suppliers?contractors
must be named in the policyB to!ether )ith the speci&ic percenta!e dependencyC 0hey mi!ht
be any)here in the )orldB and the insurer needs to &i3 a rate accordin! to the risk in1ol1edB
and the e3tent to )hich the insured8s business depends on each supplierC

;b< %n"1ecified "u11lier" .if "tated in the "chedule to 2e included/
0his is &or cases )here there are a number o& small suppliersB and is limited to suppliers in
the !eo!raphic area mentioned laterC ;'asicallyB 4S, and nei!hbourin! territories<C 0he
percenta!e dependency must be statedC
;c< Stora&e tran"it and 4ehicle
Property stored at premises else)hereB or in transit by airB roadB railB or inland )ater)ay or
bein! the insured8s motor 1ehiclesC In thisB and in almost all o& the &ollo)in! e3tensionsB
remember that %ama!e has to be by a insured perilB &or e3ampleB loss due to a 1ehicle and
!oods bein! s)ept a)ay in a &lood is co1eredB but not hi>Aackin!C
;d< Contract "ite"
,ny situation not actually occupied by the insured but )here they are carryin! out a contractC
;e< Pre4ention of acce""
Property )ithin a 10 km radius o& the insured8s premisesB destruction or dama!e to )hich
hinders or pre1ents the use o&B or access toB the insured8s premisesC , &ire can result in the
street bein! temporarily closedC Ima!ine the e&&ect o& this on a retailerB on a busy shoppin!
dayC , brid!e or road can be )ashed a)ay by a &loodC
;&< Pre4ention of acce"" > eAtended co4er .if "tated in the "chedule to 2e co4ered/
0his is similar but e3tends the co1er to property )ithin a 10 km radius o& other premisesB
such as those o& suppliersB or contract sitesC
;!< Additional 1re!i"e"
0his !i1es temporary co1er &or premises that are ne)ly added or occupiedB subAect to
noti&ication to the insurer as soon as reasonably practicableB and payment o& additional
premium i& re5uiredC
;h< Cu"to!er" .if "tated in the "chedule to 2e co4ered/
0he insured mi!ht depend hea1ily on sales to one or more lar!e consumersC I& this demand
is interrupted because o& %ama!e at the customer8s premisesB the insured8s turno1er )ill
su&&erC 0he customer;s< and the percenta!e dependency must be speci&iedC
;i< Pu2lic utilitie" > in"ured 1eril" onl+ .if "tated in the "chedule to 2e included/
Supplies o& )aterB !asB and electricity are essential to the operation o& most businessesC
Interruption o& the insured8s business as a result o& %ama!e ;by insured perils< to the
property o& the supply authority is co1ered as i& it had occurred at the insured8s o)n
premisesC
BN"IN#
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;A< Pu2lic teleco!!unication" > in"ured 1eril" onl+ .if "tated in the "chedule to 2e
included/
In the same )ayB businesses depend on telephones and computer links 1ia the
telecommunication net)orkC
Pu2lic teleco!!unication" > eAtended co4er .if "tated in the "chedule to 2e included/:
,ll risks o& dama!eB but e3cludin!=
drou!ht
a &ault in the installation at the insured8s premises
any authority le!ally )ithholdin! the &acility
riotB strikeB ci1il commotion and )ar
I& the interruption or inter&erence is due to electrical?electronic or mechanical breakdo)nB there is
no co1er unless this e3tends &or more than 24 hoursC
Pu2lic utilitie" > eAtended co4er .if "tated in the "chedule to 2e included/

,ll risks o& loss or dama!eB but e3cludin!=
drou!ht
pollution o& )ater
shorta!e o& &uel or )ater
a &ault in the installation at the insured8s premises
any authority le!ally )ithholdin! the &acility
riotB strikeB ci1il commotion and )ar
I& the interruption or inter&erence is due to electrical?electronic or mechanical breakdo)nB there is
no co1er unless this e3tends &or more than 24 hoursC
Geo&ra1hical Li!it"
;a< Speci&ied suppliers ;)here the supplier?sub contractor is speci&iedB and the insurers can
en5uire )here this business is situated<B )orld)ideC
;b< ,dditions to premisesB 4S, and Namibia
;c< ,ll othersB 4S,B NamibiaB 'ots)anaB LesothoB S)aKilandB Yimbab)eB and .ala)iC
Accidental da!a&e .if "tated in the "chedule to 2e included/
0his clause e3tends the Haccidental dama!eH section o& the .ultimark to include business
interruptionC ;,ccidental dama!e co1er is desi!ned &or physical dama!e &or )hich insurance is
not other)ise a1ailableB other than under business all risks<C
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SASRIA
S,S4I, co1er is not a1ailable &or net pro&itC Co1er can be taken based on either the
Hdi&&erenceI or the HadditionsI basisB but co1ers only Standin! Char!es or 2orkin!
:3pensesB iCeC the sum insured &or S,S4I, )ill be less than that &or business interruptionC
0he standin! char!es must be listedC ; I& the %i&&erence basis is used &or the underlyin!
policyB and all )orkin! e3penses are insuredB the uninsured )orkin! e3penses on the
S,S4I, coupon can be sho)n as HnoneI ;apart &rom 100F o& purchases less discounts
recei1ed<C
Unless there are more than 20 premisesB the &ull street address o& each situation must be
statedC
No e3tensions o& co1er are allo)edB other than claims preparation costsC 0hese are
incorporated in the )ordin! o& the S,S4I, speci&ications and are limited to=
o additional &ees paid to the insured8s usual auditors
o additional )a!es?salaries to o)n employees
o cost o& materials usedC
0here is no separate H)a!esI itemC I& salaries?)a!es are to be co1eredB this must be part
o& the o1erall sum insuredC
0he minimum indemnity period allo)ed is 12 monthsC
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In"truction"
1: Gi4e the three !ain o28ecti4e" of a 2u"ine"" interru1tion co4er:
: EA1lain wh+ there are no ?"1ecific eAce1tion"@ in the 0u"ine"" interru1tion "ection
of the 1olic+5 and a 4er+ "hort li"t of ?defined e4ent"@:
$: State whether the !aterial da!a&e in"urance and 2u"ine"" interru1tion in"urance
!u"t alwa+" 2e with the "a!e in"urer:
4: 6i"tin&ui"h 2etween a Standin, c$ar,e and an Uninsured cost"
'" Bhat i" !eant 2+ the indemnity period8
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#: 6efine standard turnover"
(: 6efine annual turnover"
3: Gi4e the for!ula for the a11lication of a4era&e in a 2u"ine"" interru1tion 1olic+:
,: 6i"tin&ui"h 2etween provision for ad4ustment .al"o called the ad8u"t!ent clau"e/5
and the deposit premium clause"
1-: EA1lain whether or not SASRIA co4er i" a4aila2le for &ro"" 1rofit:
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Module 6
1: Gi4e the three !ain o28ecti4e" of a 2u"ine"" interru1tion co4er:
Pay &or char!es that continue re!ardless o& reduction in turno1erC
Pay net pro&it that )ould other)ise ha1e been earnedC
.eet additional costs to allo) the business to reco1er more 5uicklyC
: EA1lain wh+ there are no ?"1ecific eAce1tion"@ in the 0u"ine"" interru1tion "ection
of the 1olic+5 and a 4er+ "hort li"t of ?defined e4ent"@:
I& the material dama!e is not co1eredB the business interruption co1er &alls a)ay ;unless
the material dama!e )as e3cluded only because o& &allin! )ithin a policy e3cess<C 0he
insurer is protected by all the terms and conditions o& the material dama!e policyB so these
do not ha1e to be repeatedC
$: State whether the !aterial da!a&e in"urance and 2u"ine"" interru1tion in"urance
!u"t alwa+" 2e with the "a!e in"urer:
0he material dama!e and business interruption need not be )ith the same insurerB but this
is pre&erableC , prudent under)riter )ill need details o& the material dama!e co1erB to be
sure that &unds )ill be a1ailable to reinstate the physical propertyC 0here could also be a
con&lict o& interest bet)een the t)o insurersC 0he business interruption insurer )ants the
property reinstated as soon as possibleC Speed is less important to the material dama!e
under)riterC
4: 6i"tin&ui"h 2etween a Standin, c$ar,e and an Uninsured cost"
Standin! char!es are those that )ill not diminish in proportion to reduction in turno1erC In
the ,dditions basis they are listed in the schedule and are added to the net pro&itB to
arri1e at the sum insuredC
Uninsured costs are those that )ill reduce proportionatelyC In the %i&&erence basisB the
sum insured is the turno1er less the uninsured costsB ;also listed<C Sometimes these are
called uninsured )orkin! e3pensesG the e&&ect is the sameC
'" Bhat i" !eant 2+ the indemnity period8
0he indemnity period is the period be!innin! )ith the commencement o& the %ama!e and
endin! not later than the ;stated< number o& months therea&terB durin! )hich the results o&
the business are a&&ected in conse5uence o& the %ama!eC It is the ma3imum period the
insured estimates )ill be necessary &or the business to &ully reco1erC
#: 6efine standard turnover"
0he Standard turno1er is the turno1er durin! that period in the t)el1e months immediately
be&ore the date o& the %ama!e that corresponds )ith the indemnity periodC
(: 6efine annual turnover"
0he ,nnual turno1er is the turno1er durin! the t)el1e months immediately be&ore the date
o& the dama!eC
3: Gi4e the for!ula for the a11lication of a4era&e in a 2u"ine"" interru1tion 1olic+:
,1era!e is applied= 9ross pro&it sum insured 3 loss
4ate o& !ross pro&it 3 annual turno1er
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Module 6 - cont
,: 6i"tin&ui"h 2etween provision for ad4ustment .al"o called the ad8u"t!ent clau"e/5
and the deposit premium clause"
Pro1ision &or adAustmentC In the loss settlementB the Standard turno1erB ,nnual turno1erB
and 4ate o& !ross pro&it can all be adAusted to pro1ide &or trends and special circumstances
that )ould ha1e a&&ected the results o& the businessB had the %ama!e not occurredB &or
e3ampleB turno1er mi!ht be &ound to be increasin! at an a1era!e rate o& 1F per monthB and
this )ill be taken into accountC
%eposit premiumC 0he sum insured at the be!innin! o& each period o& insurance can only
be a reasonable estimate o& the &inal resultC So that the insured is not penalised by o1er
or under insuranceB the premium &or the !ross pro&it?re1enue? rentals item is calculated on
/#F o& the sum insuredB and CF o& this is payable or re&undable based on the
insured8s year>end declarationC
1-: EA1lain whether or not SASRIA co4er i" a4aila2le for &ro"" 1rofit:
S,S4I, co1ers only Standin! char!es or 2orkin! e3pensesB )ithout any net pro&it
elementC
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Module (< Princi1le" of Lia2ilit+ In"urance
Learnin& Outco!e"
%istin!uish bet)een liability arisin! in contractB in delictB and by StatuteG
4estate the main le!al principles !o1ernin! liabilityG
List and brie&ly e3plain some o& the main de&ences to an action in delictG
Identi&y the purpose o& liability insuranceC
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Introduction
:1eryoneB and e1ery businessB runs the risk o& incurrin! le!al liability due to their actions or
omissionsB or de&ects in the !oods suppliedC .embers o& the public 1isit the &irm8s premisesB and
the &irmB throu!h its employeesB may be on the premises o& othersC :ach business is open to its
o)n special types o& riskC In ,mericaB .ac %onald8s &ast &ood chain paid substantial dama!es to
a customer )ho spilt hot co&&ee in her lapB and they no) print a )arnin! about hot li5uidsB on their
cupsC
2e ha1e not yet reached such e3tremesB but the courts tend to be sympathetic to)ard the inAured
partyB court a)ards are increasin!B and our public is becomin! more conscious o& le!al ri!htsC
:1en )here a potential claim turns out to ha1e no chance o& successB the insurer may need to
carry out preliminary in1esti!ations into )hat happenedB and !et le!al ad1iceC 0his is not a le!al
courseB but you need to understand a &e) o& the principles so that you )ill kno) )hat the policy
co1ersC
Le&al Princi1le"
0he policy co1ers amounts &or )hich you are le!ally liableC ;It does not matter )hether or
not you &eel you are responsible<C
Eou are le!ally liable to another partyG you cannot be liable to yoursel&C
Liability arises out o& contractB by statuteB or in delictC
:mployers can be held liable &or the actions o& their employees in the scope and course o&
their employmentC 0his is &urther e3plained belo)C
Contract
Parties are &ree to enter into contracts as lon! as these are not ille!alB or a!ainst public policy and
!ood moralsC For e3ampleB )e cannot issue an insurance contract indemni&yin! someone a!ainst
the risk o& speedin! &inesC
0o a lar!e e3tentB the parties to the contract can a!ree on their o)n termsB and there can be
contractual liabilities e3ceedin! those imposed by the common la)C For this reasonB liability
policies usually e3clude liability under contractB unless it )ould ha1e arisen any)ayB under
common la)C
Statute
Some duties and penalties are imposed by statuteB eC!C under the "ccupational 7ealth and
Sa&ety ,ctC Failure to comply results in a criminal char!eC 2e can co1er de&ence costs a!ainst
thisB but i& the de&ence does not succeed )e cannot indemni&y the insured a!ainst the &ines and
penalties laid do)n by the StateC Sometimes the statutory remedy and penalty is the only oneC
In other casesB a statutory o&&ence also pro1ides !rounds &or a separate ci1il action under delictC
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6elict
2e all ha1e a !eneral le!al duty not to harm the person or property o& others by our action or
ne!lectC 0he )ron!ed party ;plainti&&< brin!s a ci1il action a!ainst the party ;de&endant< that
caused his loss or inAuryC 0o succeed in thisB the plainti&& must be able to sho) that there )as=
a )ron!&ul act or omission ;intentional or ne!li!ent< by the de&endant
a link ;causal ne3us< bet)een this and the loss or dama!e
a loss ;harm< that can be e3pressed in terms o& money ;patrimonial loss<C
0he court must then consider )hether or not the harm that resulted could reasonably ha1e been
&oreseen and a1oided by a normally prudent person in the position o& the de&endantC ;0he
&orseeability test and the reasonable man test<C
I& it &inds the de&endant responsibleB the court a)ards the plainti&& compensation ;dama!es< to be
paid by the de&endantC H%ama!esI include conse5uential lossC
"&ten there is no need to !o to courtG settlement is ne!otiated by the parties concernedC
Vicariou" lia2ilit+
UsuallyB one person cannot be held liable &or the actions o& anotherB but an employer can be held
liable &or the actions o& employeesB arisin! out o& the scope and course o& their employmentC 0his
e1en includes actions &orbidden by the employerB i& they are still connected to the !eneral
character o& the employee8s )orkC
6efence"
I& any o& the abo1e elements ;an act or omission that can be directly linked to a loss or harm<B can
be sho)n to be missin!B there is no case to ans)erC For e3ampleB the de&endant may be able to
pro1e that there no ne!li!enceB or sho) that the act )as actually committed by some other
person alto!etherC
0he &ollo)in! are some other possible &orms o& de&ence=
1C Contractual eAclu"ion"
Contracts usually attempt to e3clude some &orms o& liabilityC 2e ha1e all seen notices at
entrances sayin! H1ehicles are parked at o)ner8s riskIB Hs)immin! is dan!erousIB Hpa1in!
slippery )hen )etIB or there may be clauses in the a!reements )e si!nC
0hese HdisclaimersI do not )ork in e1ery caseB because &urther precautions may be neededC
2C A11ortion!ent of da!a&e"
0he plainti&& mi!ht be partially to blame &or the accidentC 0his )ill reduce the amount o& the
dama!es a)arded a!ainst the de&endantC
C Ca1acit+
ChildrenB especially those under se1en years oldB are re!arded by the la) as unable to
understand the conse5uences o& their actsC 0he same mi!ht apply to someone )ho is
mentally de&icientC
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4C Pri4ate defence
Eou may de&end yoursel&B your &amily and propertyC 0his must be reasonable in the
circumstancesC
#C 9ece""it+
0o pre1ent harmC ,s an e3ampleB , breaks do)n the door o& '8s burnin! house to rescue CB
trapped insideC
(C Ine4ita2le accident5 and Act of God .4i" !a8or/
0he accident or loss could not ha1e been pre1ented by any reasonable precautionsC
/C Con"ent
0he le!al term is volenti non fit in>uria > Ha )illin! person is not harmedIC 0he courts )ill not
easily a!ree that a person consented to harm or the risk o& harmB you must be able to sho)
that this )as understood and a!reed toC
The Pur1o"e of Lia2ilit+ In"urance
Liability insurance is meant to indemni&y the insured a!ainst ci1il claims arisin! &rom the
unintended or une3pected conse5uences o& their actions ;or ne!lect<B to!ether )ith the
associated le!al char!es and e3pensesC 0his )ill be &urther e3plained )hen )e look at the policy
)ordin!C
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In"truction"
1: A wind "tor! 2lew the roof off a car1ort at +our hou"e: It landed on +our
nei&h2ourF" car and da!a&ed it: Can +our nei&h2our clai! a&ain"t +ouC
2. Nou and +our nei&h2our ha4e alwa+" 2een 4er+ &ood friend"5 and +ou feel
re"1on"i2le for the da!a&e to hi" car: Bhat can +ou do in the"e circu!"tance"C
$: 6efine what i" !eant 2+ the ter! ?da!a&e"@:
4: EA1lain whether lia2ilit+ 1olicie" include lia2ilit+ a""u!ed in ter!" of a contract:
': Su&&e"t how the ter!" of a contract 2etween the 1artie" !i&ht affect the lia2ilit+
co4er:
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#: State whether lia2ilit+ in"urance ha" to do with ci4il char&e"5 or with cri!inal one":
(: E""o1 i" a "ale"!an wor*in& for co!!i""ion: Ke "li11ed on a 1atch of oil at the
1etrol "tation5 2ro*e hi" hi15 and wa" una2le to dri4e hi" car or attend to hi"
2u"ine"" for "iA wee*": EA1lain whether he can clai! a&ain"t the 1etrol "tation for<
(:1 !edical eA1en"e"
(: lo"" of inco!e:
(:$ EA1lain what te"t" the court would a11l+5 in con"iderin& E""o1F" clai!:
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Module 7
1: A wind "tor! 2lew the roof off a car1ort at +our hou"e: It landed on +our
nei&h2ourF" car and da!a&ed it: Can +our nei&h2our clai! a&ain"t +ouC
Unless it can be sho)n that the roo& )as loose and you kne) about thisB it )ill be di&&icult
to pro1e ne!li!enceC ProbablyB this is an Huna1oidable accidentIC ,n ad1anta!e o& bein!
insured is that the insurer )ill undertake the de&ence o& the claimC
2. Nou and +our nei&h2our ha4e alwa+" 2een 4er+ &ood friend"5 and +ou feel
re"1on"i2le for the da!a&e to hi" car: Bhat can +ou do in the"e circu!"tance"C
Eou could come to an arran!ement )ith the nei!hbour as a !ood)ill !estureC 0his )ould
be an e3ample o& your acceptin! liability by a!reementB and your insurers )ill not payC
0hey should be in&ormed o& your intentionB so that their position is not preAudicedC
$: 6efine what i" !eant 2+ the ter! ?da!a&e"@:
H%ama!esI is the &inancial compensation the court a)ards the plainti&&B to be paid by the
de&endantC 0his includes conse5uential loss &lo)in! &rom the )ron!C
4: EA1lain whether lia2ilit+ 1olicie" include lia2ilit+ a""u!ed in ter!" of a contract:
Liability policies usually e3clude responsibilities assumed under contractB unless they
)ould ha1e applied e1en )ithout the contractC
': Su&&e"t how the ter!" of a contract 2etween the 1artie" !i&ht affect the lia2ilit+
co4er:
, contract mi!ht contain e3clusions ;disclaimers< that are a de&ence a!ainst the liability
claimC
#: State whether lia2ilit+ in"urance ha" to do with ci4il char&e"5 or with cri!inal one":
Liability insurance is mainly concerned )ith claims in delictC 0hese are ci1il claimsC
(: E""o1 i" a "ale"!an wor*in& for co!!i""ion: Ke "li11ed on a 1atch of oil at the
1etrol "tation5 2ro*e hi" hi15 and wa" una2le to dri4e hi" car or attend to hi"
2u"ine"" for "iA wee*": EA1lain whether he can clai! a&ain"t the 1etrol "tation for<
(:1 !edical eA1en"e"
0he petrol station employees &ailed to clean up the oil spill or )arn o& itC 0his )as the
direct cause o& :ssop8s inAuryB so he can claim the cost o& medical treatmentC
(: lo"" of inco!e
0he loss o& earnin!s is a conse5uence o& the accidentB and this also &orms part o& the
claimC
(:$: EA1lain what te"t" the court would a11l+5 in con"iderin& E""o1F" clai!:
The fore"eea2ilit+ te"tC 2as the oil spill in a place )here members o& the public mi!ht
be e3pected to slip on itS
The rea"ona2le !an te"t: 2ould a reasonably prudent person ha1e done somethin! to
remo1e the dan!erS
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Module 3< Other )or!" of Lia2ilit+ Co4er
Learnin& Outco!e"
State the purpose and e&&ect o& the other &orms o& liability co1er described hereG
Indicate the relationship bet)een these and the principles and co1erC
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Introduction
No) that you kno) the main principles and ha1e studied the !eneral public liability )ordin!B the
liability co1er pro1ided by other sections o& the .ultimark )ordin!B is easily e3plainedC 0here are
also some specialist &orms o& co1er not pro1ided by .ultimarkB and you should ha1e an idea o&
theseC
0uildin&" Co!2ined Section
'ecause this section co1ers buildin!sB it has a liability sub>section co1erin! liabilities inB onB or
about the property insuredB and arisin! &rom the o)nership thereo&B up to a limit o& 41 000 000C
0he o)ner o& a buildin! and the land on )hich it stands has a responsibility to maintain it in a
reasonably sa&e conditionC Claims commonly arise &rom de&ects such as &aulty stair)ays and
railin!sB or people slippin! and &allin! in the passa!esB but there could also be dama!e to other
peoples8 propertyC ;0he relationship )ith tenants depends on the terms o& the lease a!reementB
but this does not apply to 1isitors and their property<C
,n insured )hose only business is the o)nership o& a buildin! insured under the combined
section )ill not need a !eneral public liability co1erB unless it is &elt that the 41m limit is not
enou!hC
0he .ultimark policy has a pro1ision statin! that the insurers )ill not be liable &or the same
happenin! under more than one section o& the policyC 0his means that the indemnity limit under
'uildin!s combined and that under a public liability sectionB )ould not be cumulati1eC
Office Content" Section
0here are special sub>sections a1ailable to co1er loss or dama!e to documentsB the insured8s
o)n or belon!in! to clientsB at the o&&iceB and le!al liability as a direct conse5uence o& thisC
Liability under contract is e3cludedB so the co1er is a!ainst liability arisin! in delictC
People entrusted )ith temporary possession o& the property o& others are liable to compensate
the o)ner &or loss or dama!e to the propertyC 0hey can a1oid liability i& they can pro1e that they
took all reasonable care in the circumstancesB and the dama!e occurred in spite o& thisC
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E!1lo+erF" Lia2ilit+ Section
Under the pre1ious 2orkmen8s Compensation ,ctB H)orkmenI )ere de&ined as those earnin! less
than a speci&ied annual rateC 0hese employees could claim compensation &or occupational
inAuries and illness &rom the 2orkmen8s Compensation FundB so )ere not allo)ed to sue their
employerC
0he :mployers8 liability section pro1ided co1er on a claims made basis &or liability &or
occupational inAury to employees )ho )ere non>)orkmenC
0he "ccupational InAuries and %iseases ,ctB )hich came into operation on 1st .arch 1$$4B
chan!ed thisC
,lmost all employees &all under the terms o& the ne) ,ctC
The onl+ eAce1tion" are<
people such as police and de&ence &orce personnel and traineesB ;)ho &all under the
Police ,ct or the %e&ence ,ct<
independent contractors ; people )ho contract to carry out )orkB and hire other people to
)ork under them<C
domestic employees in a pri1ate householdC;7ousehold and?or personal liability policies
pro1ide co1er a!ainst possible claimsC<
In South ,&ricaB the need &or :mployers8 liability &alls a)ayB e3cept as a kind o& contin!ency co1erC
Profe""ional Lia2ilit+

0he .ultimark Liability sectionB and similar &orms o& !eneral liability co1erB e3cludes ad1ice or
treatment o& a pro&essional natureC ,part &rom thisB claims &or pro&essional ne!li!ence do not
al)ays in1ol1e accidental inAuryB or dama!e to tan!ible propertyB so a special &orm o& policy
)ordin! is neededC
No)adaysB any business )here ad1ice or ser1ice is !i1en needs pro&essional liability co1erC
Apart from the re!ognised professions# thin+ of"
translators > )ron! translation in a technical brochure
in&ormation technolo!y > in&rin!ement o& copyri!htB delayed deli1eryB 1iruses
ad1ertisin! and marketin! > mistakes in publicity materialC
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6irector" and Officer"F Lia2ilit+
Some duties are imposed by statuteB and there is a !eneral common la) duty to e3ercise the skill
and care that )ould normally be e3pectedC
, special &orm o& policy protects the directors and o&&icers in their personal capacityB in
circumstances )here they cannot claim &rom the companyB and the company itsel&B )here it is
re5uired or allo)ed to indemni&y directorsC
Li2el Policie"
, IlibelI is a published &alse statement dama!in! a person8s reputationC In South ,&rican la)B both
)ritten and spoken publication o& this kind is called Hde&amationIC 0he optional e3tension to the
.ultimark policy pro1ides &or ordinary circumstancesB but publishers o& ne)spapers and
periodicalsB and others )ith lar!e potential e3posuresB need a special policy )ith a much hi!her
limit o& indemnityC
Con"truction Ri"*"
0he risks in1ol1ed in demolitionB e3ca1ation and construction are insured by companies that
specialiKe in this &ieldC
Product Recall
Product liability co1er operates only in respect o& the dama!e or inAury actually caused by the
de&ecti1e productC
Product recall insurance is to co1er the cost o& retrie1in! products considered or suspected to be
dan!erous &rom the market placeB be&ore harmB or &urther harmB can resultC 2e o&ten read that a
particular model o& car has been recalled &or modi&icationsC "ther e3amples include Perrier
;mineral )ater suspected o& bein! contaminated
Cola in 'el!ium ;cans contaminated<C

0here are e3pert under)riters specialiKin! in this businessB and no) co1er can also be bou!ht
&or=
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e3tortion ;somebody threatens to sabota!e the product<
loss o& pro&it due to the recall
loss o& market shareB and loss o& ima!e
the cost o& the product itsel&C
Pollution and En4iron!ental I!1air!ent .EIL/
0here are social and le!al problems associated )ith pollutionC 0here is stricter le!islation than in
the pastB and the !eneral concept that the Hpolluter paysIC
Pollution is not al)ays Hsudden and accidentalIB as pro1ided in the ordinary liability )ordin!C
, )ider &orm o& insurance protection is kno)n as en1ironmental impairment liabilityB or :ILC
0his is intended &or normal inAury or property dama!e claims as )ell as impairment or
inter&erence )ith any other ri!ht or amenity protected by la)B but is not meant to co1er deliberate
pollutionC
Vehicle Ri"*"
Co1er is a1ailable in the .otorB ,1iation and .arine markets a!ainst liabilities arisin! &rom the use
or operation o& landB seaB and air 1ehiclesB includin! aircra&t han!ars and pri1ate landin! stripsC
SASRIA
SASRIA co4er doe" not a11l+ to lia2ilit+ in"urance: Liability policies contain a H)arI e3clusionB
di&&erent &rom the HriotI e3clusion that applies to other sectionsC 0here is no co1er &or inAuryB
dama!e or liability directly or indirectly caused byB related toB or in conse5uence o& )ar in1asion
act o& &orei!n enemyB hostilities ;)hether )ar be declared or not<B ci1il )ar mutinyB insurrectionB
rebellionB re1olutionB or military or usurped po)erC
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In"truction"
Nour in"ured" L client" are in"ured under the lia2ilit+ "ection of a Multi!ar* 1olic+: 0riefl+
eA1lain the "1ecial t+1e."/ of co4er5 if an+5 needed in the followin& circu!"tance": The
in"ured<
1: i" the owner of the 2uildin&:
: i" a con"ultin& en&ineer5 and *ee1" 1lan" and "1ecification" that 2elon& to client":
$: e!1lo+" a cleaner and &ardener at the 2u"ine"" 1re!i"e":
4: ad4i"e" client" on !echanical 1ro8ect":
': 1u2li"he" a new" letter co!!entin& on current e4ent" in the en&ineerin& field:
#: i" al"o a director of the co!1an+:
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(: own" a 1ower2oat5 u"ed to entertain client":
3: i" a con"truction co!1an+:
,: i" a co!1an+ ownin& a "!all ?health@ far!5 on which there i" an aircraft landin&
"tri1:
1-: di"tri2ute" 2ottled ?"1a@ water:
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Module 8
Nour in"ured" L client" are in"ured under the lia2ilit+ "ection of a Multi!ar* 1olic+: 0riefl+
eA1lain the "1ecial t+1e."/ of co4er5 if an+5 needed in the followin& circu!"tance": The
in"ured<
1: i" the owner of the 2uildin&:
Under the liability sectionB the description o& the insured8s business should include
Hproperty o)nersIC ,part &rom thisB the buildin! mi!ht also be insured under the 'uildin!s
combined sectionB but the co1er under the t)o sections )ill not be cumulati1eC
: i" a con"ultin& en&ineer5 and *ee1" 1lan" and "1ecification" that 2elon& to client":
0he Public liability section does not include property in the custody or control o& the
insuredC 0he cost o& restorin! or replacin! the documents should be insured under the
"&&ice contents sectionB )hich can then be e3tended to include le!al liability as a
conse5uence o& the dama!eC
$: e!1lo+" a cleaner and &ardener at the 2u"ine"" 1re!i"e":
0hese are not domestic employees in a pri1ate householdB so they &all under C"I%B and
cannot sue their employer &or occupational accidents or illnessC
4: ad4i"e" client" on !echanical 1ro8ect":
Public liability e3cludes ad1ice o& a pro&essional natureB so the insured needs Pro&essional
Liability co1erC
': 1u2li"he" a new" letter co!!entin& on current e4ent" in the en&ineerin& field:
0he optional de&amation co1er under the Public liability section may be enou!hC I& the
limit is not su&&icientB ;or i& insurers are not )illin! to !i1e this<B a separate HlibelI policy is
neededC
#: i" al"o a director of the co!1an+:
Claims are likely to !o beyond physical dama!e to tan!ible propertyB so %irectors8 and
o&&icers8 liability co1er is neededC
(: own" a 1ower2oat5 u"ed to entertain client":
Public liability e3cludes )ater cra&tB so a .arine or HSmall cra&tI policy is needed to co1er
collision liabilityB or inAurin! s)immersC
3: i" a con"truction co!1an+:
.inor alterationsB repair and maintenance )ork can be included in Public liabilityC 2ork
in1ol1in! e3ca1ation and the )eakenin! or remo1al o& support to any landB buildin!B or
structure )ill need special co1er under a construction risks policyC
,: i" a co!1an+ ownin& a "!all ?health@ far!5 on which there i" an aircraft landin&
"tri1:
")nership o& an airstrip is e3cluded &rom the Public liability policyC Special co1er is
a1ailable in the ,1iation marketC
1-: di"tri2ute" 2ottled ?"1a@ water:
, products liability e3tension mi!ht be su&&icientB but )ould not co1er the cost o& locatin!
and retrie1in! a &aulty or contaminated batch &rom the marketC Products recall can co1er
thisB and mi!ht also be e3tendedB at an additional premiumB to include loss o& pro&it and
loss o& marketC
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Module ,< Theft5 Mone+5 )idelit+5 Good" in
Tran"it
Learnin& Outco!e"
%e&ine the crime o& Hthe&tIG
%escribe the Hde&ined e1entsI under the abo1e sections o& the .ultimark policyG
%iscuss the co1er a&&ordedG
:3plain the purpose and e&&ect o& the e3tensionsB speci&ic e3ceptions and other restrictions
on the co1erG
Identi&y )here S,S4I, co1er is a1ailableC
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Introduction
0hese &our classes ha1e been !rouped to!etherB because althou!h the de&ined e1ent is Hloss or
dama!eIB in each case the main under)ritin! problem is that o& the&t=
,The wrongful ta+ing or handling of propert% with the intention of depriving the owner or lawful
possessor of his ownership or rights in the propert%.-
0he&tB as suchB does not ha1e to be &or the purpose o& &inancial !ainB eC!C it mi!ht be out o&
Aealousy or spiteC
,lmost anythin! can be stolenB but property most at risk is=
in demandB and easily disposable
o& hi!h 1alue in relation to its bulk
)here the o)nership is not easily identi&iableC
.oney is the best e3ampleG others include tobacco and ci!arettesB li5uor ;especially spirits&errous metalsB such as brass copperB and aluminiumC
Foodstu&&s and clothin!B althou!h more bulkyB are readily disposableC
0here are many )ays o& H)ron!&ully takin!I property > shopli&tin!B &raudB hi>AacksB and so onB so
the )ordin! o& the di&&erent sections spells out the kind o& loss the section is meant to co1erC
4emember that as )ell as the speci&ic e3ceptions and conditions mentionedB these sections are
subAect to the 9eneral e3ceptions and conditions o& the .ultimark policyC
Theft Section E 6efined E4ent"
Loss o& or dama!e to all contents ;the property o& the insured or &or )hich they are responsible<
o& any insured buildin! at the insured premises described in the schedule as a result o& the&t
accompanied by 1iolent and &orcible entry into or e3it &rom such buildin! or any attempt thereat or
as a result o& the&t or any attempt thereatB &ollo)in! 1iolence or threat o& 1iolenceC
9otice that<
)e are insurin! the contents o& a buildin! or buildin!sC
this is not any buildin! the insured occupiesG the premises are as stated in the scheduleC
shopli&tin! or pil&era!e is not co1eredC 0here must be &orced entryB )ith a de!ree o&
1iolenceC ;Not Aust openin! an un&astened )indo)B or turnin! the door knobC<
the thie& mi!ht break inB or be hidden inside the premises and break outC
the policy also pro1ides &or 1iolence in the &orm o& armed robberyC
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EAten"ion"
1C ;a< Loss or dama!eB caused by=
;i< thie1es concealed upon the premises be&ore close o& businessC
;ii< use o& skeleton keys or similar de1icesB but not duplicate keysC ;, skeleton key
has parts cut a)ayB so that it )ill &it a number o& locksG there are also pickin!
tools and pickin! !unsC Proo& that this happened is up to the insuredB and is not
easy<C
;b< to property at additional premisesB pro1ided=
;i< insurers are ad1ised o& these )ithin 0 days o& the risk attachin!
;ii< additional premiumB i& anyB is paidC
;iii< this temporary co1er is limited to #0F o& the hi!hest amount in the schedule &or
any one premisesC
2C In addition to the limit o& indemnityB
;i< dama!e to the buildin!s and landlords &i3tures and &ittin!s
;ii< the&t o& buildin!sB &i3tures and &ittin!sC
0here is automatic co1er up to 4# 000B but this can be increased at an additional premiumC
C In addition to the limit o& indemnityB co1er is pro1ided ;e3cludin! the &irst 4200< up to 42 000
&or replacin! locks and keys i& there is reason to belie1e that keys ha1e been stolenC
4C H,ll contentsI includes personal possessions o& the insuredB directors or employees up to a
limit o& 42 #00 &or any one personB and pro1ided these belon!in!s are not other)ise insuredC
Li!itation"
0he cost o& replacin! business records is limited to the 1alue o& materials and labourB and does
not include the in&ormation thereinC
Specific e/ceptions
1C Loss or dama!e that can be insured under a &ire policyC ;'ut dama!e by e3plosi1es used in
an attempt to e&&ect entry is co1ered<C
2C Loss or dama!e insurable under a !lass insurance policyC
C Property more speci&ically insuredB andB unless specially mentioned in the scheduleB money
and ne!otiable instrumentsC
4C 0he&t by &amily or employeesB or )here they are in1ol1ed as accessoriesC 0he&t by members
o& the insured8s o)n household is uninsurableC 0he&t by employees can be co1ered by &idelity
insuranceC
Specific conditions
1C 6i"clo"ure
,t common la)B there is no duty to disclose material alterations that take place durin! the
currency o& the policyC 0his condition chan!es this to a continuin! dutyC
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2C Alar! warrant+
0his condition operates i& the schedule states that the premises are subAect to the alarm
)arrantyB and becomes a condition precent to liabilityC ;0he condition must be strictly
complied )ithB or there is no co1er<C
0he alarm must be made &ully operati1e )hene1er the premises are not open to business
unless a principalB partnerB director ;memberB in the case o& a CC< or employee is on the
premisesC
0he alarm must be maintained in proper )orkin! orderC , ser1ice contract )ith the
suppliers )ill be su&&icient proo& o& thisC
Loss or dama!e &ollo)in! the use o& keys to the alarm is not co1eredB unless the keys
)ere obtained by 1iolence or threat o& 1iolenceC
Insurers ha1e de1eloped &urther )ordin!s re5uirin! that the openin! and closin! o& the premises
be monitored by the alarm company to ensure that the alarm system is acti1ated at the rele1ant
timesB and that there is an armed response unitC
SASRIA
Usually the property insured )ould also be co1ered by a &ire policyB and this is reco!nised as the
underlyin! insurance &or S,S4I,C
0here is no separate S,S4I, policy &or the&tB but S,S4I, co1ers lootin! &ollo)in! a S,S4I,
insurable e1entB i& the lootin! )as the immediate obAecti1e or )as an immediateB pro3imateB direct
and &oreseeable result o& the state o& disorderC
Mone+ Section E 6efined E4ent"
HLoss or dama!e to money occurrin!B e3cept i& other)ise speci&iedB in the 4epublic o& South
,&ricaB NamibiaB LesothoB 'ots)anaB S)aKilandB Yimbab)eB and .ala)iCI
0he Insured premises are speci&ied in the schedule to the sectionC
Mone+ means cash bank and currency notesB che5uesB postal ordersB money ordersB posta!e
and re1enue stampsB credit card 1ouchers certi&icates or ne!otiable instrumentsB the property o&
the insured or &or )hich they are responsibleC 6irtually all or!anisations handle money in one
&orm or anotherB althou!h direct debitin! by credit card reduces some o& the riskC
In some casesB )a!es are still paid out in cashB and could also be transported to contract sitesB
increasin! the risk o& attack alon! the )ayC I& this is soB these contract sites must be mentioned in
the scheduleC Fillin! stations and supermarkets take lar!e amounts in hard cashC

Insurers impose conditions on the escort o& persons to the bankB 1aryin! accordin! to the amount
bein! carriedB and mi!ht also speci&y that the transit must be direct and unbrokenC
n t$e policy section1 several different limits of liability apply"
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i< 0he HmaAorI limitB or ma3imum co1er pro1idedB other than the special item on crossed
che5uesC 0he amount is chosen by the insured and represents the lar!est amount
considered likely to be in transit or held on the premises at any one timeC 0he premises are
speci&ied in the scheduleB and there could be a di&&erent maAor limit at eachC
ii< H.inorI limitsC , small limit o& 41 #00 is pro1ided &or money at the insured8s residenceB at the
premises but not contained in a locked sa&e or stron! room outside the insured8s business
hoursB in an unattended 1ehicleB or in the custody o& a partnerB director or employee on a
business trip any)here in the )orldC
iii< Seasonal increasesC .any businesses need hi!her limits &or certain periodsB eC!C year endsB
)hen bonuses are paid outB or )hen trade is e3ceptionally busyC 0his item is specially ratedB
and is &or a speci&ied period each yearC I& such HpeaksI occur se1eral times a yearB such as at
lon! )eekendsB it is better to increase the maAor limit accordin!lyC
i1< Special itemsC Separate limits are set &or cash &loats in the hands o& petrol attendantsB
collectors and othersC Problems include cash>on>deli1ery transactionsB and a&ter>hours rent
collectionC
1< Crossed che5uesC , separate limit o& 4100 000 is automatically included in addition to the
other limits under the sectionC 0his is subAect to special conditionsB detailed laterC
1i< Limits in respect o& sa&esC 0he schedule includes a list o& cate!ories o& sa&esB mainly those
classi&ied by the South ,&rican 'ureau o& StandardsB and the ma3imum amount insurers )ill
co1er in each typeC Sa&es are !raded accordin! to ho) lon! they can be e3pected to resist
attack by 1arious means > drillin!B cuttin! disksB o3yacetylene torchB e3plosi1esC :1en in the
case o& the more hi!hly !raded and e3pensi1e sa&es this is not much more than an hourB
!i1en the ri!ht techni5ue and e5uipmentB so that the e3tra protection o& an alarm is neededC
Pro1ision is made to allo) a special limit &or a speci&ic sa&eC For e3ampleB the sa&e mi!ht be built
into a concrete shellB or be kept inside a stron! roomB )hich )ould increase the time needed to
break inC
EAten"ion"
1C Rece1tacle" and clothin&
In addition to any other paymentB insurers )ill indemni&y the insured in respect o& loss or
dama!eB as a result o& the&tB to=
4eceptacles> sa&eB stron! roomB stron!bo3B cash re!ister?tillB cash bo3 or other receptacleB
or &rankin! machine= 42 000B ;or a lar!er amountB i& stated in the schedule<C
Clothin! and personal e&&ectsB not other)ise insured= 42 000
2C Loc*" and *e+"
0his is similar to the e3tension in the the&t sectionC
C Riot and "tri*e
.oney can be insured under S,S4I,C ,n optional riot and strike e3tension is a1ailable i&
co1er is re5uired outside 4S,?NamibiaC
4C S*eleton *e+"
0his is similar to the e3tension in the 0he&t sectionC
#C Per"onal accident .a""ault/ eAten"ion .if "tated in the "chedule to 2e in"ured/
0his optional e3tension co1ers deathB disablement and medical e3penses o& employees
inAured durin! the&t or attempted the&t o& moneyC , &lat per capita char!e is madeB based on
the number o& employees to be co1eredC 0he sums insured are usually &airly smallC 0he
insured tends to limit this to people actually in1ol1ed in carryin! money &or the businessB
&or!ettin! that se1eral o& the sta&& could be inAured in an armed hold>up at the premisesC
7i!her limits o& compensation are a1ailable under a separate 9roup Personal ,ccident or
Stated 'ene&its insuranceB discussed later in this UnitC
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S1ecific EAce1tion" and Me!oranda
1C 6i"hone"t+ of e!1lo+ee"C Losses are co1eredB but only i& they are=
disco1ered )ithin 14 )orkin! daysB and
not payable under a separate &idelity insuranceC
0here is a separate First ,mount Payable ;e3cess< o&=
;a< 2 F o& the limit o& indemnityB plus
;b< 10F o& the balance o& the lossC
2C Error" and o!i""ion"C
Shorta!es due to mistakes are considered a trade riskB and are not insurableC
C %"e of *e+" to the "afe L "tron& roo!C
Losses are limited to 41 #00B unless=
the keys )ere obtained by 1iolence or threat o& 1iolenceB or
the loss in1ol1es the dishonesty or collusion o& the key holderC
4C Safe" L "tron& roo!" left unloc*ed and unattendedC , limit o& 41 #00 appliesB unless it
can be pro1ed that this )as dishonestly done )ith the intention o& allo)in! the money to be
stolenC
#C Mone+ left unattendedC .oney is sometimes le&t lyin! around or in desk dra)ersC 0he limit
and pro1isos in 4 abo1e applyC
(C Mone+ in unoccu1ied or unattended 4ehicle"C Limited to 41 #00 unless a director or
employee is actually in the 1ehicleB or able to )atch it &rom not more than # metres a)ayC Full
money co1er applies i& the occupants are incapacitated in an accidentC
Payments under B 4B #B and ( abo1e are not reduced by any &irst amount payableC
S1ecial condition" a11lica2le to che7ue"
1C Che7ue" drawn 2+ the in"ured=
details o& the procedure are !i1en in the .ultimark policyB but some main re5uirements are=
the che5ue must be crossedB Hnot ne!otiableI and marked Hnot trans&erableI
the )ords Hor orderIB or Hor bearerI must be crossed outC
the payee must be accurately and &ully namedC
the method used to complete che5ues must be one that makes an ink impression on the
paperC
no spaces should be le&t )hich )ould allo) anyone to add e3tra )ords or &i!uresC
or
the che5ue must be dispatched to the payee by certi&ied post ;or other post )ith security
e5ual to this<C
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2C Che7ue" recei4ed 2+ the in"ured=
Immediately on receiptB must be crossed and marked Hnot ne!otiableI and Hnot
trans&erableIC
0he insured must record the amount o& the che5ue and the name o& the dra)erC
C Che7ue" 1o"ted to the in"ured 2ut not recei4ed=
0he che5ue must ha1e been dra)n and crossed as abo1eB or
0he che5ue )as sent to the insured by certi&ied post ;or otherB as abo1e<
or
0he insured8s in1oiceB &or )hich payment is bein! madeB contained a messa!e re5uirin!
or recommendin! that the che5ue be dra)n in accordance )ith 1;a< abo1eC
If the"e re7uire!ent" are not !et5 the a!ount 1a+a2le i" reduced 2+ 'J:
)idelit+ Section
HFidelityI is a stran!e name &or this insuranceB because the co1er is really a!ainst the
conse5uences o& in&idelityC 0he reason &or the ori!inal name is that people employed to handle
money used to be re5uired by their employer to pro1ide a &inancial !uarantee under )hich
possible the&t or &raud )ould be made !oodC
0odayB it is employer )ho takes out the policyB to protect a!ainst the possibility o& HinsiderI the&t or
&raudC Insurers used to make care&ul en5uiries each employeeB somethin! like the 5uestions one
mi!ht be asked )hen applyin! &or credit or takin! out a credit cardC 2ith hi!h sta&& turno1er and
the pace o& modern business much o& this has &allen a)ayC H2hite collar crimeI is ri&eC "&ten
&raud and the&t is related to poor internal controls and collusion bet)een employees and outside
partiesC
6efined e4ent"
1C Loss o& money and?or other property belon!in! to the insured or &or )hich they are
responsible stolen by an insured employee durin! the currency o& this sectionC
;4emember that the&t does not ha1e to be &or &inancial !ain<C
2C %irect &inancial loss sustained by the insured as a result o& &raud or dishonesty o& an insured
employee durin! the currency o& this section )hich results in dishonest personal &inancial
!ain &or the employee concernedC
I& an employee commits a &raud but !ains no &inancial bene&it &rom itB there is no co1er
under the sectionC
Sometimes it is clear that &raud is takin! placeB but it is impossible to pro1e that any
particular employee !ained &inanciallyC
0he loss must be directly related to the &raudB and be &inancially 5uanti&iableC
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6i"co4er+ 1eriod
Losses must be disco1ered )ithin=
1;a< 24 months o& the e1entC ;0his can be e3tended to ( monthsB at an additional premium<C
,part &rom thisB losses must also be disco1ered )ithin=
;b< 12 months a&ter the termination o&=
;i< co1er under the sectionB or
;ii< co1er in respect o& the employee concernedB or
;iii< the employment o& the employeeB or the last o& the !roup o& employees concernedB
)hiche1er occurs &irstC
6efinition of e!1lo+ee
,n employee is any person under a contract o& ser1ice )ithB or apprenticed to the insuredB or
hired or seconded by another party into the ser1ice o& the insuredB )hom the insured has the ri!ht
to !o1ernB control and direct in the per&ormance o& his?her )ork in the course o& the insured8s
businessC

0he policy can be issued to co1er=
;a< 0lan*et 2a"i"
,ll employees are includedC 0he indemnity limit &or any one e1ent is the sum insuredB
irrespecti1e o& the number o& employees )ho may be in1ol1ed in the incidentC
;b< 9a!ed or 1o"ition 2a"i"
0hese )ould be people )ho re!ularly handle money or ha1e control o& stockB described by
name or accordin! to the position heldC , manu&acturerB &or e3ampleB mi!ht co1er his
bookkeeper and store manC
0he sum insured &or each indi1idual is stated a!ainst that name or positionC 2here se1eral
employees are in1ol1ed in the same lossB these limits are cumulati1eC
Premiums are calculated on the number o& employees and the sum insuredB so a
proportionately hi!her premium per person is needed &or the named or position basisC
S1ecific eAce1tion"
1;a< Loss resultin! &rom the actions o&=
any partnerB to the e3tent that he )ould bene&it by the insuranceC , partner cannot commit
a &raud or the&tB and bene&it as )ell &rom the policyC
any principalB director or memberB unless also an employeeC ;0he responsibility and
liability o& directors is the subAect o& %irectors and "&&icers8 LiabilityB discussed else)here
in this courseC
any employeeB &rom the time that the insured disco1ers that he?she has committed &raud
or act o& dishonestyC
1;b< ,ny conse5uential lossC
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2C ,ny company or le!al entity ac5uired durin! the period o& insuranceC ;0hey probably had
their o)n &idelity insuranceB and in any caseB the co1er )ill ha1e to be rene!otiated<C
C ,ny e1ent arisin! &rom the dishonest
manipulation o&
input into
suppression o& input into
destruction o&
alteration o&=
any computer pro!rammeB systemB data or so&t)are by any employee in the insured8s
electronic data processin! department or areaC 0his e3ception does not apply to
employees usin! non>net)orked ;stand>alone< micro?personal computersB but a hi!her
e3cess is applicable to Hcomputer the&tIC
2ith computer literacy becomin! more !eneralB there is a hu!e potential &or employees
at all le1els to manipulate computers to their o)n ad1anta!eC Small and relati1ely
unnoticeable amounts can be trans&erred &rom indi1idual accountsC Non>e3istent
suppliers can be HcreatedI and paidC Stock records can be &alsi&iedC
Full co1er &or main&rames and net)orks can be obtained only on completion o& a special
5uestionnaire and a thorou!h in1esti!ation o& the computer systemC Special terms )ill
applyC
4C 0he partners?principals?directors? or members )ho )ere not in1ol1ed in the &raud may still
bene&it &rom the insuranceB but only to the e3tent o& their shareholdin! or interestC
S1ecific Condition"
1C 0he insured is &ree to run his business and make chan!esB but must continue to maintain
proper checks and audits
2C I& the loss e3ceeds the sum insuredB the insured is entitled to reco1eriesB apart &rom the
basic policy e3cessB until the short&all is made upC
,&ter thisB any &urther reco1eries are allocated in accordance )ith item ;b< o& the First
,mount PayableC
Accountant"F clau"e
Certi&ied in&ormation &rom the insured8s auditors or pro&essional accountants is acceptable as
prima &acie e1idenceC 0his can still be challen!edB but the obAect is to a1oid unnecessary
duplication o& )orkC
EAtended co4er for 1a"t e!1lo+ee" eAten"ion
Co1er &or past employees is e3tended &or 0 daysC Fraud mi!ht be committed a&ter the employee
has o&&icially le&tC
Retroacti4e co4er eAten"ion
;I& stated in the schedule to be included<C
I& there )as no pre1ious policy in &orceB this e3tends the co1er to e1ents ;as yet unkno)n< durin!
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the 12 months prior to inception but not more than 24 months prior to disco1eryC ,n additional
premium is char!edC
Su1er"eded in"urance eAten"ion
;I& stated in the policy to be included<C
0his can be applied i& there )as pre1ious insuranceC Co1er is restricted to losses that )ould ha1e
been co1ered by the pre1ious insuranceB but are disco1ered too lateC 0he limit is the lo)er o& the
e3istin! and the pre1ious insuranceC 0he period o& backdated co1er is decided by the
under)riterB and an additional premium is char!edC
Other in"urance"
It is a condition that no other policy co1erin! these risks may be in &orceB e3cept &or a money
policyB a pension &und policy not e3ceedin! this sectionB or a policy declared to the insurers on
inception or rene)alB or at the time o& the claimC
Co!1ul"or+ fir"t a!ount 1a+a2le
0his escalates automatically as the sum insured increasesC 0he policy holder cannot !et around
this re5uirement by takin! out a number o& smaller policiesB because these must be declared and
the sums insured )ill be added to!ether &or the purpose o& the &irst amount payableC
0here is a t)o>part calculation=
;a< 2 percent o& the sum insuredB ;there is a ma3imum deduction o& 4 (0 000B )hich )ould
mean a sum insured o& 4 m or more<
;b< 10 percent o& the balanceC ;In Speci&ic condition 2B this is re&erred to as coinsuranceG the
insured carries 10F o& the loss and the insurer $0F<C
0he calculation is illustrated by the &ollo)in! e3ample=
Co!1uter lo""e" fir"t a!ount 1a+a2le
For those computer losses that are co1ered under the standard )ordin!B iCeC non>net)orked
micro ? personal computersB the percenta!e part in part ;b< abo1e is increased &rom 10F to 20FB
i& the employee8s duties in1ol1e mana!in!B super1isionB desi!nB creation or alteration o& computer
systems or pro!rammesC
)ir"t a!ount 1a+a2le for lo""e" di"co4ered !ore than 1 !onth" after the+ were
co!!itted
0he amounts under para!raph ;a< and ;b< o& the First ,mount Payable are increased as &ollo)s=
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More than 1 !onth"5 2ut not !ore than 4 !onth" after 2ein& co!!itted<
Para ;a< &rom 2F to 4F
Para ;b< &rom 10F to 1#F
Computer losses &rom 20F to 0F
,t additional premiumB the disco1ery period can be increased &rom 24 months to ( monthsB and
the First ,mount Payable is increased in respect o& losses=
6i"co4ered !ore than 4 !onth"5 2ut not !ore than $# !onth" after 2ein& co!!itted<
Para ;a< &rom 2F to #F
Para ;b< &rom 10F to 20F
Computer losses &rom 20F to #F
0here is a third possibilityC I& the insured has had a pro&essional audit carried out on the systems
o& control and the detection o& dishonestyB and subAect to the implementation and maintenance o&
the audit recommendationsB the 24 month restriction may be remo1edC
)or an+ lo"" di"co4ered later than 1 !onth" after the e4ent5 the a!ount" are
increa"ed<
Para ;a< &rom 2F to F
Para ;b< &rom 10F to 12B#F
Computer losses &rom 20F to 2#F
Voluntar+ fir"t a!ount 1a+a2le clau"e
,s )ell as the compulsory amountsB the insured can carry a 1oluntary e3cessB and !ain a
premium discountC Note that the insured is responsible &or the di&&erence bet)een the
compulsory and the 1oluntary amount ;pro1ided al)ays that the 1oluntary amount is lar!er< and
not the total o& the t)oC
In the pre1ious e3ample o& the &irst amount payable calculationB )ith a 1oluntary amount o&
440 000B the claim )ould cost the insurer 4110 000B ;41#0 000 > 440 000<C 0his last &i!ure is
made up o& the ori!inal deductible o& 422 200 plus the di&&erence= 41/ *00C
Reduction L rein"tate!ent of in"ured a!ount clau"e
0he payment o& a loss reduces the sum insured &or the remainder o& the period o& insuranceC
Under the Fidelity sectionB the amount o& the loss is not reinstatedB unless the insured has asked
&or this optional e3tension at inception or on rene)alC 0he number and amount o&
reinstatements is restricted in such a )ay that the insurer8s ma3imum liability durin! any one
annual period o& insurance )ill ne1er be more than double the ori!inal sum insured sho)n in
the scheduleC
Two additional premiums are applicable5
1C For the inclusion o& the clause at inceptionB or on rene)alC ;, percenta!e premium loadin!<C
2C For the actual reinstatementB &ollo)in! a lossC ;'ased on the amount o& the loss<C
E/ample
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0his is a H&latI additionalC No pro rata reduction is made &or periods less than 12 monthsC

Co"t" of reco4er+ eAten"ion
0his comes into e&&ect )here the amount o& the loss e3ceeds the sum insuredC Normally the
insured has the option o& tryin! to reco1er any short&all &rom the !uilty employeeC 0he costsB
ho)e1erB can be considerableB especially i& this in1ol1es court actionC
Under the cost o& reco1ery e3tensionB the insurers )ill repay these e3tra costs ;up to the sum
insured under the e3tension<B but any reco1ery made o1er and abo1e the short&all )ill be &or the
bene&it o& the insurersB not the insuredC
Co!1uter lo""e" eAten"ion
SubAect to the completion and submission o& a satis&actory 5uestionnaireB co1er can be e3tended
to main> &rame and net)orked computersC
Speci&ic e3ception B dealin! )ith computer &raudB and the &irst amounts payable &or computer
lossesB are deletedC
EAten"ion for lo""e" di"co4ered !onth" after 2ein& co!!itted
Co1er is e3tended to losses that occurred up to ( months prior to disco1eryC 0his also applies to
the superseded insurances e3tensionB i& there is oneC
0he e&&ect o& this e3tension on the &irst amount payable has already been e3plainedC
Note that the insured al)ays has the option to claim only &or that part o& the loss that )as
disco1ered )ithin t)el1e ; or t)enty>&our< monthsB in )hich case the lo)er &irst amounts payable
applicable to that period )ill applyC
Me!oranda
1C 9eneral condition ( o& the policy re5uires that cases o& the&t be reported to the policeC .emo
1 relie1es the insured o& this dutyB unless insurers speci&ically re5uire thisC "&tenB there is a
better chance o& reco1ery &rom the employee i& this can be done )ithout police in1ol1ementC
2C It has happened that the person )ho completed the proposal &or &idelity co1er )as actually
en!a!ed in committin! a &raud at the timeB and o& course did not disclose thisC ,s a result o&
this memoB the policy itsel& is not in1alidated in these circumstancesC
C 0he 9eneral e3ceptions o& )arB riot and nuclear risks do not apply to this sectionC 9eneral
condition $ ;4einstatement< does not applyB because there are special reinstatement
pro1isionsC
4C I& the sum insured is increasedB this )ill apply only to e1ents committed ;not disco1ered< a&ter
the date o& the increaseC
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Good" in Tran"it Section
0his is desi!ned to co1er the collection and deli1ery o& !oodsC 0he insurance is usually on an H,ll
4isks IbasisB but the main risk is that o& the&t > alon! the )ayB by hi>AackB or simply &or the 1alue o&
the 1ehicleC .any o& the lar!erB lon! distance 1ehicles no) ha1e trackin! systems installedC 0he
type o& !oods and the area o& operation are important under)ritin! considerationsC
0he co1er includes property o)ned by the insured or &or )hich they are responsibleC 0his is one
thin! )here )e ha1e manu&acturers or tradin! &irms mo1in! their o)n !oodsB but special co1er is
needed i& the insured is a transport companyC 0he transport operator is usually una)are o& the
e3act nature and 1alue o& the !oodsB and there are le!al implications ;beyond the scope o& this
course<C
0he 9oods in transit section is limited to property in 4S,B Namibia 'ots)anaB LesothoB S)aKiland
and .ala)iC "utside this areaB a .arine policy is neededC Some insurers pre&er to do most o&
their !oods in transit business in the .arine departmentC ,nother aspect is the transportation o&
machinery and plantB )here special co1ers issued in the :n!ineerin! department may be more
appropriateC
Mean" of con4e+ance
0he schedule to this section speci&ies the means o& con1eyanceC 2hen !oods are carried by the
insured8s o)n 1ehicle;s< the insured retains control o1er the AourneyB and the !oods are not
handled to any !reat e3tentC Sometimes lar!e 1ehicles are used &or the lon!er tripsB and the
!oods trans&erred to li!ht deli1ery 1ehicles &or the local deli1eryC , rate is char!ed based on the
limit per 1ehicleB and the number o& 1ehiclesC
9oods mi!ht also be dispatched by road or rail transport or by parcel postB )ith a limit &or any one
consi!nmentC 0he premium is based on the annual carryB or annual 1alue o& the !oods
transportedC , pro1isional premium is char!ed based on an estimateB and a &inal adAustment is
made at the end o& each period o& insuranceB )hen the actual &i!ures are kno)nC
"ther clients collect bulk stocksB brin! them to their premisesB and subse5uently make indi1idual
deli1eries to customersB so the policy schedule )ould re&er to transit to or &rom the insuredC
6efined e4ent"
Loss or dama!e in the course o& transit by any accident or mis&ortune not other)ise e3cludedC
Pro1ision is made &or a &irst amount payable ;not applicable to &ireB li!htnin!B or e3plosion<C
Liability &or any one de&ined e1ent shall not e3ceed the limit o& indemnity stated in the scheduleC
Me!oranda
1C 0ransit starts at the consi!nor8s premises and ends )hen the !oods are o&&>loaded and
deli1ered at the consi!nee8s premisesC ;Property that is carried around continuallyB and not
intended &or deli1ery to a consi!neeB should be insured under 'usiness ,ll risksB described
later in the course<C Co1er is pro1ided &or temporary stora!eB not e3ceedin! $( hoursB in the
course o& the AourneyC
2C I& the consi!nee re&uses to accept the !oodsB the transit is considered to continue ;by any
means o& con1eyance< until the property is returned to the insuredC
C I& the insurance is on a speci&ied 1ehicle basisB a loaned ;not o)nedB leased or hired< 1ehicle
is allo)ed in substitution )hile the re!ular 1ehicle is a)ay &or repair or ser1icin!C
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4C SimilarlyB measures can be taken to complete the transit by other transport in the e1ent o&
1ehicle breakdo)n or other emer!encyC
6e2ri" re!o4al eAten"ion
Clearin! up and remo1in! debris a&ter an accident can be 1ery e3pensi1eB eC!C )hen a tanker
spills its load o1er the national road in some remote areaC 0he limit pro1ided is 4 1 000B but this
can be increased i& re5uiredC
Re"tricted co4er
0he normal co1er is H,ll 4isksI but in order to sa1e premium this can be reduced to &ireB
e3plosionB collisionB o1erturnin! or derailment o& the means o& con1eyanceC "&tenB re5uests are
recei1ed to e3tend this to include the&t &ollo)in! these e1entsC ;2hen the pro3imate cause o& the
loss is an accidentB the&t or pil&era!e can usually be re!arded as a direct conse5uenceB unless the
!oods are le&t un!uarded lon! enou!h &or the chain o& causation to be broken<C
0his restricted co1er may be suitable &or !oods )here the risk o& the&t is lo)B eC!C printed matter or
chemicals in drumsC 0here is a dan!er that the consi!nment be stolen &or the 1alue o& the 1ehicle
aloneB and the load simply dumped or destroyedB resultin! in a serious loss to the insuredC
S1ecific eAce1tion"
1C ;a< 0his applies only to 1ehicles in the custody or control o& the insuredC
0he&t &rom unattended 1ehicles is not co1eredB unless the 1ehicle is completely closed
and securely locked or is contained in a securely locked buildin!C 0here must be
&orcible and 1iolent entry?e3itC
;b< 6erminB insectsB dampB milde) or rustB or inherent &aultC
;c< %ishonesty o& employeesC
;d< Con&iscation by the authoritiesC ;Special co1er may be a1ailable in the .arine
department<C
;e< 0ransit by seaB or inland transit incidental to thisC
;&< 'reakdo)n o& re&ri!eration e5uipmentC ;Co1er may be a1ailable &rom the :n!ineerin!
department<C
2C 2ear and tear or !radual deteriorationB unless &ollo)in! an accidentC
C .echanical?electrical?electronic breakdo)nB unless &ollo)in! an accidentC
4C ;a< Cash and documents that can be co1ered under the money sectionC
;b< Property outside the territorial limits pre1iously mentionedC Usually insured under a
.arine policyC
;c< Property other)ise insuredC I& there is other insurance this section )ill not contribute a
share o& the claimB but can be used to)ard any short&all in the amount payableC ;0his is
called a non>contribution clause<C
#C Conse5uential lossB depreciationB or chan!es brou!ht about by natural causesC 0he 'usiness
interruption section o& the .ultimark pro1ides co1er &or conse5uential loss &ollo)in! &ire and
perils dama!e to property in transitC
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S1ecific eAten"ion"
)ire eAtin&ui"hin& char&e" eAten"ion
Co1ers costs incurred in e3tin!uishin!B or tryin! to e3tin!uish a &ireB up to the limit o& 41 000
sho)n in the scheduleC Pro1ision is made &or an increased limitB i& re5uiredC
Riot and Stri*e eAten"ion
0his is needed &or transits outside 4S, and NamibiaC
SASRIAL9ASRIA
, special &orm o& S,S4I, certi&icate is issued &or !oods in transit co1erC 4ates char!ed 1ary
accordin! to )hether the premium on the underlyin! policy is &i3edB or adAustableC
In terms o& a reciprocal a!reement )ith N,S4I,B ;the Namibian ,ssociation<B co1er e3tends to
include property in transit &rom 4S, to NamibiaB includin! the return Aourney i& the !oods )ere
only temporarily remo1edC Co1er ceases on deli1ery to the consi!neeB or i& the interest in the
property passes to any party other than the insuredC
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In"truction"
1: In the Theft "ection5 eA1lain wh+ the re7uire!ent of ?forci2le and 4iolent entr+@ i"
i!1ortant:
: The theft "ection doe" not co4er lo"" or da!a&e that can 2e in"ured under a fire
1olic+L"ection: State whether eA1lo"ion da!a&e i" co4ered:
$: Identif+ the effect of the Alar! Barrant+:
4: In the Mone+ "ection5 eA1lain what i" !eant 2+ ?!a8or and !inor li!it"@:
': Nour in"uredLclient !a*e" 2u"ine"" tri1" to 0ot"wana: Ad4i"e whether an+
additional !one+ co4er i" needed:
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#: EA1lain what i" !eant 2+ a ?"ea"onal increa"e@:
(: 6i"tin&ui"h 2etween the two ?defined e4ent"@ in the fidelit+ "ection:
3: 6ifferentiate 2etween the two t+1e" of co4er a4aila2le a&ain"t co!1uter fraud:
,: In the Good" in tran"it "ection5 to which 1eril" doe" the fir"t a!ount 1a+a2le not
a11l+C
1-: There i" a "1ecial eAce1tion of theft fro! unattended 4ehicle": Gi4e the !ain
1ro4i"ion" of thi" eAce1tion5 and "tate in what circu!"tance" it will not a11l+:
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Module 9
1: In the Theft "ection5 eA1lain wh+ the re7uire!ent of ?forci2le and 4iolent entr+@ i"
i!1ortant:
0he ordinary de&inition o& Hthe&tI is too )ideC 0he policy section is not meant to co1er
pil&erin!B casual the&tB or Hcon&idence tricksBI so there must be &orce ;)hich mi!ht be only
nominal< and a de!ree o& 1iolence in1ol1ed in the entry or e3itC
: The theft "ection doe" not co4er lo"" or da!a&e that can 2e in"ured under a fire
1olic+L"ection: State whether eA1lo"ion da!a&e i" co4ered:
:3plosion dama!e is co1ered i& done by thie1es in attemptin! to e&&ect entry to the
premisesC
$: Identif+ the effect of the Alar! Barrant+:
0he bur!lar alarm )arranty applies i& stated in the scheduleC Unless the terms o& the
)arranty are strictly complied )ithB there is no co1erC 0here must be an alarmB properly
maintainedB and operati1e )hene1er the premises are not open &or business and no sta&&
member is presentC 0his )ould apply e1en i& the entry )ould not ha1e set o&& the alarmB
eC!C by makin! a hole in the )allC
4: In the Mone+ "ection5 eA1lain what i" !eant 2+ ?!a8or and !inor li!it"@:
0he maAor limit is the ma3imum co1er pro1ided by the sectionB apart &rom the separate
additional co1er &or crossed che5uesC 0his is the ma3imum amountB other than crossed
che5uesB considered likely to be in transit or held on the premises at any one timeC ,
minor limit o& 41 #00 is allo)ed &or money on business tripsB at the insured8s residenceB
out o& sa&e or stron! room outside the insured8s business hoursB or in an unattended
1ehicleC
': Nour in"uredLclient !a*e" 2u"ine"" tri1" to 0ot"wana: Ad4i"e whether an+
additional !one+ co4er i" needed:
S)aKiland is included in the territories co1eredC I& the purpose o& these 1isits is to collect
money &rom customersB a special item &or Hcollectors or roundsmenI is neededC
"ther)iseB the minor limit o& 41 #00 &or business trips )ill applyC S,S4I, co1er does not
apply to S)aKilandB so the insured may also )ant co1er under the riot e3tension to the
policyC
#: EA1lain what i" !eant 2+ a ?"ea"onal increa"e@:
.any businesses need hi!her limits &or certain speci&ied periodsB eC!C year ends )hen
sta&& bonuses and lea1e pay are due to be paidB or o1er the holiday season )hen trade is
e3ceptionally busyC Pro1ision can be made &or a hi!her amount at a special rateC I& such
peaks occur se1eral times a yearB eC!C at lon! )eekendsB it is better to increase the normal
maAor limitC
(: 6i"tin&ui"h 2etween the two ?defined e4ent"@ in the fidelit+ "ection:
%e&ined e1ent 1 is H loss o& money or other property stolen by an employee included in the
co1erIC 0he&t does not mean that there must be &inancial !ainB so it is not necessary to
sho) that the employee deri1ed any bene&it &rom the actC
%e&ined e1ent 2 co1ers direct &inancial loss as a result o& employee &raud or dishonestyB
)hich results in dishonest personal &inancial !ain &or the employee concernedC I& the
employee cannot be sho)n to ha1e !ained &inanciallyB there is no co1er under %e&ined
e1ent 2C
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Module 9 - cont
3: 6ifferentiate 2etween the two t+1e" of co4er a4aila2le a&ain"t co!1uter fraud:
Fraud by employees usin! non>net)orked ;stand >alone< micro?personal computers is
co1ered automaticallyC Part ;b< o& the &irst amounts payable is increased &rom 10F to 20F
i& the employee8s duties in1ol1e mana!in!B super1isionB desi!nB creation or alteration o&
computer pro!ramsC 0his is &urther increased to 0F i& losses are disco1ered more than
12 months a&ter they )ere committedB and to #F i& disco1ered more than 24 months ;but
not more than ( months< a&ter they )ere committedC
Fraud in1ol1in! the use o& main&rame and net)orked computers is not co1eredB unless the
policy is speci&ically e3tendedC , special 5uestionnaire re!ardin! the systems o& control
and checkin! must be submitted to insurersC I& this is satis&actoryB special e3ception B
dealin! )ith computer &raudB is deletedB to!ether )ith the special &irst amounts payable in
respect o& computersC
,: In the Good" in tran"it "ection5 to which 1eril" doe" the fir"t a!ount 1a+a2le not
a11l+C
Loss or dama!e by &ire or e3plosionC
1-: There i" a "1ecial eAce1tion of theft fro! unattended 4ehicle": Gi4e the !ain
1ro4i"ion" of thi" eAce1tion5 and "tate in what circu!"tance" it will not a11l+:
0he&t &rom unattended 1ehicles is not co1ered unless the 1ehicle is completely enclosed
and securely lockedB and there is &orcible and 1iolent entry?e3itC ,lternati1elyB the 1ehicle
must be housed in a securely locked buildin!B )ith &orcible and 1iolent entry?e3it to or &rom
the buildin!C
0his does not apply to 1ehicles that are not in the custody or control o& the insured or any
principalB partnerB director or employee o& the insuredC
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Module 1-< Account" Recei4a2le5 Gla""5
0u"ine"" All Ri"*"5 Accidental 6a!a&e
Learnin& Outco!e"
%escribe the Hde&ined e1entsI under the abo1e sections o& the .ultimark policyG
%iscuss the co1er pro1idedG
:3plain the purpose and e&&ect o& the e3tensionsB speci&ic e3ceptions and other restrictions
to the co1erG
Identi&y )hen S,S4I, co1er is a1ailableC
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Introduction
0hese are the &our HaccidentI sections concerned )ith the insurance o& property on an all risks
basisC Co1er is a!ainst Hloss or dama!eIB but this is restricted by a list o& speci&ic e3ceptionsC
Account" Recei4a2le Section
Under other sections o& the policyB such as "&&ice contentsB FireB or 0he&tB co1er is a1ailable &or
the cost o& material and labour in reinstatin! business recordsB but not &or any &orm o&
conse5uential lossC 0his is also limited to the perils insuredC 0he ,ccounts recei1able section
o&&ers co1er on an all risks basis &or=
debit balances the insured is unable to collect as a result o& the destruction o& the records
the cost o& reinstatin! the recordsB so as to establish the amounts o)in!B and additional
collection costs made necessary because o& the dama!eC
6efined e4ent"
Loss or dama!e as a result o& accident or mis&ortune
to the insured8s books o& account or other business books or records
at the premises or at the residence o& any directorB partner or employee
or at the premises o& any accountant o& the insured
in conse5uence )hereo& the insured are unable to trace the outstandin! debit balances
due to themC
Indemnity is limited to the sums insured stated in the scheduleB plus additional costs o& collection
reasonably incurredC
I& the records are in immediate dan!er o& destruction and are remo1ed to a place o& sa&etyB the
co1er )ill also apply at this place and durin! transit to and &rom the usual premisesC 0he insured
must noti&y the insurers in )ritin! )ithin 0 daysC
S1ecific EAce1tion"
;a< ;i< )ear and tearB !radual deteriorationB moth or 1ermin
;ii< detentionB seiKure or con&iscation by any la)&ul authority
;iii< electricalB electronic or ma!netic inAuryB disturbances or erasureC 0his )ill be
co1ered i& the insured maintains duplicate records stored at di&&erent premises &rom
the ori!inalsB but there is a 4#00 e3cessC
;b< Loss caused by &raud or dishonesty o& any principalB directorB partner or employee o& the
insuredC 0his )ould be a &idelity claimC
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S1ecification
0he loss sustained by the insured in respect o& debit balances outstandin! as a direct result o&
the dama!eB but not e3ceedin! the di&&erence bet)een the outstandin! debit balances and the
amounts recei1ed or tracedC
E/ample5
"utstandin! debit balances 4 2#0 000 ;as de&ined<
0raced or recei1ed 4 100 000
Policy pays 4 1#0 000
Plus additional collection costs 4 2# 000
R 1(' ---
I& the sum insured is less than the outstandin! debit balancesB a1era!e appliesC
6eclaration" and ad8u"t!ent
NormallyB a pro1isional premium is char!edB based on /#F o& the sum insuredC
2ithin (0 days o& the end o& each monthB or other a!reed periodB the insured should submit a
si!ned declaration o& the total amount o& customers8 accounts outstandin!C ;0he amount
declared must not e3ceed the sum insured< ,t the end o& the yearB the &inal premium is
calculatedB based on the a1era!e amount at riskC 0he insured pays in the di&&erenceB or is
re&unded up to C F o& the pro1isional premiumC
For some reasonB this re5uirement is o&ten i!noredC Insurers and intermediaries miss the
opportunity o& e3tra premium?commissionC 0his also means that there is no check on )hether the
sum insured should be increased durin! the yearC
6efinition" E Out"tandin& de2it 2alance"
0he total declared in the most recent declarationB adAusted &or=
;a< bad debts
;b< accountin! entries subse5uent to the declaration
;c< any abnormal conditions o& trade that a&&ected or could ha1e a&&ected the businessC

E/ample5
Last declaration o& amounts outstandin! 4 2# 000
Less bad debts ;uncollectable< 4 10 000
4 22# 000
Plus subse5uent debits ;but be&ore the date o& loss< 4 0 000
Less credits 4 # 000
Plus?minus adAustment &or abnormal conditions Nil
"utstandin! debit balances R '- ---
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Other clau"e"
"ptional 4iot and Strike e3tensionB &or property outside 4S, or NamibiaC
,ccountants clauseC Certi&icates pro1ided by the insured8s auditors or pro&essional
accountants )ill be accepted as prima &acie e1idence in the adAustment or 1eri&ication o& a
claimC
%uplicate records ;i& stated in the schedule<C 0he e3istence o& duplicate recordsB kept
else)hereB 5uali&ies &or a reduced rateC :lectrical or ma!netic erasure o& records is not
co1ered unless duplicate records are keptC
Protections )arranty ;i& stated in the schedule<C 0he records must be kept in a &ire
resistant sa&e or stron! room outside business hoursB unless they are bein! used or
)orked onC .ore &a1ourable terms mi!ht be o&&ered i& this )arranty is includedB but the
)arranty must be strictly complied )ithC
0ransit e3tension ;i& stated in the schedule<C 4ecords may ha1e to be mo1ed around the
di&&erent premises co1ered under the %e&ined e1entsC 0his e3tension !i1es the necessary
co1er )hilst in transitC ;4emember that automatic co1er applies to remo1al in an
emer!ency situation<C
SASRIA
S,S4I, policies do not co1er conse5uential or indirect loss o& any kind ;other than loss o& rent<C
0he actual accountin! records )ill probably be co1ered under the Fire or the "&&ice contents
section o& the .ultimarkB and S,S4I, can be issued in conAunction )ith these onlyC
Gla"" Section
0he )ordin! includes internal and e3ternal !lassB )hether or not coated )ith a &ilmB as )ell as
mirrorsC 0here is no minimum thicknessB so that e1en small )indo) panes are co1eredC In the
pastB it )as usual to measure each sheet o& !lass and speci&y this in a scheduleG a time
consumin! processC In modern policiesB there is a blanket sum insured &or each set o& premisesC
0his has led to under>insuranceB so the co1er is no) subAect to a1era!eB ieC the sum insured
must be enou!h to co1er the replacement 1alue o& the !lass to!ether )ith any special treatment
or si!n)ritin!C
Some types of ,lass must be specified in order to be covered5
ColouredB patterned or )ired !lass ;anythin! other than plain plate or &loat !lass<C
9lass that is more than ( mm thickC
Laminated or sa&ety !lass more than (B# mm thickC ;Sa&ety !lass has t)o layers o& !lassB
&used to!ether by a plastic sheet<C
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6efined e4ent"
Loss or dama!e to internal and e3ternal !lass ;includin! mirrors<B si!n )ritin! and treatment
thereon at the insured8s premisesB the property o& the insured or &or )hich they are responsibleC
0he insurer8s ma3imum liability &or replacement is the sum insured stated in the schedule &or the
particular premisesC
Follo)in! loss o& or dama!e to the !lass the policy )ill also pay=
1C the cost o& boardin! up
2C dama!e to &ramesB )ido) displays ;includin! &i3tures and &ittin!s<B and bur!lar alarm stripsB
)ires and 1ibratorsC
C the cost o& remo1al and reinstallation o& &i3tures and &ittin!sC
4C the cost o& employin! a )atchman prior to replacement o& the !lass or boardin! up or repair
o& the alarmB unless payable under any other insuranceC
0here is an a!!re!ate limit o& 4 2 000 &or any one occurrenceC
S1ecific eAce1tion"
1C Loss or dama!e that is co1ered by &ire insurance unless the insured is responsible as tenant
and not as o)nerC 7o)e1erB i& the &ire co1er is insu&&icientB the !lass policy can be used to
make up the di&&erenceC
2C 9lass &ormin! part o& stock in tradeC
C 9lass that )as already cracked or broken at the start o& the co1erB unless specially a!reed by
the insurersC
4C %e&acement or dama!e other than actual &ractureC 0he policy )ould not co1er scratchin!B or
1andalism )ith spray cansC
EAten"ion > S1ecial re1lace!ent
0he National 'uildin! 4e!ulations re5uire that !lass in an area that is used by the public can be
replaced only by !lass o& shatterproo& 5ualityC 0he &rames mi!ht also ha1e to be altered to accept
the hea1ier !lassC 0his optional e3tension pro1ides &or the increased costs in1ol1edC 0he sum
insured must be su&&icientB or a1era!e )ill applyC
Riot and "tri*e
Premises outside 4S, or NamibiaC
SASRIA
NormallyB S,S4I, co1er )ould be issued in conAunction )ith the &ire insurance on the buildin!
and contentsC 0he 9lass section can be used as an underlyin! policy &or S,S4I,B but only i& Fire
perils are co1eredB eC!C &or !lass the tenant is responsible &or insurin! in terms o& the lease
a!reementC
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0u"ine"" All Ri"*" Section
Property is e3posed to many risks o& loss or dama!eB at the insured8s remises and a)ay &rom
themC NormallyB it is too e3pensi1e to co1er all property on an ,ll 4isks basisB so this is used
mainly &or hi!h 1alue itemsB especially those that are portableC Contracts o& hire or lease o&ten
re5uire ,ll 4isks co1er to be taken on the e5uipmentC
:3amples include=
LaptopB palmtop and notebook computers
Cellular phones
Photo!raphicB 1ideo and sound recordin! e5uipment
Car radios and C% players
Fa3 machines
Portable tools and e5uipment ;the section is subAect to a1era!eB so the sum insured must
be &or the &ull 1alue o& all such e5uipmentC Insurance should speci&y a ma3imum 1alue &or
any one item<C
Property on e3hibitionC Special short term insurances are also arran!edC
6efined e4ent"
Loss or dama!e to the )hole or any part o& the property described in the schedule )hile
any)here in the )orld by any accident or mis&ortune not other)ise e3cludedC 0here is pro1ision
&or a &irst amount payableG this does not apply to &ire li!htnin! or e3plosionC
S1ecific eAce1tion"
1C Loss o& or dama!e to property resultin! &rom or caused by
;a< the&t &rom any unattended 1ehicleB unless the 1ehicle is completely closed and securely
lockedB or is in a securely locked buildin!C 0here must also be &orcible and 1iolent entry or
e3itG 0his e3ception does not apply to 1ehicles that are not in the custody or control o& the
insuredC
;b< its under!oin! a process o& cleanin!B repairB dyein!B bleachin!B alteration or restorationG
;c< inherent 1ice or de&ectB 1erminB insectsB dampB milde) or rustG
;d< dishonesty o& directors or employeesG ;insurable under &idelity<
;e< detentionB con&iscation or retention by the authoritiesG
2C )ear and tear or !radual deteriorationB !radual action o& li!ht or climatic or atmospheric
conditionsB unless &ollo)in! an accident not other)ise e3cludedG
C mechanicalB electronic or electrical breakdo)n or deran!ement unless &ollo)in! an accident
not other)ise e3cludedG
4C loss or dama!e to cashB banknotesB etcC > insurable under moneyC

#C loss or dama!e to !oods consi!ned under a bill o& ladin!C , bill o& ladin! is e1idence that
!oods ha1e been accepted &or transport by seaC 0his e3ception a1oids contribution )ith
marine insuranceB )here the scope o& co1er is totally di&&erentC
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S1ecific condition"
Avera,e= 0his does not apply to property that is indi1idually insured as a separate itemC For
e3ampleB insurance on a particular camera )ould not be subAect to a1era!eB but a !eneral item
on photo!raphic e5uipment )ould beC ,n item co1erin! H)orkmen8s toolsI )ould ha1e to be
su&&icient &or all the tools o& all the )orkmenC
Re1lace!ent 4alue condition"
I& stated in the schedule to be includedC
0he amount payable is the cost o& replacin! property o& the same kind or typeB or repairin! it in as
!ood as ne)B but not better than ne)B conditionC I&B as o&ten happensB the only replacement
a1ailable is superior to the insured item )hen ne)B the insured )ill ha1e to contribute to the lossC
0his is called Hallo)ance &or bettermentIC
I& the insurance is on replacement 1alue conditionsB the basis &or a1era!e is=
sum insured 3 loss
cost o& replacement o& the )hole o& the property insured
S1ecific eAten"ion"
Increa"e in co"t of wor*in& eAten"ion
0his optional e3tension is to co1er costs reasonably incurred to maintain normal operationsB
&ollo)in! a loss payable under the 'usiness all risks sectionC For e3ampleB this could be used to
pay &or the hire o& a replacement )hile a dama!ed o&&ice machine )as bein! repairedC
Riot and "tri*e eAten"ion
For property outside 4S, or NamibiaC
SASRIA
,ll risks insurance includes the &ire perilsB and is a permitted underlyin! policy &or S,S4I, co1erC
Accidental 6a!a&e Section
It is &airly easy to identi&y the property &or )hich one )ould need speci&ic co1erB such as 'usiness
all risksB .oneyB or 9oods in transitB but other property can be dama!ed in une3pected )aysC ,n
e3ample is the accidental collapse o& shel1in! or stora!e racksC "&tenB bulky and hea1y items
needin! mechanical handlin! are stacked on the upper racksB )hile smaller and li!hter man>
handled packa!es are placed )ithin con1enient reach on the lo)er racksC 0he entire top hea1y
structure can collapseB )ith considerable dama!e to stockC
Instead o& tryin! to identi&yB list and 1alue indi1idual itemsB a sin!le amount is insured on the
insured property de&ined in the sectionB at the premisesC
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6efined e4ent" .i/
,ccidental physical loss or dama!e to the insured property at or about the premisesB not
other)ise insuredB
or &or )hich insurance is a1ailable under any other section ;e3cept the 'usiness all risks
sectioncontri2ution clau"e= I& any de&ined e1ent is more speci&ically insuredB the ,ccidental
dama!e insurance )ill not contribute to)ard the settlementC
S1ecific eAce1tion"
0he abo1e description includes property o& all kindsB and the co1er is a!ainst ,ll 4isksB so
insurers ha1e to be especially care&ul that this section does not co1er e1en more than it )as
meant to doC
0he company shall not be liable &or=
;a< perils and circumstances speci&ically e3cluded &rom any other insurance a1ailable &rom the
companyB nor &or any e3cess applied to any other policyB or short&all due to the application o&
the a1era!e condition
;b< more than the indi1idual 1alue o& any itemC 0he co1er does not allo) &or the special 1alue an
item may ha1e as part o& a set or collectionB )ithout )hich the rest o& the set is incompleteC
0his is called the QPairs and setsI clauseB and is part o& many ,ll risks policiesC

;c< detentionB con&iscation ;etc<C
;d< une3plained disappearance or shorta!esB errors and omissionsC 0here is no co1er a!ainst
HtradeI risks like stock shorta!esB or the results o& poor administration and controlC
;e< loss or dama!e caused by =
;i< &raudB committed a!ainst the insuredB or by the insured8s principals or a!ents
;ii< o1erheatin!B implosion ;burstin! in)ards< crackin!B &racturin!B )eld &ailureB nipple
leaka!e or other &ailure o& 1esselsB pipesB tubes or similar apparatusC .ostly these are
matters &or en!ineerin! insuranceC
;iii< breakdo)nB electricalB electronic and?or mechanical deran!ementC
0heseB tooB are en!ineerin! insurance risks=
;i1< )orkin! on property in any )ay
;1< inherent &aultsB and !radually operatin! causes
;1ii< dentin!B chippin!B scratchin! or crackin! that does not a&&ect the operation o& the item
0his is kno)n as cosmetic dama!eC
;1iii< termitesB moths and other insectsB 1erminB inherent 1ice ;a characteristic o& property or
!oods that leads to deterioration<B &umesB &la)sB latent de&ectB the action o& li!htB
&luctuations in atmospheric or climatic conditionsC ;.ostlyB theseB tooB can be classed
as natural or !radually operatin! causes<C
;&< settlement or beddin! do)nB !round hea1e or crackin! o& structuresB remo1al or )eakenin! o&
support
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;!<
;i< loss o& or dama!e to chemicalsB li5uids !ases or &umes due to leaka!e &rom the
container
;ii< loss or dama!e resultin! &rom this leaka!e
0his can be specially insured under %e&ined e1ents ;ii<B e3plained laterC
;h< &ailureB )ithholdin!B or lack o& supplies o& )aterB steamB !asB electricityB &uel or re&ri!erant
;i< collapse o& plant and machineryB buildin!s and structures ;other than shel1in! or
stora!e plat&orms<
0he schedule to this section makes pro1ision &or a &irst amount payable on claimsC 0his is to !i1e
the insured an e3tra stake in the continued sa&ety o& the property insuredB and to sa1e the
administrati1e cost o& handlin! small claimsC
6efinition of In"ured Pro1ert+
,ny tan!ible property belon!in! to the insured or held in trust or commission &or )hich they are
responsibleC H0an!ibleI is Hable to be touchedIC 0his means that there is no co1er &or intan!iblesB
such as copyri!ht or the insured8s !ood nameC
2e do not automatically include all such property in the co1er and the sum insuredB because=
some property )ill already be insured on an ,ll risks basisB under other sections o& the
.ultimark policyB or else)here
some kinds o& property need special under)ritin!B or there are other insurances that are
desi!ned &or thisC
0he &ollo)in! are not co1eredB unless stated in the schedule=
;a< moneyB and the kind o& property that )ould be insured under the money section
;b< &ursB Ae)elleryB and similar items o& special 1alue
;c< property in transit by airB inland )ater)ay or sea
;d< mechanically or electrically propelled 1ehiclesB mobile plantB cara1ans or trailers
;e< standin! or &elled treesB cropsB animalsB landB roads pa1ements and dri1e)aysB damsB
reser1oirs brid!esB e3ca1ationsB tunnels and property belo) !roundB cable)aysB and
e3plosi1es ;0his is a shortened listB but you )ill !et the !eneral idea<C
;&< electronic data processin! e5uipmentB data mediaB and in&ormation
;!< property in course o& erection or dismantlin!
;h< &ra!ile or brittle obAects like !lass or china)areC
6efined e4ent" .ii/
;I& stated in the schedule to be co1ered<C
Loss o& or dama!e to chemicalsB &luidsB !ases or &umes and physical dama!e to insured
propertyB resultin! &rom dischar!e or leaka!e &rom tanksB pipes or apparatusC 0his does not co1er
loss or dama!e resultin! &rom )ear and tear or other !radually operatin! causesC
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3estricted cover clause
0he insurance in respect o& )ritten documents and recordsB patternsB modelsB moulds and
computer system records is limited to the materials and labour &or recreatin! themB and does not
include the 1alue o& the in&ormationC
Additional costs clause
In respect o& buildin!sB plant and machineryB the sum insured includes=
;a< costs in repair or reinstatement due to ha1in! to comply )ith public authority re5uirements
;b< &ees &or the e3amination o& plans
;c< cost o& demolitionB and remo1al o& debris &rom the site and area immediately adAacentC 0here
is no co1er &or any costs or e3penses arisin! &rom pollution or contamination o& property not
insured by this policy?section
;d< pro&essional &ees o& architectsB 5uantity sur1eyors and other consultants and the sum insured
on all insured property includes
;e< &ire bri!ade char!es
Mort,a,ee clause
Insurers accept the interest o& a mort!a!ee i& they ha1e been noti&ied o& thisC 0he mort!a!ee8s
interest in the insurance )ill not be preAudiced by acts or omissions o& the mort!a!or that took
place )ithout the mort!a!ee8s kno)led!eC 0he mort!a!ee must noti&y the insurers as soon as
this comes to his attention and be responsible &or any additional premium payableC
Tenants clause
SimilarlyB the insured )ill not be preAudiced by the act o& any tenant in the premises he o)nsB or o&
the landlord or a co>tenant in premises he occupiesC Insurers must be noti&ied as soon as he
becomes a)are o& such actB and he must then pay any resultant additional premiumC
3ailway and ot$er
0he insured shall not be preAudiced by si!nin! the H0ransnet Carta!e subro!ation clause
;7aKardous Premises< IndemnityI or other special a!reements )ith the 0ransnet ,dministration
re!ardin! pri1ate sidin!s or similar a!reements )ith other !o1ernment bodiesC 0hese a!reements
in1ol1e the )ai1er o& some o& the insured8s common la) ri!htsB )hich )ould then a&&ect insurers8
ri!hts o& subro!ationC 'y this clauseB insurers accept the positionC
Me!oranda
;I& stated in the schedule to be includedC<
Avera,e
I& the insurance is on a &ull 1alue basisB pro rata a1era!e applies i& there is underinsuranceC
E/cluded property
0he insured mi!ht not )ant this type o& insurance on some o& the propertyB so this can be
specially e3cludedC
3einstatement
0he amount payable &ollo)in! an insured e1ent to buildin!sB plant and machinery ;not stock or
!eneral contents< is the cost o& replacement on the same site property o& the same kind or typeB
but not superior to or more e3tensi1e than the insured property )hen ne)C I& this option is taken
the sum insured on property o& this kind must be increased to allo) &or replacement 1aluesB so as
not to be penalised by a1era!eC
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First loss avera,e
Instead o& insurin! &or &ull 1alueB the insured can decide to insure only &or the ma3imum amount
likelyB in his?her estimationB to be lost in any one e1entC In &i3in! the premiumB the insurers )ill still
)ant to kno) the total 1alue o& property at riskC In the policy scheduleB the 0otal 1alueB and the
Sum insuredB are both sho)nC I& the total 1alue at the time o& loss or dama!e is less than that
sho)n in the scheduleB the amount payable is proportionately reducedC
0otal 1alue sho)n in schedule 3 &irst loss sum insured
,ctual 1alue at time o& loss
SAS3A
,lthou!h the ,ccidental %ama!e section is issued on an ,ll risks basisB it does not co1er Fire
perilsB and cannot be used as the underlyin! policy &or the issue o& S,S4I,C
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In"truction"
1: State at what 1lace" the record" are co4ered:
: Identif+ the circu!"tance" where du1licate record" are re7uired:
$: Indicate what t+1e" of &la"" !u"t 2e "1eciall+ !entioned if co4er i" re7uired:
4: State which additional co"t" are co4ered5 and for how !uch:
': Identif+ the effect of the 9ational 0uildin& Re&ulation" on Gla"" in"urance:
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#: Identif+ the 1eril" to which the fir"t a!ount 1a+a2le doe" not a11l+:
(: State which territorie" are co4ered:
3: Gi4e an eAa!1le of the o1eration of the eAten"ion for increa"ed co"t of wor*in&:
,: EA1lain what i" !eant 2+ ?co"!etic da!a&e@:
1-: A container at the in"uredF" 1re!i"e" lea*ed a corro"i4e fluid onto a "toc*1ile of
fini"hed &ood"5 !a*in& the! unfit for "ale: EA1lain whether or not thi" lo"" i"
co4ered:
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$**
Module 10
1: State at what 1lace" the record" are co4ered:
,t the &irm8s premisesB or at the residence o& any directorB partner or employeeC
,t the premises o& the insured8s accountantC
2hilst temporarily remo1ed to a place o& sa&etyB because o& immediate dan!er o&
destructionB includin! transit there and backC
%urin! other transitsB but only i& the special transit e3tension has been takenC
: Identif+ the circu!"tance" where du1licate record" are re7uired:
:lectrical electronic or ma!netic erasure o& records is not co1ered unless duplicate
records are kept at separate premisesC %uplicate records mi!ht also be kept in order to
5uali&y &or a reduced rate &or the co1erC
$: Indicate what t+1e" of &la"" !u"t 2e "1eciall+ !entioned if co4er i" re7uired:
ColouredB patterned or )ired !lass ;anythin! other plain plate or &loat !lass and
mirrorsC<G
9lass more than ( mm thickG
Laminated or sa&ety !lass more than (B# mm thickG
9lass that is already cracked or brokenC
4: State which additional co"t" are co4ered5 and for how !uch:
Cost o& boardin! upC
%ama!e to &ramesB )indo) displays ;includin! &i3tures and &ittin!s<B bur!lar alarm
stripsB )ires and 1ibratorsG
4emo1al and reinstallation o& &i3tures and &ittin!sG
Cost o& employin! a )atchman prior to replacement o& the !lass or boardin! up or
repair o& the alarmB unless payable under any other insuranceC
0here is an a!!re!ate limit o& 42000 &or any one occurrenceC
': Identif+ the effect of the 9ational 0uildin& Re&ulation" on Gla"" in"urance:
0he re!ulations re5uire that !lass in an area used by the public can be replaced only by
!lass o& shatterproo& 5ualityC 0his !lass is more e3pensi1eB and the &rames mi!ht also
need to be alteredC , special e3tension to the policy is needed in order to co1er these
e3tra replacement costsC
#: Identif+ the 1eril" to which the fir"t a!ount 1a+a2le doe" not a11l+:
Fire and li!htnin!C
(: State which territorie" are co4ered:
NormallyB the co1er is )orld)ideC
3: Gi4e an eAa!1le of the o1eration of the eAten"ion for increa"ed co"t of wor*in&:
I& an o&&ice machine is stolen or dama!edB it may be necessary to hire another until repairs
are carried out or a replacement can be obtainedC 0he optional increase in cost o&
)orkin! e3tension can co1er the hire costC
,: EA1lain what i" !eant 2+ ?co"!etic da!a&e@:
%entin!B chippin!B scratchin! or crackin! that does not a&&ect the operation o& the itemC
BN"IN#
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Module 10 - cont
1-: A container at the in"uredF" 1re!i"e" lea*ed a corro"i4e fluid onto a "toc*1ile of
fini"hed &ood"5 !a*in& the! unfit for "ale: EA1lain whether or not thi" lo"" i"
co4ered:
Loss or dama!e resultin! &rom the leaka!e o& chemicals is not co1eredB unless specially
insured under %e&ined e1ents ;ii<C
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Module 11< Grou1 Per"onal Accident and
Stated 0enefit"
Learnin& Outco!e"
%istin!uish bet)een contracts o& indemnity and contracts o& compensationG
:3plain ho) insurable interest applies in Personal ,ccident?Stated 'ene&its contractsG
%i&&erentiate bet)een 9roup Personal ,ccident and Stated 'ene&its co1ersG
%escribe the %e&ined :1ents co1eredG
:3plain the e&&ect o& the de&initionsB pro1isosB e3tensions and e3ceptionsG
Identi&y )hat is meant by passi1e )ar riskB and the reason this co1er may be necessaryG
:3plain )hy S,S4I, co1er does not apply to these sectionsC
BN"IN#
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Introduction
.ost insurances are contracts o& indemnityC 0he aim is to place the insured in the same &inancial
position a&ter the loss as be&oreC 2e cannot put a &inancial 1alue on li&e and limbB so Personal
,ccident and Stated 'ene&its policies do not set out to indemni&yB but only to pay a sum insured
as statedC
UsuallyB these are contracts o& compensationB not indemnityC
Insurable interest is an essential elementB as it is )ith other &orms o& insuranceC People ha1e an
unlimited insurable interest on their o)n li&eB and husbands and )i1es each ha1e an insurable
interest in the li&e o& the otherC In practiceB the amount insured depends on the proposer bein!
able to a&&ord the premiumB and the insurer bein! )illin! to accept the riskC ;Eou need to be
care&ul )here the amount insured seems hi!h in relation to the person8s income and position in
li&eC H,ccidentsI and e1en murders ha1e been arran!ed to !et the insurance money<C
'ecause the .ultimark policy is meant &or businessesB it is usually the employer )ho takes out
the policy &or the bene&it o& the employeesB to supplement the bene&its a1ailable under the
Compensation &or "ccupational InAuries and %iseases ,ctC
In terms o& the C"I% ,ctB all employees are entitled to compensation &or occupational accidents
and diseasesC %isability bene&its under the ,ct are ta3>&reeB but are based on /#F o& earnin!s<C
Sometimes insurance is taken out by someone else alto!etherC For e3ampleB a business mi!ht
not be able to continue )ithout a particular employeeB and insures &or the amount it )ould cost to
&ind and train a replacementC 0his is called key man insuranceC It becomes a policy o& indemnityB
and the amount they can insure is limited to their &inancial interestC
Per"onal Accident and Stated 0enefit"
0he co1er is almost the sameB but=
.ersonal accident
is arran!ed on actual sums insuredB eC!C death or permanent disability 400 000B
temporary disability 42 000 per )eekB medical e3penses 410 000C
has a rate char!ed as a percenta!e o& the sums insured under the di&&erent sectionsC
is use&ul &or sel&>employed peopleB and others )ho do not ha1e a &i3ed )a!eC
bene&its are independent o& any other e3istin! co1erC
Stated benefits
is directly related to earnin!sB eC!C %eath or permanent disability 3 annual earnin!sB
temporary disability 1?#2 o& the annual earnin!sB per )eekC ;.edical e3penses are
co1ered &or a &i3ed amountC<
has a rate char!ed on the annual salary &i!ureC
is use&ul &or businessesB especially those )ith a number o& employeesC ;,s the salary
increasesB so does the bene&it under the policy<C
ha1e any bene&it recei1ed under the Compensation &or "ccupational ,ccidents and
%iseases ,ct deducted &rom the amount payable &or temporary disability or medical
e3pensesC
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:ither policy can be issued on=
a schedule o& names ;this is more common on the Personal accident basis<
positionsB such as Company secretary or 2orks mana!erB
classes o& occupationB such as administrati1e and clerical employeesB tra1ellers and
representati1esB and &actory )orkersC
,ll employees can be co1eredB or only speci&ied cate!oriesC Co1er can be on a 24 hour basisB or
&or occupational accidents onlyC
In theoryB the insured can choose any combination o& bene&itsB but insurers mi!ht not be )illin! to
insure some o& these in isolation &rom the othersC
6efined E4ent"
'odily inAury ;this includes death<
caused by accidentalB 1iolent e3ternal and 1isible means ;HaccidentalI means unintended
or une3pectedC Shootin!B stabbin!B and poisonin!B or any inAury intentionally in&licted by
anotherB is accidentalB &rom the 1ictim8s point o& 1ie)C 0he de!ree o& 1iolence does not
matterC H:3ternal and 1isibleI is the opposite o& internal causesB like illnesses and bodily
ailments<C
to any principalB partner director or employee o& the insured speci&ied in the scheduleC
0hese e1ents must result in the circumstance claimed &or ;deathB permanent or temporary
disabilityB and?or medical e3penses< )ithin 24 calendar months o& the inAuryC 0he mount o& co1er
is stated in the schedule to the sectionC
Insurers )ill pay to the insured on behal& o& such person or his?her estate ;the employer is the
insuredB and submits the claimB but e3cept in the case o& special Hkey>manI insurance described
abo1eB the employer has no insurable interestB and must pass on the payment to the
employee?estate<C
6efinition"
Per!anent di"a2ilit+ .PT6/
0here is a scale o& bene&itsB ran!in! &rom 100F o& the amount insured &or the loss by physical
separation o& one or more limbsB or the loss o& an eyeB to 2F &or a toeC
Permanent total incapacity &rom &ollo)in! the insured person8s usual occupation or any other
occupation &or )hich such person is &itted by kno)led!e or trainin!B is also insured &or 100F o&
the amount insuredC
For e3ampleB a sur!eon mi!ht no lon!er be able to per&orm operationsB but )ould not be
permanently disabled i& still capable o& actin! as a consultantC , salesperson )ho can no lon!er
dri1e a car mi!ht !et a clerical AobC
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Memoranda
;i< 2here the inAury is not speci&iedB insurers )ill pay such sum as is consistent )ith the scaleC
;ii< Permanent total loss o& use o& part o& the body shall be treated as loss o& such partC ;0his
modi&ies the re&erence to Hphysical separationI<C
;iii< 100F shall be the ma3imum percenta!e o& compensation &or permanent disability &or any one
accident in respect o& any one personC I&B in the same accidentB someone su&&ers se1eral o&
the inAuries listed in the scaleB they are entitled to the 1arious bene&itsB but not to more than
100F in totalC
Te!1orar+ total di"a2ilit+ .TT6/
.eans total and absolute incapacity &rom &ollo)in! usual business or occupationC UsuallyB the
person )ould be Hbooked o&& )orkIB but this also re&ers to bein! unable to do any )ork at all in the
current occupationC ,n earB nose and throat sur!eon )ho sprained his )rist and )as temporarily
unable to operateB )as held to be temporarily totally disabledC
0he schedule &or the Personal ,ccident and Stated 'ene&its sections o& the .ultimark pro1ides
&or a time &ranchiseC 0his means that there is no claim &or short periods o& disability lastin! less
thanB sayB one or t)o )eeksB but compensation is payable &or the entire period i& the disability
lasts lon!er than thisC
0here is also an upper limit to the disability periodB usually #2 or 104 )eeksC
Medical eA1en"e"
0his includes medicalB sur!icalB dental and hospital treatmentB aids and prostheses ;arti&icial
limbs< as a result o& an accidentC 0here ha1e been !reat ad1ances in medical science and
technolo!yB )ith correspondin! increases in the cost o& treatmentC For e3ampleB )here a se1ered
&in!er )ould once ha1e been trimmed o&& and the stump stitched o1erB it may no) be possible to
reattach thisC Insurers do not allo) 1ery hi!h sums insured &or medical e3pensesC
Note that the same accident can result in a claim &or permanent disabilityB temporary total
disabilityB and medical e3pensesC
Annual earnin&" ;,pplicable to the Stated 'ene&its co1er<
0his is the annual rate o& )a!eB salary and cost o& li1in! allo)ance o& the inAured employee at the
time o& the accidentC It includes o1ertimeB house rentB &ood allo)anceB commissionB and any other
considerations o& a constant natureC 0he premium and the death and permanent disability
bene&its are based on this &i!ureC
A4era&e wee*l+ earnin&" ;,pplicable to the Stated 'ene&its co1er<
0his is one &i&ty>second o& the annual &i!ureB and applies to temporary disabilityC
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0u"ine"" li!itation
I& stated in the schedule to be applicableC
"&tenB this is called the H)orkin! hours basisIB but the co1er is actually a!ainst occupational
accidents onlyB as compared to t)enty>&our hour co1erC 2hether an accident occurred Hin the
course o& employment in the businessI depends on the circumstancesB and not necessarily on
)hether this )as durin! normal business hoursC
4emember that all employees also enAoy co1er &or occupational accidents under the
Compensation &or "ccupational InAuries and %iseases ,ctC I& the co1er is Stated 'ene&itsB
compensation under the policy is reduced by any amount payable under C"I%C
Pro4i"o"
1C In respect o& any one accident in1ol1in! any one personB the insured can claim &or death or
disabilityB ;)hiche1er is the hi!her amount<B but not &or both o& theseC 7o)e1erB they can also
claim &or temporary disability and medical e3pensesC
2C Payment &or temporary total disability is limited to the number o& )eeks stated in the
scheduleB and ceases as soon as the inAury has healed as &ar as is reasonably possibleC
C 0he a!e limits under the policy are 1# to /0 yearsC :3cept in special circumstancesB persons
under 1# are not supposed to be )orkin!C 0he upper a!e limit can be e3tended at the
under)riter8s discretionB usually on a year to year basisB and subAect to satis&actory e1idence
o& healthC Care must be taken that this does not con&lict )ith any reinsurance arran!ementsC
4C Appli!able to Stated 3enefits onl%
,ny compensation &or temporary total disability or medical e3penses shall be reduced by the
compensation payable under any )orkmen8s compensation enactmentB such as C"I%C
#C 0he insurer has the ri!ht to insist on an independent medical e3amination at its o)n e3penseC
0he claimant may not re&use medical treatmentC ;Claims )ill be supported by a medical
certi&icateB but the insurer mi!ht )ant con&irmationC 0he claimant cannot re&use medical
treatmentB but accordin! to the le!al 1ie)B cannot be compelled to under!o sur!ery<C
(C 9eneral condition 2 ;"ther insurance?contribution< and $ ;,utomatic reinstatement o& co1er
a&ter loss<B do not applyC
/C 0he usual e3clusion o& )arB riot and strike does not apply to these sectionsB and is replaced
by the H2ar e3clusionIC S,S4I, co1er is not neededB but the policy does not co1er death or
inAury directly or indirectly related to or in conse5uence o& )ar or similar circumstancesC

Pa""i4e Bar Ri"*"
Notice that death or inAury directly or indirectly related to or in conse5uence o& )ar and similar
hostilities is e3cludedC For e3ampleB )hen an army o&&icer )as )alkin! alon! a rail)ay line to 1isit
sentries and )as killed by a trainB the e3clusion appliedC People 1isitin! the )orld8s trouble spots
should apply &or additional co1erB kno)n as Hpassi1e )ar riskIC 0his may be a1ailable at the
under)riter8s discretion dependin! on the indi1idual circumstances and the risk in1ol1edC
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EAten"ion"
1C EA1o"ure
'odily inAury shall be deemed to include inAury caused by star1ationB thirst and?or e3posure to
the elementsB directly or indirectly resultin! &rom mishapC H.ishapI means Han unlucky
accidentIC 0his includes circumstances like ship)reckB or !ettin! lost on a mountain trailC
2C 6i"a11earance
0he insurers )ill pay i& they are satis&ied that the circumstances indicate inAury co1ered by this
section o& the policyB resultin! in deathC For e3ampleB people ha1e &allen o1erboard &rom
ships or ha1e been abductedB and the body has ne1er been reco1eredC ;It is not su&&icient
that someone has simply H!one missin!I<C 0he sna! is that i& the person subse5uently turns
upB ali1eB the insured must return the moneyC
C 0urn" di"fi&ure!ent ;i& stated in the schedule to be included<C
.edical treatment &or accidental burns is co1ered under the medical e3penses itemC Under
the optional burns dis&i!urement e3tension to the scale o& bene&itsB insurers also pay
compensation &or permanent dis&i!urementC 0his is up to #0F o& the amount insured
;dependin! on the percenta!e area dis&i!ured< i& this is on the &ace or neckB and up to 2#F i&
this is on the rest o& the bodyC
I& there is less than 10F dis&i!urementB there is no claim under this e3tensionC
UsuallyB the rate char!ed &or P0% is loaded by 2#F to #0FB dependin! on the riskC
4C Life "u11ort !achiner+
NormallyB death must result )ithin 24 calendar months o& the de&ined e1entsB but this mi!ht
ha1e been delayed by the use o& li&e support machineryB e5uipment or apparatusC In
reckonin! the 24 month periodB any time o& not less than three consecuti1e days on li&e
support machinery )ill not be includedC
S1ecific EAce1tion"
In the .ultimark policyB there are as &e) e3ceptions as possibleB and some o& these can be
amended on payment o& additional premiumC
:3ceptions are deathB disability or medical e3penses=
;a< )hile tra1ellin! by airB e3cept purely as a passen!er ;not necessarily &are>payin!<C 0here is
no restriction on the type o& aircra&tC
;b< by the person8s suicideB or intentional sel& inAuryC
;c< caused solely by an e3istin! physical de&ect or other in&irmityC Indi1idual personal accident
policies usually call &or disclosure o& any physical de&ects that mi!ht a&&ect the riskB but this is
di&&icult in the case o& an employerC In the .ultimark policyB e3istin! physical in&irmities are
not !rounds &or repudiation o& a claimB unless they are the sole cause o& the accidentC
;d< as a result o& the in&luence o& alcohol dru!s or narcoticsB unless administered or prescribed by
a member o& the medical pro&ession and taken on doctor8s ordersC It is not enou!h to sho)
that the person )as drunk or dru!!edG this must be a contributin! cause o& the accidentB
althou!h it need not be the sole causeC
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;e< as a result o& participatin! in any riot or ci1il commotionC HParticipatin!I means Htakin! partIC
I& the person )as merely an innocent bystanderB the co1er )ould still operateC Cases such as
a person attemptin! to mediateB or a security !uard tryin! to protect persons or propertyB are
probably co1eredB but dependin! on the indi1idual circumstances and &actsC
;&< in the case o& &emalesB directly or indirectly resultin! &rom or accelerated by or attributable to
pre!nancyB childbirthB abortionB miscarria!eB obstetrical procedures or any disease related to
theseC
0his )ide e3clusion may seem harshB but the problems in1ol1ed are o& a medical natureC
;!< en!a!in! inB or as a result o& en!a!in! inB
;i< motor cyclin!B )hether as a dri1er or a passen!erB other than on the business o& the
insuredC 'usiness use is allo)edB because this may be the person8s means o& makin! a
li1in!B but the particular occupationB e!C motor cycle messen!er?deli1eryB should be rated
appropriatelyC For an additional premiumB insurers may be prepared to delete or modi&y
the e3clusion &or sta&& members )ho use motor cycles &or transport to )orkB and &or pri1ate
purposesC
;ii< racin! o& any kind in1ol1in! the use o& any po)er dri1en 1ehicleB 1esselB or cra&t
;iii<
mountaineerin! necessitatin! the use o& ropesB
)inter sports in1ol1in! sno) or iceB
polo on horsebackB
steeplechasin! ;this is a horse race )ith obstacles to Aump o1erB but could also be a
cross> country &oot race<
pro&essional &ootball ;not only soccerB but 4u!by as )ell<C
han!>!lidin!C
SASRIA
S,S4I, co1er is not neededB and there is no S,S4I, policy applicableC
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In"truction"
1: EA1lain wh+ 1er"onal accident in"urance i" u"uall+ de"cri2ed a" a contract of
co!1en"ation:
: Indicate the rele4ance of in"ura2le intere"t to 1er"onal accidentL"tated 2enefit"
in"urance:
$: 6i"tin&ui"h 2etween the in"ured5 and the 1er"on."/ in"ured:
4: Identif+ the !ain difference in the 2enefit" a4aila2le under Grou1 Per"onal Accident
and Stated 0enefit" co4er":
': State whether the "ection" !entioned in 7ue"tion 4 a2o4e would 1a+ a clai! in
re"1ect of a 1er"on who had 2een 1oi"oned 2+ "o!eone el"e5 &i4in& rea"on" for
+our an"wer:
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#: EA1lain whether contri2ution will a11l+ if "o!eone i" co4ered under !ore than one
Per"onal Accident L Stated 0enefit 1olic+:
(: )ollowin& a clai!5 !u"t the "u! in"ured 2e rein"tatedC Gi4e the rea"on for +our
an"wer:
3: Identif+ the !eanin& of ?1a""i4e war ri"*" co4er@ and the circu!"tance" in which it
i" needed:
,: EA1lain wh+ SASRIA co4er i" not needed in connection with Per"onal Accident and
Stated 0enefit" in"urance:
1-: )or 1ur1o"e" of the 1olic+ co4er5 di"tin&ui"h 2etween !otorc+clin& on the
in"uredF" 2u"ine""5 and !otorc+cle tra4el to and fro! wor*:
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Module 11
1: EA1lain wh+ 1er"onal accident in"urance i" u"uall+ de"cri2ed a" a contract of
co!1en"ation:
2e cannot put a &inancial 1alue on li&e and limbB so it is not possible to place the claimant
in the same &inancial position a&ter the accident as be&oreC For this reasonB personal
accident insurance undertakes to pay compensationB not to indemni&yC ,n e3ception is
Hkey>man insuranceI )here the sum insured is limited to a &inancial interest in the li&e
insuredC
: Indicate the rele4ance of in"ura2le intere"t to 1er"onal accidentL"tated 2enefit"
in"urance:
Insurable interest is an essential element o& an insurance contractC People ha1e an
unlimited insurable interest in their o)n li&eB and husbands and )i1es each ha1e an
insurable interest in the li&e o& the otherC 2hen the employer takes out 9roup Personal
,ccident or Stated 'ene&its insuranceB this is done on behal& o& the employeesC 0he
employee?estate is entitled to the policy bene&itC
$: 6i"tin&ui"h 2etween the in"ured5 and the 1er"on."/ in"ured:
0he insured is the person )ho takes out the policyB pays the premiumB and submits any
claimsC 0he persons insured are the people )hose li1es are co1ered by the policyC In
9roup P,?S'B the policy bene&its are paid to the insured on behal& o& the employeesC
4: Identif+ the !ain difference in the 2enefit" a4aila2le under Grou1 Per"onal Accident
and Stated 0enefit" co4er":
Under Stated 'ene&itsB any compensation &or temporary total disability or medical
e3penses is reduced by the compensation payable under 2orkmen8s Compensation?
C"I%C 0his does not apply to 9roup Personal ,ccident bene&itsC This is the main
differen!e between the two !overs. Iou !ould mention that S3 is based on wages and &A
on fi2ed sums insured# but this does not reall% affe!t the poli!% benefits.
': State whether the "ection" !entioned in 7ue"tion 4 a2o4e would 1a+ a clai! in
re"1ect of a 1er"on who had 2een 1oi"oned 2+ "o!eone el"e5 &i4in& rea"on" for
+our an"wer:
,ccidental poisonin! is co1eredC ,ny inAury intentionally in&licted by another is accidentalB
&rom the 1ictim8s point o& 1ie)B so intentional poisonin! is also co1eredC Poison is
administered by 1isible e3ternal meansB althou!h the e&&ects mi!ht be &elt internallyC
#: EA1lain whether contri2ution will a11l+ if "o!eone i" co4ered under !ore than one
Per"onal Accident L Stated 0enefit 1olic+:
9eneral condition 2B other insurance?contributionB does not apply to P,?S'C It is
impossible to place a &inancial 1alue on li&e and limbB so the co1er under both policies )ill
applyC
(: )ollowin& a clai!5 !u"t the "u! in"ured 2e rein"tatedC Gi4e the rea"on for +our
an"wer:
9eneral condition $B 4einstatement o& co1er a&ter lossB does not apply to P,?S'C 0he
policy limits apply to an accident or series o& accidents arisin! &rom one cause in respect
o& any one personC
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Module 11 - cont
3: Identif+ the !eanin& of ?1a""i4e war ri"*" co4er@ and the circu!"tance" in which it
i" needed:
In a )arlike situationB innocent non>combatants can be killed or inAured ;passi1e )ar risk<C
0he P,?S' sections do not co1er death or inAury directly or indirectly caused byB related toB
or in conse5uence o& )ar and similar circumstancesC People 1isitin! areas )here there
are open hostilities ;)hether or not )ar has actually been declared< need co1er a!ainst
passi1e )ar riskC
,: EA1lain wh+ SASRIA co4er i" not needed in connection with Per"onal Accident and
Stated 0enefit" in"urance:
0he P,?S' sections do not e3clude the HS,S4I,I perils o& riotB strike and public disorderC
Separate S,S4I, co1er is not neededB so there is no S,S4I, policy a1ailable &or these
bene&itsC
1-: )or 1ur1o"e" of the 1olic+ co4er5 di"tin&ui"h 2etween !otorc+clin& on the
in"uredF" 2u"ine""5 and !otorc+cle tra4el to and fro! wor*:
.otorcyclin! on the insured8s business is automatically co1eredB because this may &orm a
necessary part o& the occupationC .otorcycle tra1el &or other purposesB such as tra1el to
and &rom )orkB is not co1ered unless the policy is specially e3tendedC
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Module 1< Electronic E7ui1!ent Section
Learnin& Outco!e"
%escribe the Hde&ined e1entsI under the abo1e section o& the .ultimark policyG
%iscuss the co1er a&&ordedG
Indicate ho) claims &or total and partial loss and ne) and older e5uipment are
indemni&iedG
:3plain the purpose and e&&ect o& the e3ceptionsB clausesB e3tensionsB and !eneral
memorandaG
State )hether S,S4I, co1er is a1ailable in terms o& this sectionC
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Introduction
.ost businesses use electronic e5uipment such as personal computers and &a3 machinesC 0o
pro1ide &or thisB a special kind o& ,ll 4isks sectionB )ith pro1ision &or material dama!e and some
&orms o& conse5uential lossB is included in the .ultimark )ordin!C 0he more e3pensi1e and
complicated kinds o& machine need to be separately consideredB and are usually insured in the
:n!ineerin! departmentC
Su2>"ection A< Material 6a!a&e
6efined e4ent"
Physical loss o& or dama!e to the property insured described in the schedule &rom any cause not
hereina&ter e3cluded )hilst
;a< at )ork or at rest any)here )ithin the insured8s premises as speci&ied
;b< in transit includin! loadin! and unloadin! or )hilst temporarily stored at any premises en
route
;c< temporarily remo1ed &rom the insured8s premises to any other locationC
0here are special re5uirements and restrictionsB mentioned laterB &or the&t co1erC
EAce1tion" to Su2>"ection A
1C First amount;s< payableC :ach item on the schedule has its o)n &irst amount payableC I&
more than one item is lost or dama!ed in the same occurrenceB the e3cesses are not
cumulati1e > only the hi!hest sin!le &irst amount payable appliesC
2C %eran!ementB unless accompanied by physical dama!e co1ered by this sectionC
C Loss or dama!eB i& it is reco1erable in terms o& any maintenance or leasin! a!reement in
&orceC
4C Faults or de&ects kno)n to the insured )hen the insurance )as arran!edB or not disclosed
durin! the currency o& the insuranceC
#C Normal )ear and tearB and cosmetic dama!e to painted or polished sur&acesC
(C Some e3chan!eable partsB such as bulbs and &usesB ha1e a limited li&eC I& they are dama!ed
as pro1ided &or in this sub>sectionB insurers )ill pay only the residual 1alue prior to the lossC
/C 0he cost o& reproducin! dataC 0his can be insured under sub>section 'C
*C Conse5uential lossC PartlyB this can be insured under sub>section '
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$C
;a< 0he&t or disappearance is not co1ered unless accompanied by &orcible and 1iolent
entry or e3itC
;b< Loss in transit or )hilst temporarily remo1ed must be as a result o& a speci&ic incidentB
immediately reported to insurers and the policeC
0he&t o& property &rom 1ehicles is not co1ered unless=
;a< i& le&t there o1erni!htB the 1ehicle is in a securely locked buildin! and there is
&orcible and 1iolent entry or e3it to the buildin!C
;b< in a compartment o& the 1ehicleB and not 1isible to passers>byC
;a< and ;b< abo1e do not apply i& the 1ehicle
;i< has been hiAackedB or
;ii< has been in1ol1ed in an accident or has a breakdo)nB and is una1oidably
le&t unprotectedC
0a"i" of Inde!nification
SubAect to the sums insuredB this includes cost o& dismantlin!B re>erectionB transportationB remo1al
o& dama!ed propertyB import duties and 6,0C
1C Partial loss ;the dama!e is economically repairable<
0he cost o& restorin! the dama!ed property to )orkin! orderB pro1ided that=
;a< the 1alue o& dama!ed parts )hich can be used )ill be deductedC
;b< the costs o& alterationsB additionsB impro1ements or o1erhaul are not reco1erableC
;c< insurers )ill pay the cost o& temporary repairs in the interests o& sa&ety or to minimise
lossB but the insured must pay i& these cause additional dama!e or make thin!s )orseC
;d< i& the dama!e is to part only o& the item insuredB insurers )ill not pay more than the
1alue o& that partC
2C 0otal loss
;,< Property bou!ht no more than se1en years be&ore the lossB and totally lost or destroyedB
is subAect to reinstatement conditionsC
0he cost o& replacin! or reinstatin! )ith ne) property o& e5ualB or the nearest e5ui1alentB
per&ormance and?or capacityB on the same site ;or anotherB i& this does not increase the
cost to the insurer<B pro1ided that=
;i< this must be carried out promptlyB other)ise payment is limited to the market 1alue
;see de&inition belo)<B immediately be&ore the dama!eC
;ii< the insured has incurred e3penditure in replacin! or reinstatin! the propertyC
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;iii< the insured has si3 months &rom the date o& the dama!eB to ad1ise insurers o& this
decisionB and is not unable or un)illin! to reinstateC
;i1< at the option o& the insurersB the period o& se1en years can be e3tended annually
by a memorandum on the policyC
;'< Property other than in ;,< abo1eB iCeC
older than se1en yearsB and?or
not totally lost or destroyedB but not economically repairableB or
)here the insured does not )ish to reinstateC
Indemnity is based on market 1alueC
6efinition of Mar*et Value
0he cost o& second hand?used e5uipment o& e5ual per&ormance and?or capacity and in similar
conditionC orB i& no similar property is a1ailableB the ne) replacement cost o& the nearest
e5ui1alentB less
;i< 20F &or the &irst year a&ter the date o& purchaseB and
;ii< 10F per year &or each year therea&terB but ;subAect to the sum insured bein! ade5uate<
settlement )ill ne1er be less than 40F o& the ne) replacement costC
A4era&e
Cost o& repairB replacement or reinstatement o& the )hole o& the property 3 loss
Sum insured
Li!it of Lia2ilit+
0he sum insured is the limit o& liabilityB but in addition insurers )ill pay=
;a< ,rchitects and other pro&essional &ees ;but not claims preparation costs<B up to 1#F o& the
total amount o& the claimC
;b< Cost o& demolition and clearin!B up to 1#F o& the total amount o& the claimC
;c< Necessary and reasonable e3press deli1eryB air&rei!htB and o1ertime )a!es &or e&&ectin!
repairs appro1ed by insurersB up to an e3tra #0F o& )hat the claim )ould other)ise ha1e
costB i& these additional char!es had not been incurredC
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Power "ur&e and li&htnin& "tri*e"
:lectronic e5uipment is easily dama!ed by theseC ;, direct li!htnin! strike is not neededC Cloud>
to>cloud li!htnin! or strikes up to a kilometre a)ay can cause dama!eB also po)er sur!es are
carried alon! po)er lines and telephone cables<C
0here is an additional e3cess o& 10F o& the claimB )ith a minimum o& 4 1 000 and a ma3imum o&
4 2 000C 0his e3cess is )ai1ed i& the property is ade5uately protected a!ainst &luctuations in the
electrical supplyC
)ire 2ri&ade char&e"
Public authority char!es in dealin! )ith the conse5uences o& any insured peril ;eC!C pumpin! out
&lood )atertenantB but the
insured must noti&y insurers as soon as this comes to his noticeC
Kire 1urcha"eL finance a&ree!ent"
Insurers are entitled to pay directly to the &inance companyC
Su2>"ection 0< Con"e7uential 6ataLPro&ra!!e"
0he co1er is limited to increased cost o& )orkin! and the cost o& reinstatin! dataB limited to the
amounts sho)n in the scheduleC I& a claim is paid under sub>section 'B the sum insured is
automatically reinstatedB and a pro>rata additional premium )ill be char!edC ;Note that a1era!e
does not apply to sub>section 'C<
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6efined E4ent"
;i< Increased cost o& )orkin!
,dditional e3penditureB necessarily and reasonably incurred by the insured
durin! the indemnity period ;the de&inition and schedule pro1ide &or a time e3clusion
be&ore the indemnity period commences<
in conse5uence o& the accident ;this is de&ined later<
&or the sole purpose o& a1oidin! or diminishin! the interruption or inter&erence )ith the
insured8s normal business ;eC!C hirin! replacement e5uipment or temporary sta&&<
less any sa1in!s &rom char!es or e3penses that cease or reduce in conse5uence o& the
accidentC
;ii< 4einstatement o& data ? pro!rammes
0he reasonable cost o& reco1erin! or recompilin! data and?or pro!rammes stored in data carryin!
mediaB lost as a result o&=
accidental erasure
the&t
)il&ul or )anton cancellation or corruptionB ;not 1irusesB troAans or )orms<C
1ro4ided that<
this does not co1er data lost throu!h pro!rammin! errorsB or operator errors such as incorrect
entries and inad1ertent cancellation or corruption o& data and?or pro!rammesC
, list o& so&t)are pro!rammes must be lod!ed )ith the insurersB i& insurance is re5uiredC
6efinition"
Inde!nit+ 1eriod ;,pplicable to increased cost o& )orkin! only<
0he period ;stated in the schedule< durin! )hich the results o& the business are a&&ected as a
result o& the accidentC
0he insurance is not meant to co1er minor stoppa!esB so the schedule pro1ides &or an initial time
e3clusionB )hich mi!ht be hours or daysB be&ore the indemnity period is considered to commenceC
0his time e3clusion does not apply to loss or dama!e caused by &ireB storm ;e3cludin! li!htnin!<B
subsidenceB )indB or the collapse o& buildin!sC
Accident
1C ;,pplicable to increased cost o& )orkin! only<
Physical loss o& or dama!e to the property described in the schedule by any cause pro1ided
&or under sub>section ,C In order &or a claim to be payable under increased cost o& )orkin!B
there must be insurance &or the physical dama!eC 0his is a usual re5uirement under
conse5uential loss insurancesC
2C ;,pplicable i& Failure o& electricity supplies is included in the schedule<
Failure o& the public supply o& electricity at the premises &rom any accidental cause other
than=
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;a< the deliberate act o& the insured or any supply authorityC
;b< drou!ht or shorta!e o& &uel at the supply company ;electricity is !enerated usin! steam
or )ater>dri1en turbines<C
Special conditions applicable to &ailure o& the public supply o& electricity=
;a< Liability is limited to the sum insured by this sub>section
;b< 0he indemnity period does not commence until 12 hours a&ter the &ailureB and ends no
later than 0 days a&ter the &ailureC 0here is no co1er &or short stoppa!esB and the
ma3imum indemnity period is e&&ecti1ely reduced to 2$ ] daysC
S1ecific eAce1tion" a11lica2le to "u2>"ection 0 ;unless speci&ically pro1ided &or<
Fines and dama!es or any penalties )hatsoe1erB &or late or non>completion o& orders
Loss o& pro&it
Rein"tate!ent
Insurers )ill not pay &or any )orsenin! o& the interruption due to=
;a< the insured bein! un)illin! or unable to replace or reinstate dama!ed propertyB or causin!
unreasonable delayC
;b< the repair period bein! len!thened by any additionB alteration or impro1ements carried outC
Tel*o! Acce"" Line" ;I& stated in the schedule to be included<C
Co1ers increased cost o& )orkin! and reinstatement o& data?pro!rammes as a conse5uence o&
accidental &ailure o& 0elkom linesC
Special conditions applicable to 0elkom access lines=
;a< Liability is limited to the sum insured by this sub>section
;b< 0here is a 12 hour initial time e3cessB and co1er ends not later than 0 days a&ter the &ailureC
;c< 0his does not include loss by the deliberate act o& any 0elkom employeeB or 0elkom
)ithholdin! or restrictin! access to its linesC
9eneral Memoranda
1C Capital additions and currency &luctuations
0he indemnity by this section includes=
;a< the purchase o& additional e5uipment o& a similar nature to that speci&iedB but insurance
a!ainst loss or dama!e due to electrical or mechanical breakdo)n or e3plosion )ill
commence only a&ter satis&actory installation?commissionin!? testin!C
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;b< currency &luctuations and other in&lation that increases the replacement 1alue o& the propertyC
0his increase is limited to 2#F o& the total sum insured under sub>section ,C 0he insured must
ad1ise insurers o& the alterations on e3piry o& the period o& insuranceB and pay the appropriate
premiumB not e3ceedin! #0F o& the di&&erenceC
2C Pre1ention o& access
I& there is dama!e by &ireB li!htnin!B e3plosionB stormB &loodB earth5uakeB or impact by 1ehiclesB to
property )ithin a 10 km radius o& the insured8s premisesB pre1entin! access to the property
insured and inter&erin! )ith the insured8s businessB insurers )ill indemni&y the insured &or losses
o& the kind co1ered by this sectionC
Pro1ided that=
;i< the insured is not entitled to indemnity under any other policy or section o& the policyC
;ii< this section shall not be brou!ht into contribution )ith any other policy or sectionC
S1ecial EAce1tion .Su2>"ection" A and 0/
Loss or dama!e o& )hatsoe1er nature arisin! directly or indirectly out o& or in connection )ith the
action o& any computer 1irusB troAan or )orm;s< or other destructi1e mediaB is e3cludedC
General EAten"ion E Inco!1ati2ilit+ Co4er
Inco!1ati2ilit+ Co4er
Follo)in! indemnity under sub>section ,B the ne) or replacement e5uipment mi!ht not be
compatible )ith e3istin! systemsC 0he optional incompatibility co1er e3tends sub>sections , and
' to include the cost o& modi&ications or alterations to other e5uipmentB replacin! or up!radin!
pro!rammes and restorin! pre1iously captured dataC
0hese costs must be=
necessary and reasonable to maintain normal )orkin!
a direct conse5uence o& an indemni&iable loss under Sub>section , or ' ;ii<
not other)ise co1ered by this :lectronic section
For any one e1entB the a!!re!ate indemnity by this e3tension is limited to 20F o& the total sum
insured under Sub>section , and ';ii<B or 42# 000B )hiche1er is the lesserC

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SASRIA
:lectronic e5uipment insurance is an underlyin! policy &or S,S4I, purposesC Costs &or
reconstitution o& computer data can also be includedB i& the underlyin! insurance pro1ides this
co1erC
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In"truction"
1: 9a!e the two "u2>"ection" of the Electronic e7ui1!ent "ection:
: State under what circu!"tance" the "ettle!ent can 2e 2a"ed on rein"tate!ent
condition":
$: State under what circu!"tance "ettle!ent i" 2a"ed on !ar*et 4alue:
4 Li"t the *ind of lo""e" that will 2e 1aid in addition to the "chedule "u!" in"ured
under "u2>"ection A:
': State what the in"ured !u"t do if the eAce"" for 1ower "ur&e and li&htnin& "tri*e"
i" to 2e wai4ed:
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#: In connection with the inde!nit+ 1eriod5 de"cri2e the 1ur1o"e of the ti!e
eAclu"ion:
(: Li"t the t+1e" of lo"" or da!a&e to which the a2o4e ti!e eAclu"ion doe" not a11l+:
3: Su2>"ection 0 .ii/ co4er" the co"t of reco4erin& data lo"t a" a re"ult of accidental
era"ure5 2ut there are certain eAce1tion": Li"t the"e eAclu"ion":
,: )ollowin& a clai! "ettle!ent under "u2>"ection A5 the new e7ui1!ent !a+ not 2e
co!1ati2le with eAi"tin& "+"te!": EA1lain how thi" can 2e 1ro4ided for:
1-: Nour clientF" data2a"e wa" de"tro+ed 2+ a co!1uter 4iru": State whether there i"
co4er5 &i4in& the rea"on for +our "tate!ent:
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Module 12
1: 9a!e the two "u2>"ection" of the Electronic e7ui1!ent "ection:
Sub>section , .aterial dama!eB sub>section ' Conse5uential lossC
: State under what circu!"tance" the "ettle!ent can 2e 2a"ed on rein"tate!ent
condition":
Property bou!ht not more than se1en years be&ore the loss ;at the option o& the
insurersB this can be e3tended annually by a memorandum on the policy<C
Property totally lost or destroyedC
Insured is able and )illin! to reinstate ;they ha1e si3 months to ad1ise insurers o&
their decision<C
Insured has incurred e3penditure in reinstatin! the propertyC
$: State under what circu!"tance "ettle!ent i" 2a"ed on !ar*et 4alue:
Property older than the abo1eG
Not totally destroyedB but not economically repairableG
I& the insured does not )ish to reinstateC
4 Li"t the *ind of lo""e" that will 2e 1aid in addition to the "chedule "u!" in"ured
under "u2>"ection A:
,rchitects and other pro&essional &ees up to 1#F o& the total amount o& the claimG
Cost o& demolition and clearin!B up to 1#F o& the amount o& the claimG
Necessary and reasonable e3press deli1eryB air&rei!htB and o1ertime )a!es &or
makin! repairs appro1ed by the insurersB up to an e3tra #0F o& )hat the claim )ould
other)ise ha1e costG
Public authority char!es in dealin! )ith the conse5uences o& an insured perilC
;Increase in 1alues as a result o& purchase o& additional e5uipment or currency
&luctuations is included in the indemnityB but the insured pay the appropriate additional
premium &or these<
': State what the in"ured !u"t do if the eAce"" for 1ower "ur&e and li&htnin& "tri*e"
i" to 2e wai4ed:
0he property must be ade5uately protected a!ainst &luctuations in the po)er supplyC
#: In connection with the inde!nit+ 1eriod5 de"cri2e the 1ur1o"e of the ti!e
eAclu"ion:
0he purpose o& the time e3clusion is to e3clude claims &or minor stoppa!esC 0he
indemnity period commences only a&ter the initial period stipulated has e3piredC
(: Li"t the t+1e" of lo"" or da!a&e to which the a2o4e ti!e eAclu"ion doe" not a11l+:
FireB storm ;but not li!htnin!"ection 0 .ii/ co4er" the co"t of reco4erin& data lo"t a" a re"ult of accidental
era"ure5 2ut there are certain eAce1tion": Li"t the"e eAclu"ion":
%ata lost throu!h pro!rammin! errors and operator errors such as incorrect entries and
inad1ertent cancellation or corruption o& data and pro!rammesC 0here is also a special
e3ception relatin! to computer 1irusesB troAansB or )ormsC
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Module 12 - cont
,: )ollowin& a clai! "ettle!ent under "u2>"ection A5 the new e7ui1!ent !a+ not 2e
co!1ati2le with eAi"tin& "+"te!": EA1lain how thi" can 2e 1ro4ided for:
0here is an optional e3tension co1erin! incompatibilityB under )hich Sub>sections , and '
are e3tended to include the cost o& modi&ications or alterations to other e5uipmentB
replacin! or up!radin! pro!rammesB and restorin! pre1iously captured dataC 0he
a!!re!ate liability by this e3tension is limited to 20F o& the sums insured under sub>
section , and ' ;ii<B or 42# 000B )hiche1er is the lesserC
1-: Nour clientF" data2a"e wa" de"tro+ed 2+ a co!1uter 4iru": State whether there i"
co4er5 &i4in& the rea"on for +our "tate!ent:
Loss or dama!e o& any nature arisin! &rom the action o& a computer 1irus is e3cludedC
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Module 1$< Other Cla""e" of In"urance
Learnin& Outco!e"
'rie&ly e3plain the purpose o& each o& the insurances listedG
"utline the co1er !i1enG
Identi&y ho) these insurances are usedG
%escribe di&&erent types o& proportional and non>proportional reinsuranceC
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Introduction
In e1eryday commercial insuranceB most risks are pro1ided &or in the .ultimark )ordin!C 0here
are other classes o& business you should kno) o&B and a brie& description o& these is !i1en in this
chapterC
Ad4ance Profit"
2hen a ne) enterprise is planned or a maAor e3pansion to an e3istin! business is decided uponB
there is usually a sta!e )hen dama!e or delay a&&ectin! the )orksB key plant and e5uipment at
the premises o& the insured or his suppliersB or e1en in transitB could cause serious &inancial lossC
0he protection o& this risk is called ad1ance pro&itsC Payment o& any claim does not take place
until the date the business )ould ha1e startedB )ere it not &or the dama!eC
0he risks in1ol1ed mi!ht be &ire and perilsB en!ineerin! ;accidental dama!e to plantB includin!
installation and testin! risks< and marine and transitC UsuallyB an o1erall premium is assessed by
the 1arious under)riters concernedB and this is then apportioned in some )ay bet)een the
departments concernedC
A""et" All Ri"*"
Lar!e business corporations &ind it almost impossible to keep track o& schedules o& property
insuredB and are also able to absorb 5uite lar!e portions o& the loss themsel1esB rather than
insure itC 0hey do not take out separate insurance a!ainst &ireB accidental dama!eB and so onB
but a special policy )ordin! is dra)n upC
0he co1er is based on their o1erall assets 1alues and includes a )ide ran!e o& circumstancesB
)ith special pro1isions &or certain kinds o& assetsC 0he deductibles ;&irst amounts payable< are
1ery lar!eB and mi!ht 1ary bet)een the di&&erent di1isions o& the corporation8s businessC
0he 1alues at risk )ill run into many millions o& 4andsB and the business )ill be shared amon! a
number o& insurersC
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A4iation
0his is a specialist department in a market constantly under!oin! chan!eC ,ircra&t ran!e &rom
hu!e commercial airliners to microli!htsC 4isks co1ered in the a1iation market include=
the aircra&t itsel& ;hull insurance death or inAury to passen!ers and persons and property on the !roundB also
in1ol1in! e3posure to lar!e lossesB
personal accident insurance > pilots and aircre) need special co1erB passen!ers take out
coupon insurance at airport 1endin! machinesB and passen!er accident insurance can be
arran!ed on an automatic ;seatin!< basisC ;"rdinary personal accident policies include
&lyin! as a passen!erB but sometimes this is restricted to &lyin! by scheduled airlines<C
4emember also that ordinary liability co1ersB includin! the public liability section o& .ultimarkB
e3clude liabilities in connection )ith=
;i< the re>&uellin! o& aircra&t
;ii< the o)nershipB possessionB maintenanceB operation and use o& aircra&t
;iii< the o)nershipB hire or leasin! o& any airportB airstrip or helicopter padC
;i1< de&ecti1e )orkmanship or products liability in1ol1in! aircra&t or aircra&t parts and e5uipmentC
Co1er a!ainst these risks &alls under the a1iation marketC
Cancellation and A2andon!ent
Plu4iu" In"urance
0he success or &ailure o& outdoor e1ents is hea1ily dependent upon the )eatherC 0his can in1ol1e
hea1y losses ;e3pense outlay and anticipated pro&it<B )here maAor e1ents are concernedC
,bandonment policies pro1ide co1er should the e1ent be cancelled alto!etherC 0he reasons &or
this mi!ht include rain&all be&ore the e1ent ;lea1in! the !round &looded<B drou!ht ;a&&ectin! &ishin!
and )ater sports<B hi!h )ind ;skydi1in!B balloon races<B or no )ind ;yachtin!<C
,!reed 1alue policies co1er rain&all onlyC ;Sometimes this is called Plu1ius insuranceB in honour
o& the 4oman !od o& rainB Pupiter Plu1ius<C ,n a!reed 1alue policy allo)s the insured to choose
the periods durin! )hich rain )ill ha1e the !reatest e&&ectB and ho) much is to be paidB dependin!
on the rain&allC Usually this means that accurate measurement in a rain !au!e is needed by an
appointed o&&icialB and there must be no tamperin! )ith the resultsC
Sometimes co1er is re5uested a!ainst possible cancellation or curtailment &or other reasonsB
such as the non>appearance o& a per&ormer or key speakerC 0he market &or this is 1ery limitedC
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Credit In"urance
Credit is a system o& buyin! !oods or ser1ices )ithout immediate paymentC 0he purchaser
promises to make payment on or be&ore a speci&ied dateB or perhaps Hon demandIC
0he abo1e class o& insurance is not concerned )ith hire purchase and similar business handled
by banksB or )ith the comparati1ely small amounts o& credit e3tended on a short>term basis by
trades people such as a pharmacy or clothin! storeC
It is an aid to lar!e scale trade and &inanceB and is especially important )here medium and lon!>
term credit ;eC!C anythin! up to 10 years a&ter deli1ery< has to be !ranted )ith the e3port o& capital
!oods and ser1icesC 0he seller cannot al)ays a&&ord to )ait this lon!B so the Industrial
%e1elopment Corporation o& South ,&rica has a scheme &or &inancin! such creditsB pro1ided a
suitable credit insurance policy can be obtainedC
In South ,&ricaB Credit 9uarantee Corporation o& ,&rica Limited has been established by the maAor
insurance companiesB banks and &inancial institutions to act as a specialist insurer o&&erin! credit
insurance onlyC
0he Credit 9uarantee Corporation=
conducts the South ,&rican :3port Credit insurance scheme ;)ith the assistance o&
9o1ernmentB )ho act as reinsurers &or the political risks<C
issues policies co1erin! South ,&rican &irms sellin! on credit to buyers in South ,&ricaC
0he &irst schemeB the e3port policyB co1ers non>payment o& a debt due to the insol1ency or
protracted de&ault o& the buyer or as a conse5uence o& e1ents ;usually political<B outside the
control o& the buyer or seller and )hich pre1ent the deli1ery o& the !oods or the receipt o&
payment in South ,&ricaC
0he domestic policies co1er only the insol1ency or protracted de&ault o& the buyerC
:3cept &or the smaller accountsB the co1er is subAect to the insurin! company ha1in! &irst
in1esti!ated the credit )orthiness o& the buyerC 0herea&terB a credit limit is set &or each buyerB
)hich becomes the limit o& the insurer8s liability &or that particular buyerC

En&ineerin& In"urance
"&tenB en!ineerin! risks are met )ith to!ether )ith other &orms o& commercial insuranceC For
e3ampleB 9oods in transit does not co1er breakdo)n o& re&ri!eration e5uipmentG this co1er must
be obtained &rom the en!ineerin! departmentC
0he specialised kno)led!e and ad1ice o& the en!ineerin! department can be 1aluable )hen
considerin! some all risksB products liability and de&ecti1e )orkmanship co1ersB and there is a
special policy to co1er accidental dama!e to machinery and plant bein! mo1ed &rom one situation
to anotherC
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Several :inds of .olicy are Available
Machiner+ 0rea*down
,ccidental and un&oreseen physical loss o& or dama!e to machinery and plantB arisin!
&rom mechanical or electrical breakdo)nC
0u"ine"" Interru1tion
Loss o& !ross pro&it and increased cost o& )orkin! &ollo)in! loss or dama!e co1ered by
the breakdo)n policyC
6eterioration of Stoc*
Spoila!e o& perishable commodities due to temperature or humidity 1ariation &ollo)in!
breakdo)n o& plant co1ered as abo1eC 0he policy can be e3tended to include
contamination by escapin! !as or re&ri!erantB the contents o& re&ri!erated trucksB all risks
co1er &or &ailure o& public electricity supplyB and the disposal cost o& deteriorated !oodsC
Contract Bor*"
In the case o& lar!e proAectsB this type o& insurance can in1ol1e both the :n!ineerin! and
.arine departmentsC 'asically the insurance is on ci1il and en!ineerin! )orks in the
course o& construction or erection at the contract siteB &or the &ull period o& the contractC
"n completion o& construction and erectionB there is usually a testin! and a maintenance
or !uarantee periodC
In addition to the contract site itsel&B there may be suppliers premises and other sites
;e1en o1erseas< )here )ork &ormin! part o& the proAect is bein! done and certain
e3tensions o& the co1er to these situations are necessaryC
Plant All Ri"*"
0his is intended &or construction plant used outside insured8s o)n premisesC ,lthou!h
basically all risksB this e3cludes mechanical or electrical breakdo)nB and e3plosionC
Tran"it 6i"!antlin& and Erection
,ccidental loss or dama!e to machinery and plant bein! mo1ed &rom one situation to
anotherC Co1er includes dismantlin!B loadin!B transitB stora!eB o&&>loadin!B repositionin!
and re>erectionB and public liability risksB or any re5uired combination o& theseC For ne)
machineryB there )ill be a testin!B and possibly !uaranteeB periodC
Bor*" 6a!a&e
, restricted &orm o& insurance a!ainst impact dama!e to Insured8s o)n plant and
machinery or !oods bein! manu&actured and?or in his custody and controlC Losses &allin!
more speci&ically under the special perils ;impact< section o& the &ire policyB )ill be dealt
)ith by that sectionC
Co!1uter and Electronic All Ri"*"
Insurance o& electronic e5uipmentB especially maAor itemsC
)inancial Guarantee" L Contract" of Suret+
0hese &orm a special class o& businessB more like a &inancial transaction than the usual Htrans&er
o& riskIC
Some insurers do not handle IbondI business at allB )hile others do so under strict mana!ement
controlB usually at a senior le1elC
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It is important to understand the di&&erence bet)een an insurance policy and a &inancial
!uaranteeC
,n insurance policy is e1idence in )ritin! o& a contract bet)een t)o partiesG insurer and insuredC
0he insurer a!rees to pay or indemni&y the insured i& certain e1ents happenC 0he policy is si!ned
by an authorised o&&icial o& the insurance companyC
, surety contractB or !uaranteeB is 5uite di&&erentC
Party , is bound to Party ' &or a certain sum o& moneyB not payable i& certain duties are properly
per&ormedC

'B in turnB mi!ht )ant to be certain o& actually !ettin! the money i& thin!s !o )ron!B so asks , to
pro1ide suretyB usually &rom a &inancial institution such as an insurerB CB that they )ill be
responsible &or payment o& the debtC C makes a char!e &or doin! thisC
0his is called actin! as securityB or as !uarantorC 0he document is si!ned by CB the HsuretyI or
H!uarantorIB and by ,B the HprincipalIB )ho is the person or &irm !uaranteedC Usually each
si!nature is )itnessed by t)o personsC
, is still responsible &or per&ormanceB and i& C has to pay it is entitled to reco1er its payment &rom
,C
0his is no use i& , has no money le&tB so insurers and others are care&ul about issuin! !uaranteesC
0here are other important di&&erencesC
In"urance 1olic+ Suret+ or Guarantee
Proposal &orm Forms the basis o& the contract Forms no part o& the contract
0erms and conditions
;cancellationB contributionB etc<
Standard in most policies No such conditions ;only certain
kinds o& !uarantees can be
cancelled<C
Scope o& co1er Limited by the policyC Usually
does not include insured8s
ne!li!ence or dishonestyC
.uch )iderB and ne!li!ence and
dishonesty are includedC
0he &ollo)in! are some o& the !uarantees you mi!ht come acrossC ;0he )ordin! &or these is laid
do)n by the authority that re5uires them<C
Court 0ond"
0rusteesB li5uidatorsB and people in1ol1ed in the administration o& the estates o& deceased
personsB minorsB insol1entsB and people absent &rom the 4epublicB mi!ht ha1e to !i1e a
!uarantee to the H.asterI ;the court o&&icial in char!e o& these matters< that their duties )ill be
properly carried outC Claims can arise throu!h ne!li!ence or dishonestyC Court bonds are
irre1ocableB and sometimes the estate takes many years to &inaliseC 0here is a set scale o& ratesB
amended &rom time to time by o&&icial proclamationC
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Go4ern!ent 6e1art!ent"
.any o& these re5uire !uarantees &rom persons or &irms that deal )ith themC Claims can arise
throu!h dishonestyB ne!li!enceB and non>obser1ance o& 1arious re!ulationsB but the main risk to
sureties is that the party !uaranteed becomes insol1entC For this reasonB 9o1ernment bonds and
others o& a similar type are called Hsol1ency !uaranteesIC
Sureties check the annual accounts o& the &irms they !uaranteeB and usually re5uire counter
indemnities &rom the principals o& the &irm in their pri1ate capacityC
Unlike Court bondsB the surety can cancel by !i1in! one month8s notice to the department
concernedC
Cu"to!" and EAci"e 0ond"
0hese are types o& !o1ernment bondC Imported !oods are remo1ed Hin bondI &rom the ship or
aircra&tB and transported to some inland destinationB )here they are held until cleared by customsC
Some shippin! a!ents ha1e established bonded )arehouses at centres throu!hout the countryB
appro1ed by Customs and kept under close super1isionC 9oods are kept Hin bondI on behal& o&
clientsC 0he o)ners o& the !oods pay the duty to CustomsB )ho pro1ide them )ith a release
)arrantC 0hey must produce this be&ore the !oods can be handed o1er to themC
In both casesB Customs re5uire a !uaranteeB the amount o& )hich depends on the turno1erC
0here are se1ere penalties &or breach o& the re!ulationsB and the surety is liable &or these in
addition to the Customs dutyC
Landin&5 Shi11in&5 and )orwardin& A&ent"F 0ond"
0hese are solely to !uarantee due obser1ance o& Customs re!ulations by the a!entsC Pro1ided
the principal is e3perienced and reputableB there is not much risk to the suretyC
Co!!ercial Perfor!ance Guarantee"
9uarantees may be re5uired in terms o& a contractC For e3ampleB a contractor en!a!es to carry
out certain )orkC 0he !uarantee is &or the due &ul&ilment o& the conditions o& the contractB and is
usually &or 10F ;sometimes #F< o& the contract priceB and cannot be cancelled by the suretyC
0he competence o& the contractor is importantB but the bi!!est risk o& claims is that the contractor
becomes insol1ent be&ore the contract is &inishedC
Fe) insurers are prepared to si!n these !uaranteesB and only &or contractors )ho are re!arded
as &irst classB concernin! competence and &inancial stabilityC
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)inancial Guarantee"
"ther bonds and !uarantees may be o& a purely &inancial kindB eC!C
3ailway led,er account ,uarantees
.any businesses depend on 0ransnet &or transport o& their !oodsB and pay substantial amounts
annuallyC Unless credit has been arran!edB the transporters insist on cash on deli1eryC 0ransnet
!rants dailyB )eekly or monthly credit accounts i& acceptable securityB such as an insurance
!uaranteeB has been pro1idedC
For a daily accountB this must be enou!h to co1er an estimated three days8 tra&&icB &or a )eekly
account t)o )eeksB and &or monthly accounts si3 or e1en ei!ht )eeksB so that the amounts
in1ol1ed can be substantialC
0he !uarantee is issued &or an inde&inite periodB but 0ransnet ad1ises the surety as soon as the
account is in arrearB and the !uarantee may be cancelled on one month8s notice &or monthly and
)eekly accountsB or se1en days &or daily accountsC
Insurers may be prepared to issue these )here a business connection is in1ol1ed and they are
satis&ied o& the client8s &inancial standin!C

Electric power supply bonds
0hese are re5uired by :skomB or by local authoritiesB to !uarantee the payment o& monthly
accounts &or electricity consumptionC 0hey are subAect to one month8s notice o& cancellationC

ntermediaries 9uarantee Facilities !td
In terms o& the Short>term insurance ,ctB intermediaries )ho collect or handle premiums on
behal& o& insurers must be able to !uarantee paymentC 0he amount o& the !uarantee is 0F o&
annual premiums handledC 0he abo1e is a separate company re!istered &or this purposeC
Kole>in>one In"urance
Personal lines policies usually include a small amount payable i& an amateur !ol&er scores a hole>
in>one on a reco!nised !ol& courseC 0his is to help meet the cost o& the customary round o& drinks
in the clubhouse a&ter)ardC
In commercial insuranceB there is a di&&erent kind o& Hhole>in>oneI co1erC 0o help attract entrantsB
the or!anisers o& &und>raisin! !ol& days sometimes o&&er a substantial priKe &or a hole>in>one o&& a
particular teeC 0hey then ask &or insurance co1er a!ainst the chance that this may happenC
.any under)riters )ill not 5uote &or this co1erB on the !rounds that it is a speculati1e risk or
!ambleB but sometimes it is insured as accommodation businessC ;Normally unacceptable
business taken as a &a1our to a 1alued connectionB in the hope that &urtherB better businessB )ill
&ollo)<C
Kidna1 and Ran"o! In"urance
0his is to co1er the ransom demanded by kidnappersC Insurance may be purchased by
indi1iduals to co1er the risk o& their o)n kidnappin! or that o& a &amily memberB or by business
enterprises to co1er the kidnappin! o& key e3ecuti1es and other employeesB at home or a)ayC
Co1er mi!ht also include household !uestsB or customers )hile on the insured8s premisesC
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0he sum insured should not be more than the indi1idual or &irm )ould be e3pected to be able to
payB i& uninsuredC
Marine In"urance
Kull in"urance=
0his is &or the ship or boat itsel&B to!ether )ith the liability riskC 0he property insured could be
anythin! &rom small pleasure cra&t ;sometimes insured in the personal lines departmentmadeI policies &or super tankersC 0his aspect is unlikely to concern the ordinary
commercial under)riterB but brokers8 o&&ices sometimes !et en5uiries &or insurance o& sea>!oin!
yachts and special cra&tC
Car&o in"urance=
I& you li1e a lon! )ay &rom the seaB you may think that marine insurance does not a&&ect youB but
this is not soC .ost o& the imported !oods you see in the shops )ere co1ered by marine car!o
insuranceB as are our e3ports to other countriesC "&tenB this in1ol1es not only the actual 1oya!eB
but H2arehouse to 2arehouseI transitB ri!ht up to the importer or distributor8s storeB and
in1ol1in! lon! inland HhaulsIC Some insurers handle all their HtransitI business in the marine
departmentB rather than under the 9oods in transitC
FireB ,ll risksB and 9oods in transit co1ers are specially )orded to a1oid o1erlap or contribution
)ith marine insuranceB especially as the conditions and scope o& co1er are so di&&erentC
2hen takin! o1er co1er a&ter a marine transitB as )hen imported !oods are trans&erred to your
client8s premisesB it is important that someone &irst check the consi!nment &or dama!e or
shorta!es that may ha1e occurred on the 1oya!eC
Rein"urance
Introduction
, basic principle o& insurance is that the risks under)ritten are spread or sharedC 4einsurance
)orks in the same )ayC ,n insurer )ho has accepted a risk can reinsure all or part o& itC 0he
insurer has no insurable interest in the ori!inal subAect matterB but has an interest in respect o& the
insurance contract entered intoC
'y usin! reinsuranceB an insurer can accept lar!er risks than )ould other)ise be the caseC
0he company that reinsures is called the cedin! companyG it cedes part o& its liability to the
reinsurerC
0here are t)o separate contracts in1ol1ed=
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Contract ?A@
0his is the ori!inal policy issued by the insurer to the insuredC 0he reinsurer has no direct
connection at allB )ith this contractC
Contract ?0@
0his is the contract bet)een the cedin! company and the reinsurerC 0he ori!inal insured has no
connection )ith this contractB and does not e1en kno) about itC
'ecause o& the separate contractsB
;a< 0he ori!inal policyholder has no ri!hts a!ainst the reinsurerB )hate1er the
circumstancesC
;b< I& the reinsurer becomes insol1entB the cedin! company is still liable to the insured &or the
&ull amount o& the policyC
;c< I& the cedin! company becomes insol1entB the reinsurer is still liable under the
reinsurance contractC 0he ori!inal policyholder has no special claimG any amounts
reco1ered &rom the reinsurer become part o& the cedin! company8s !eneral assetsC
;d< 0he reinsurer has no contractual ri!hts a!ainst any )ron!>doin! o& the ori!inal
policyholderC
0here are t)o main systems o& reinsurance= Facultati1e and 0reatyC
)acultati4e Rein"urance
:ach risk is dealt )ith indi1iduallyC 0he cedin! company may o&&er the riskB or any part o& itB to
any reinsurerB and the reinsurer is &ree to accept the riskB or notC
0his is time consumin!B so &acultati1e reinsurance is used mainly &or 1ery lar!e or unusual risksC
Treat+ Rein"urance
Ri"*" are not dealt with on an indi4idual 2a"i": 0he terms and conditions o& the treaty
are set in ad1anceC SubAect to theseB cessions and acceptances are obli!atoryB the cedin!
company is bound to cede and the reinsurer is bound to acceptC
0here are t)o main kinds o& treaty= Proportional and Non>proportionalC
Pro1ortional Treatie"
Surplus Treaties
0his is the more common typeC 0he cedin! company decides upon its standard retention &or the
1arious classes o& risk dealt )ith under the treatyC ;For e3ampleB it )ould be prepared to hold a
lar!er &ire sum insured on an o&&ice risk than on a )arehouseB and less still on a plastics &abricator
or a )ood)orker<C 0he amount retained by the cedin! company is called its line or net
retentionC
0he reinsurers8 sharin! in the treaty each a!ree to accept a set number o& linesB until the desired
treaty capacity is made upC For e3ampleB a ten line treaty enables the cedin! company to accept
a ma3imum o& its o)n lineB plus a &urther ten times that amountC
BN"IN#
22&
E/ample &5
Insurer8s retention ;one line< 4 100 000
0reaties ;ten lines< 4 1 000 000
0otal capacity 4 1 100 000
Note that there are not al)ays ten linesC 0he number depends on the capacity the cedin!
company )antsB and the reinsurance market is prepared to pro1ideC
Further capacity mi!ht be pro1ided by additional treaties ;second and third surplusB that come
into e&&ect only )hen the &irst surplus is H&ullI<C
0he cedin! company is bound to pass any surplus to the treatiesB but it uses only as much o& the
treaty capacity as it needsC
E/ample 65
Suppose that the cedin! company8s retention &or a particular risk is 4 *0 000B and the sum
insured is 4 4 000 000C
0he cedin! company keeps its 4 *0 000
It cedes the rest to the treaties 420 000
Premium and any claims are shared in 1ro1ortion to the sums insuredC In this e3ampleB the
cedin! company keeps 1?#th o& the premiumB and the treaties !et 4?#thsC ;In practiceB the
reinsurers )ill allo) commission on their share o& the premium<C
;uota S$are Treaties
0his kind o& treaty is less commonC Premiums and claims are still shared on a proportionate
basisB but the reinsurer8s proportions are &i3edC 0hese are on a percenta!e basisB and applyB &or
e3ampleB to e1ery risk )ritten in the &ire accountC 2ith a #0F 5uota share treatyB the cedin!
company must cede #0F o& e1ery riskB and )ill reco1er #0F o& all claimsC
0his arran!ement is more &a1ourable to reinsurersB because the cedin! company cannot keep
more o& the better risksB so commission )ill usually be at a hi!her rate than &or a surplus treatyC It
mi!ht be used especially
&or a ne)ly &ormed insurance company that needs e3tensi1e reinsurance protection in its
early sta!es
)here the results under the cedin! company8s surplus treaty ha1e been consistently poorB
and reinsurers insist on a di&&erent basisC

9on>1ro1ortional Treatie"
4isks and premium are not shared proportionatelyC 0he reinsurer char!es a speci&ic rate and
pro1ides co1er a!ainst losses o1er and abo1e an a!reed &i!ure in a particular class o& businessC
"nce the treaties ha1e been arran!edB the actual administration is easyB so that the
administration costs are less than &or other kinds o& treatyC
0he three most basic and commonly used methods are=
;a< Cata"tro1he eAce"" of lo""
0his protects the insurer8s net account a!ainst a loss or series o& losses arisin! out o& one
e1entB principally disasters like &loodB earth5uakeB )indstorm and con&la!rationC ;Sometimes
it can be e&&ected on the insurer8s treatyB as )ell as netB retention<C
BN"IN#
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0he e3cess point and e3tent o& the co1er 1ary accordin! to the siKe o& the insurerC 0he aim is
to limit the insurer8s loss to a &i!ure it &eels it could a&&ord to lose )ithout threatenin! its
sol1ency mar!inB or perhaps ruinin! the results o& a particular under)ritin! accountC
;b< %nderwritin&5 or wor*in& eAce"" of lo""
0he reinsurer pro1ides co1er a!ainst losses on a per risk basisC 0he e3cess is much lo)er
than &or catastrophe e3cess o& lossB so the cost o& the reinsurance is hi!herC Claims are also
more &re5uent > the co1er is desi!ned to be H)orkedIB as compared to bein! meant only &or
unusual circumstancesC SometimesB this &orm o& co1er can be used instead o& proportional
reinsuranceC
;c< EAce"" lo"" ratio5 or "to1lo""
0here is no speci&ic loss e1ent or riskC Co1er is a!ainst unusual or )ide &luctuations in the
under)ritin! accountB due to losses o1er a period o& at least a yearC
0he reinsurer a!rees to pay all losses o1er an a!reed percenta!e o& the cedin! insurer8s
retained accountB up to a certain percenta!e limitC For e3ampleB the reinsurer mi!ht a!ree to
pay the amount o& losses e3ceedin! the ratio o& /0FB up to a ma3imum o& 120F o& the
retained accountC 0he cedin! company is liable &or &urther losses abo1e 120FB unless it has
arran!ed a &urther or second layer Hstop lossI co1erC
Note that it is not intended to !uarantee a pro&it to the cedin! company in the year o& accountB
only to protect a!ainst )ide &luctuations in the under)ritin! resultsC
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In"truction"
1: EA1lain wh+ Ad4ance Profit" in"urance !a+ 2e needed:
: Identif+ when A""et" All Ri"*" in"urance i" u"ed5 in"tead of 0u"ine"" All Ri"*"5 or
Accidental 6a!a&e co4er:
$: Nour client" ha4e in"talled a helico1ter landin& 1ad: State whether an+ "1ecial
lia2ilit+ co4er i" needed5 and if "o5 wh+:
4: %nder Cancellation and a2andon!ent L Plu4iu" in"urance5 di"tin&ui"h 2etween
a2andon!ent 1olicie"5 and a&reed 4alue 1olicie":
': Outline the co4er under the two !ain t+1e" of 1olic+ offered 2+ the Credit Guarantee
Cor1oration:
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#: Li"t and 2riefl+ eA1lain four t+1e" of en&ineerin& 1olic+:
(: Gi4e two of the wa+" in which &uarantee" are different fro! in"urance 1olicie":
3: Li"t four co!!on t+1e" of &uarantee:
,: State the 1ur1o"e of Inter!ediarie" Guarantee )acilitie" Ltd:
1-: Identif+ the i!1ortance of Marine in"urance:
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Module 13
1: EA1lain wh+ Ad4ance Profit" in"urance !a+ 2e needed:
In plannin! ne) enterprises or maAor e3pansionB there is usually a sta!e )hen dama!e or
delay a&&ectin! the )orksB key plant and e5uipment at the insured8s premises or those o&
his suppliers or )hilst in transitB could cause serious &inancial lossC Co1er is needed
a!ainst &ireB e3plosion and &ire perilsB en!ineerin! risksB includin! installation and testin!B
and marine?transitC
: Identif+ when A""et" All Ri"*" in"urance i" u"ed5 in"tead of 0u"ine"" All Ri"*"5 or
Accidental 6a!a&e co4er:
Lar!e business corporations ha1e di&&iculty in maintainin! detailed schedules o& property
insuredB and are also able to absorb lar!e e3cessesC ,ssets ,ll 4isks insurance can co1er
their o1erall assets a!ainst a )ide ran!e o& circumstancesB )ith special pro1isions &or
certain kinds o& assetsB and di&&erent deductibles &or di&&erent di1isions o& the corporation8s
businessC
$: Nour client" ha4e in"talled a helico1ter landin& 1ad: State whether an+ "1ecial
lia2ilit+ co4er i" needed5 and if "o5 wh+:
"rdinary policies e3clude liability arisin! &rom the operation o& aircra&t and the o)nership o&
any airportB airstrip or helicopter landin! padC Special co1er is needed &rom the a1iation
marketC
4: %nder Cancellation and a2andon!ent L Plu4iu" in"urance5 di"tin&ui"h 2etween
a2andon!ent 1olicie"5 and a&reed 4alue 1olicie":
,bandonment policies pro1ide co1er should the e1ent be cancelled alto!etherB as a result
o& a 1ariety o& )eather conditionsC
,!reed 1alue policies are a!ainst the risk o& rain onlyC 0he insured can choose the periods
durin! )hich rain )ould ha1e the most e&&ectB and the compensation to be paidB dependin!
on the amount o& rain recordedC
': Outline the co4er under the two !ain t+1e" of 1olic+ offered 2+ the Credit Guarantee
Cor1oration:
0he e3port policyB )hich co1ers non payment o& the debt due to the insol1ency or
protracted de&ault o& the buyerB or as a result o& e1ents outside the control o& the buyer or
seller and )hich pre1ent deli1ery o& the !oods or pre1ent payment in South ,&ricaC
0he domestic policyB )hich co1ers only the insol1ency or protracted de&ault o& the buyerC
#: Li"t and 2riefl+ eA1lain four t+1e" of en&ineerin& 1olic+:
,ny &our o& those listed in the chapterC
(: Gi4e two of the wa+" in which &uarantee" are different fro! in"urance 1olicie":
,ny t)o o&=
Insurance policies are si!ned by the insurer onlyB sureties by the !uarantor and the
person !uaranteedC
, proposal &orm mi!ht be used &or !uaranteesB but unlike insurance this does not &orm
the basis o& the contractC
0erms and conditions o& insurance policies are not part o& !uaranteesC "nly certain
!uarantees can be cancelledC
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Scope o& co1er under !uarantees is )iderC Ne!li!ence and dishonesty are not
e3cludedC
Module 13 - cont
3: Li"t four co!!on t+1e" of &uarantee:
,ny &our o& those listed in the chapterC
,: State the 1ur1o"e of Inter!ediarie" Guarantee )acilitie" Ltd:
Intermediaries )ho deal )ith premiums on behal& o& insurers are re5uired to &urnish
security in the amount o& 0F o& the annual premium handledC 0he I9F is a separate
company established &or the purpose o& issuin! these !uaranteesC
1-: Identif+ the i!1ortance of Marine in"urance:
Imports and e3ports are co1ered by .arine insuranceC Some insurers transact all their
transit business in the .arine departmentC
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2%,
Module 14< Clai!"
Learnin& Outco!e"
%iscuss the adAustment o& the main classes o& commercial claimG
Indicate some o& the problems in1ol1edG
Identi&y the relationship bet)een the C"I% ,ct and Stated 'ene&its insuranceC
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2%$
Introduction
In order to handle claimsB you need a &air kno)led!e o& the di&&erent types o& co1erC It is important
to open the claim under the correct policy sectionC I& an outside adAuster is employedB he or she
must be !i1en correct and complete in&ormationC For e3ampleB )hen dealin! )ith a the&t claimB
details o& o&&ice contents insurance and o& any items on ,ll 4isks may also be neededC
,dAusters should be a)are o& standard policy )ordin!sB but must be told o& any special
)arrantiesB e3tensions or &irst amounts payable that applyC
I& the loss is clearly not co1eredB the insured should be ad1ised o& this at an early sta!eB
other)ise insurers may be estopped &rom denyin! liabilityC Sometimes it is a simple matter o& the
insured claimin! a!ainst the )ron! insurerB or there is no policy or item that co1ers the lossC "n
the other handB &ormal repudiation lettersB eC!C on the !rounds o& non>compliance )ith policy
conditionsB should be si!ned by a relati1ely senior personC
UsuallyB there )ill be a roster or panel o& appro1ed loss adAustersB ranked accordin! to the
probable siKe o& the claimB and the type o& lossC Insurers may also ha1e their o)n Hin>houseI
claims inspectors or en!ineersC Smaller claims mi!ht be settled directly )ith the insured on
submission o& suitable documentary proo&C
0he claims department is o&ten called the sho) )indo) o& insuranceB and prompt and e&&icient
claims handlin! is 1ital to the reputation o& the company and intermediaryC
)ire and 0u"ine"" Interru1tion
0he adAustment o& a maAor &ire lossB and minimisin! the period o& interruption re5uires many
pro&essional skillsC 0his can in1ol1e &orensic e3pertsB ci1il and mechanical en!ineersB 5uantity
sur1eyorsB and contractorsB amon! othersC 'usiness interruption claims re5uire a !ood
kno)led!e o& accountancyC ,dAusters )ill ha1e suitable people on their sta&&B or be able to call
upon them as neededC
Fire policies used to ha1e a clause re5uirin! that business books and records be kept in a &ire>
proo& sa&eC 0his no lon!er appliesB but the insured is e3pected to pro1e the amount o& the claimC
0he adAuster )ill )ant to check the purchases and sales to ensure that the amount is reasonableB
so it is in the insured8s interest to make some kind o& arran!ement to sa&e!uard these recordsC
4emember that any loss resultin! &rom a bona &ide and necessary e&&ort to put out the &ire or limit
the amount o& the dama!e is included as &ire dama!eC :3amples are !oods and property
dama!ed by )ater used in e3tin!uishin! the &ireB thro)in! articles out o& the )indo)B e1en tearin!
do)n adAoinin! property to stop the &ire &rom spreadin!C
.any &ires are started deliberatelyB but unless the insured can be pro1ed to be in1ol1edB the loss
is still H&ortuitousI or accidental as &ar as he or she is concernedC Initial in1esti!ation )ill be by the
police and &ire ser1iceB but the adAuster )ill &ollo) up on thisC
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2%2
Tenant"
South ,&rican la) places a hea1y onus on the tenant o& a buildin! &or &ire or e3plosion dama!e in
the premises occupiedC
.ost local insurers subscribe to an a!reement )hereby the lessee o& the )hole or part o& any
buildin! shall not be liable to indemni&y the lessor in respect o& dama!e caused by &ire or
e3plosion unless
;a< caused by the )il&ul act or ne!li!ence o& the lessee or his ser1ants actin! )ithin the scope o&
their employmentB or
;b< by )ritten a!reement bet)een the lessor and lesseeB the lessee has speci&ically accepted
responsibility &or insurin! the buildin! a!ainst &ire or e3plosionC
0his does not a&&ect the ri!hts o& tenantsB eC!C )hen dama!e is caused to their property by the
ne!li!ence o& a co>tenantB but in these cases you )ould need to check the terms o& the leaseC
Accident Cla""e"
For the&t claimsB the business records need to be checked in the same )ay as &or &ire claimsC
0he in1esti!ation includes comment on the means o& entryB and perhaps su!!estions on
impro1in! securityC
Conse5uential lossB such as by thie1es makin! lon!>distance telephone calls or lea1in! )ater
&lo)in! do)n the drainB is not co1eredC
.ost o& the accident classes co1er Hloss or dama!eIB then limit the types o& loss or dama!e in
some )ayC
HLossI can mean more than )e think it doesC For e3ampleB temporary depri1ation does not
constitute a lossB but i& reco1ery is unlikelyB or at least uncertainB the article is considered lostC I& it
turns up a&ter the claim has been a!reedB it must be treated as sal1a!eC
Sometimes people are tricked into partin! )ith their 1aluablesC Like the Hpre1ention o& lossI
conditionB the test is )hether this )ould ha1e seemed reasonable at the timeB to a person in the
insured8s positionC
Pre1iouslyB the courts took the 1ie) that )hereB &or e3ampleB a car is 1oluntarily handed o1er in
e3chan!e &or a HdudI che5ueB the insured has not lost the carB but the proceeds o& the saleC
,ccordin! to more recent opinionB payment is a condition o& the saleC No paymentB no saleB so
the car has been stolenC
Some policies no) speci&ically e3clude loss resultin! &rom &raudulent schemes or tricks practised
on the insuredC
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Per"onal Accident
In The South Afri!an Law of 1nsuran!eB 9ordon and 9etK 5uote the &ollo)in! e3amples o&
HaccidentsI established o1er the years in le!al actionsC
0he insured died &rom a disease caused by the bite o& a poisonous insectC
0he insured )as struck on the head by a hammerC 7e later died o& menin!itisB because
his resistance to in&ection )as reduced by the )oundC
, si!nalman tried to pre1ent a rail)ay accident by si!nallin! to the dri1erC 0he &ri!ht
produced a ner1ous shockB )hich incapacitated him &rom employmentC
0he insured )ounded his le! by scratchin! it )ith his thumbnailC
0he insured died o& sunstrokeC
, )ell kno)n e3ample is the insured )ho &ell and dislocated his shoulderC 7e )as
con&ined to his roomB )eakenedB cau!ht a coldB and de1eloped pneumoniaB o& )hich he
died a month laterC It )as held that his death )as due to Hthe e&&ects o& inAury caused by
accidentIC
I& the insured is inAured by the combined e&&ects o& a pre>e3istin! disease and an accidentB
co1er )ill depend on )hich is the pro3imate causeC
,s an e3ample o& pro3imate causeB i& a barman strains his back )hile eAectin! a drunkB
this could be classed as an occupational inAuryB but is not an HaccidentI &or insurance
purposesC It is the unintended result o& an intended actC I& the drunk thro)s a punchB
breakin! the barman8s Aa)B this is an inter1enin! &ortuitous causeB and the inAury to the Aa)
is accidentalC
%isability claims are supported by a medical certi&icateB and the usual claim &orm pro1ides &or thisC
4emember that the policy e3cludes intentional sel&>inAuryC
Proo& o& deathB and the cause o& deathB is needed &or the admission o& a death claimC %eath
certi&icates do not al)ays sho) the cause o& deathB and medical e1idence such as the &indin!s in
a post mortem e3amination )ill be rele1antC It is important that none o& the policy e3clusions
applyC
Under the usual &orm o& commercial policyB )e pay the insuredB or on behal& o& the insured
personB or his estateB so the policy holder must account to the heirs and e3ecutorsC I& it is asked
that payment be made to someone elseB eC!C the sur1i1in! spouseB some &orm o& le!al
con&irmation should &irst be obtainedC 0here is a riskB ho)e1er sli!htB o& payin! the )ron! personC
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2%&
Accident" in the Cour"e of E!1lo+!ent
In terms o& the Stated 'ene&its sectionB compensation &or temporary total disability or &or medical
e3penses is reduced by the amount recei1ed or recei1able under any )orkmen8s compensation
enactmentC
In South ,&ricaB the 2orkmen8s Compensation ,ct has been replaced by the Compensation &or
"ccupational InAuries and %iseases ,ct ;1$$<B and most employees no) &all under this ,ctC
EAce1tion" are=
;i< a personB not a member o& the Permanent ForceB per&ormin! military ser1ice or under!oin!
military trainin!B
;ii< a member o& the Permanent ForceB )hile on Hser1ice in de&ence o& the 4epublicIB as de&ined
in the %e&ence ,ctB
;iii< a member o& the South ,&rican Police Force on Hser1ice in de&ence o& the republicIB as abo1eB
;i1< an independent contractorB )ho en!a!es other persons to per&orm the )orkB
;i1< a domestic employee in a pri1ate householdC
0he employee is entitled to a scale o& compensation &or occupational inAury or sicknessB unless as
a result o& his?her Hserious and )il&ul misconductI ;bein! under the in&luence o& li5uor or narcoticsB
or in )il&ul disre!ard o& sa&ety la)s<C %ependants are entitled to compensation &or deathB
not)ithstandin! the employee8s misconductC
,n assault by an employer on a )orkman has been held to be due to )ron!&ul intentional and
unla)&ul action by the employerB and not by reason o& the contract o& employmentC
0he 9roup Personal ,ccident and Stated 'ene&its sections ha1e an optional 'usiness limitationC
Like the C"I% co1erB this does not mean that the accident has to occur durin! normal business
hoursB or e1en at the insured8s premisesB but it must arise &rom and in the course o& employment
in the businessC
,n employee &ell and inAured hersel& on the employer8s premisesB a&ter the day8s )ork and )hile
on her )ay homeC 0his )as held to be in the course o& her employmentC It )ould ha1e been
di&&erent i& this had occurred in the streetC
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2%'
Lia2ilitie"
0he insured is re5uired to !i1e insurers notice o& any e1ent that may !i1e rise to a claimC "&ten
an immediate in1esti!ation o& the circumstances is necessaryB be&ore details are &or!otten and
e1idence destroyedC
It must be made clear that these in1esti!ationsB to!ether )ith any correspondence entered intoB
are )ithout admission o& liabilityC SimilarlyB any &ormal denial o& liability must be care&ully )orded
so that it does not a&&ect le!al de&ences that )ould other)ise be a1ailable to insurersC I& &urther
action ensuesB the matter )ill probably be handed to insurer8s le!al ad1isers &or the appropriate
responseC "n no account may the insured attempt to deal )ith the matter himsel&B as this mi!ht
seriously preAudice the insurer8s positionC
"&tenB claimants )ait until almost the end o& the le!al prescription periodB and then issue
summonsC 0his is meant to pro1oke the client and insurers into panic actionB or !ain a de&ault
Aud!ement should they omit to enter an Happearance to de&endIC
In many casesB an out o& court settlement is pre&erable to the 1ery considerable costs o& a court
actionB obtainin! e3pert testimonyB and so &orthB but this must be decided at mana!ement le1elC
)idelit+
,dAustment o& these claims needs accountin! kno)led!eB and is usually le&t to adAusters )ho
specialiKe in this &ieldC
0here is a problem )hen losses are kno)n to be takin! placeB but the crime cannot be brou!ht
home to the particular employee or !roup o& employees concernedB or it cannot be pro1ed that
this resulted in &inancial !ain to any o& themC I& there is !ood reason to suspect an employeeB he
or she should not be !i1en the opportunity to continue )ith the &raudB &or &urther losses )ill not be
co1ered by the insuranceC 7e or she cannot be dismissed )ithout proo&B so the ans)er mi!ht be
temporary suspension on &ull payB pendin! the outcome o& in1esti!ationsB or temporary remo1al to
a Aob )here the opportunity &or &raud does not e3istC
Sometimes an employeeB con&ronted )ith the &actsB )ill admit !uilt and o&&er restitutionC For this
reasonB insurers do not al)ays insist that the matter be reported to the police &or &urther actionC
"n the other handB i& the !uilty party has already resi!ned &rom ser1iceB the chances o& reco1ery
are slimC Fraud in1esti!ations can be len!thyB and are o&ten inconclusi1eC
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Motor
0he assessment o& motor dama!e is carried out by people )ith the appropriate mechanical
kno)led!e and trade skillsC 0he hi!h cost o& parts and labour o&ten result in the 1ehicle bein! a
H)rite o&&I ;not economically repairable<B e1en thou!h there is little or no mechanical dama!eC
0his can cause hardship to the insuredB because the utility 1alue o& the 1ehicle as basic transport
is o&ten !reater than the market 1alue that the insurers are able to payC , compromise can
sometimes be reachedB but there may be di&&iculties )ith contractors )ho ha1e undertaken to
take o1er the insurer8s )ritten o&& 1ehiclesC I& a cash>in>lieu settlement is madeB and the 1ehicle is
subse5uently pri1ately repairedB insurers need to kno) that it is road)orthyB and that the repairs
are properly doneB be&ore !rantin! &urther co1er on the 1ehicleC
:3tensi1e repairsB such as mi!ht be done to a hi!h 1alue 1ehicleB can also cause troubleC In this
caseB the insured mi!ht not )ant the 1ehicle repairedB and )ill detect all kinds o& real or ima!ined
&aults a&ter)ardC
4eco1eries &rom third parties must be &ollo)ed up )ithout delayC 9et in touch )ith possible
)itnesses and obtain their statement be&ore they &or!et the details o& the accidentB or chan!e
their addressC I& the police attended the scene o& the accident and took measurementsB a copy o&
their report must be obtainedC
In many collisionsB both dri1ers are partly to blameC I& there is no knock>&or knock a!reementB
)hereby insurers ha1e each pre1iously a!reed to meet their o)n dama!esB it may be possible to
apportion the dama!esC
Claims &or passen!er liability need especially care&ul handlin!C Sometimes these claims are
made lon! a&ter the accidentB )hen it is no lon!er possible to check some o& the detailsC For
e3ampleB the passen!er8s &ailure to )ear a seat belt can constitute contributory ne!li!enceB and
reduce the dama!es a!ainst your insuredC 4emember that passen!er liability is partly co1ered
under the 4oad ,ccident Fund ,ctC

Court 0ond"
Claims under court bonds are rareB but may occur many years a&ter the bond has been issuedB
eC!C missin! bene&iciaries may come to li!htC 0his possibility sho)s the importance o& ad1ertisin!
and takin! any special steps )hich may be necessary to trace bene&iciaries )hen it appears that
some are missin!C
In any !i1en instanceB the Court needs to be satis&ied that the e3ecutor took all reasonable stepsB
but the terms o& the bond are 1ery )ideC
0husB claims under Court bonds can arise not only throu!h dishonestyB but also throu!h the
incompetence or ne!lect o& the administratorC Claims due to dishonesty need no e3planationB but
the &ollo)in! are e3amples o& claims caused by incompetence or ne!lect=
BN"IN#
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I& some o& the assets in an estate consist o& sharesB the e3ecutor must realise them at
onceB unless he can !i1e the .aster sound reasons )hy this should not be doneC 0here
ha1e been cases )here an e3ecutorB actin! in per&ectly !ood &aithB has held on to shares
in the e3pectation o& a rise in their priceB but the price has &allenB so that the sureties ha1e
been called upon to pay the di&&erenceC It is thus ad1isableB in estates )here shares are
not disposed o& immediatelyB to ha1e these lod!ed in a bank in the Aoint names o& the
e3ecutor and the suretiesB so that the latter can e3ercise control o1er themC
2here a person has dies intestateB there is an additional burden on a e3ecutor in that he
must satis&y himsel& that the estate is distributed amon! the le!al heirsC 7e must bear in
mind the ri!hts o& the sur1i1in! spouse ;i& any<C 0he e3ecutor must also remember that
ille!itimate childrenB i& they can pro1e their parenta!eB can inherit on an e5ual &ootin! )ith
le!itimate childrenC +no)led!e o& the la) o& intestate succession is there&ore all important
to an e3ecutorB &or a mistakeB ho)e1er !enuineB on the part o& the e3ecutorB can result in a
claim a!ainst the suretiesC
I& an e3ecutor or administrator etcC ne!lects to insure a property a!ainst &ireB and it is burnt
do)nB a claim can be made under the court bondB so that sureties must see to it that all
such property is ade5uately insuredC
0he abo1e are only three e3amples )here incompetence or ne!lect can result in a claimC 0hey
can be multiplied many timesB since estates can be 1ery complicatedB ran!in! &rom cash and
shares to 1aluable immo1able property )hich )ill ha1e to be disposed o& to the best ad1anta!e
and e1en to business )hose continued operation mayB or may notB be necessaryC
2hen claims ariseB these are best handled by the insurer8s attorneysB o&ten in conAunction )ith a
pro&essional accountantC 0he .aster o& the Supreme Court )ill al)ays !i1e the sureties e1ery
assistance in dealin! )ith claims under Court bonds and in e&&ectin! reco1ery &rom the
administratorC "n recei1in! notice o& a claim it is necessary to take all possible steps to tie up
assets a1ailable so that the administrator cannot deal )ith themC It may be re5uiredB &or instanceB
that cash shall be deposited to the Aoint order o& the administrator and the suretyC
0he procedure in re!ard to claims under bonds issued in terms o& the Insol1ency or the
Companies8 ,cts is similar to that in respect o& bonds !i1en in terms o& the :state ,ctC 7ere
a!ainB ne!li!ence as )ell as dishonesty can result in claims a!ainst the suretiesC 0he suretiesB
ho)e1erB may ha1e the de&aulter remo1ed &rom o&&ice and a &it person appointed in his place on
makin! application to the Supreme CourtC
Go4ern!ent 0ond"
,ll 9o1ernment bonds pro1ide &or the payment on demand o& the amount claimed under the
bondC In practice rele1ant authorities usually noti&y the sureties that the principal has de&aulted
and that a claim )ill be lod!edC 0he sureties there&ore ha1e an opportunity o& takin! steps to
minimise their lossC For 4ail)ays Led!er ,ccounts !uarantees and customs bondsB &or instanceB
the sureties can ask &or all credit &acilities to be stoppedC
BN"IN#
2%*
Co!!ercial Guarantee"
I& a contractor de&aultsB the sureties can arran!e to ha1e the contract completed by some other
person or &irmC 2here purely &inancial aspects are concernedB the sureties )ill ha1e taken steps
to secure their position by obtainin! counter indemnities or collateralC :1en under the most
strai!ht&or)ard bondsB points o& la) are in1ol1ed= the practice o& insurers is to deal )ith claims in
close consultation )ith their attorneysC 0here is also a ri!ht o& reco1ery a!ainst the de&aulter at
common la) and the surety )ill naturally e3ercise these ri!htsC
BN"IN#
2%+
In"truction"
1: EA1lain wh+ 2u"ine"" record" "hould 2e "afe&uarded a&ain"t de"truction 2+ fire5
e4en thou&h the fire 1olic+ doe" not "1ecificall+ re7uire thi":
: State whether fire in"urance include" da!a&e 2+ ar"on5 &i4in& +our rea"on":
$: In ter!" of the local in"urer"F a&ree!ent5 indicate under what circu!"tance" the
tenant !a+ 2e held lia2le for fire or eA1lo"ion da!a&e:
4: Co!1an+ A in"ured it" faA !achine under 0u"ine"" All Ri"*": Their rece1tioni"t
handed o4er the !achine for "er4ice to a 2o&u" technician: 6e"1ite en7uirie"5
neither the !achine5 nor the ?"er4ice!an@ were e4er "een a&ain: 6i"cu"" whether
the lo"" i" co4ered:
BN"IN#
2&,
': Per"onal AccidentLStated 0enefit" co4er" ?2odil+ in8ur+ cau"ed 2+ accidental5
4iolent5 eAternal and 4i"i2le !ean"@: 0riefl+ indicate how the co4er a11lie" if the
in"ured 1er"on i" in8ured 2+ effect of a 1re>eAi"tin& di"ea"e co!2ined with an
accident:
#: If the a2o4e 1olicie" are "u28ect to the ?2u"ine"" li!itation@5 "tate whether the
accident !u"t occur<
#:1 6urin& nor!al 2u"ine"" hour"
#: At the in"uredF" 1re!i"e" or contract "ite:
(: An elderl+ lad+ "li11ed and fell on the 1atio out"ide Geor&eF" re"taurant: She
li!1ed awa+5 !utterin& an&ril+5 2ut did not !a*e a for!al co!1laint: In ter!" of
Geor&eF" lia2ilit+ in"urance5 de"cri2e what he !u"t do5 and the rea"on" for thi":
BN"IN#
2&$
3: Co!1an+ P "u"1ect" that it" "tore!an i" cheatin& with the order"5 2ut there i" no
1roof of thi": The+ allow hi! to continue5 in the ho1e that the+ can o2tain 1roof:
0riefl+ di"cu"" how thi" affect" their fidelit+ in"urance:
,: EA1lain wh+ in"urer" !i&ht not alwa+" in"i"t that a fidelit+ lo"" 2e re1orted to the
1olice:
1-: 6e"cri2e wh+ a ca"h>in>lieu "ettle!ent of a !otor clai! !i&ht 2e allowed5 and
outline the 1o""i2le 1ro2le!":
BN"IN#
2&2
Module 14
1: EA1lain wh+ 2u"ine"" record" "hould 2e "afe&uarded a&ain"t de"truction 2+ fire5
e4en thou&h the fire 1olic+ doe" not "1ecificall+ re7uire thi":
0he insured is e3pected to pro1e the amount o& the claimC 0he adAuster should be able to
check records o& purchases and salesB to ensure that the amount claimed as lost is
reasonableC
: State whether fire in"urance include" da!a&e 2+ ar"on5 &i4in& +our rea"on":
Unless the insured can be pro1ed to be in1ol1ed ;by settin! the &ireB or arran!in! to ha1e it
set<B the loss is &ortuitous as &ar as the insured is concernedB and the policy must payC
$: In ter!" of the local in"urer"F a&ree!ent5 indicate under what circu!"tance" the
tenant !a+ 2e held lia2le for fire or eA1lo"ion da!a&e:
I& this )as caused by the )il&ul act or ne!li!ence o& the lessee or his ser1ants actin! )ithin
the scope o& their employmentB or i& by )ritten a!reement bet)een lessor and lesseeB the
lessee has speci&ically accepted responsibility &or insurin! the buildin! a!ainst &ire and
e3plosionC
4: Co!1an+ A in"ured it" faA !achine under 0u"ine"" All Ri"*": Their rece1tioni"t
handed o4er the !achine for "er4ice to a 2o&u" technician: 6e"1ite en7uirie"5
neither the !achine5 nor the ?"er4ice!an@ were e4er "een a&ain: 6i"cu"" whether
the lo"" i" co4ered:
4eco1ery o& the machine is unlikelyB and it must be re!arded as lostC 0he ',4 section
has no e3clusion o& loss by &raudulent scheme or trickC;In these casesB the trickster usually
produces a &alse deli1ery note or authorisation<C I& there )as a !enuine mistake by the
receptionistB iCeC he or she is not suspected o& collusionB the loss is co1eredC
': Per"onal AccidentLStated 0enefit" co4er" ?2odil+ in8ur+ cau"ed 2+ accidental5
4iolent5 eAternal and 4i"i2le !ean"@: 0riefl+ indicate how the co4er a11lie" if the
in"ured 1er"on i" in8ured 2+ effect of a 1re>eAi"tin& di"ea"e co!2ined with an
accident:
I& the insured is killed or inAured by the combined e&&ects o& a pre>e3istin! disease and an
accidentB co1er depends on )hich is the pro3imate causeC
#: If the a2o4e 1olicie" are "u28ect to the ?2u"ine"" li!itation@5 "tate whether the
accident !u"t occur<
#:1 6urin& nor!al 2u"ine"" hour"
#: At the in"uredF" 1re!i"e" or contract "ite:
0he accident must arise &rom and in the course o& employment in the businessB not
necessarily=
(C1 durin! normal business hours
(C2 at the insured8s premises or contract sitesC
BN"IN#
2&%
Module 14 - cont
(: An elderl+ lad+ "li11ed and fell on the 1atio out"ide Geor&eF" re"taurant: She
li!1ed awa+5 !utterin& an&ril+5 2ut did not !a*e a for!al co!1laint: In ter!" of
Geor&eF" lia2ilit+ in"urance5 de"cri2e what he !u"t do5 and the rea"on" for thi":
In terms o& !eneral condition (B 9eor!e must !i1e insurers notice o& any e1ent )hich may
result in a claimC 0his is so that important details can be recordedC ;Is the patio part o&
9eor!e8s premisesB )as it )et or slippery at the time andB i& soB )as any )arnin!
displayed or !i1enB did anyone else slip or &all be&ore or a&ter)ardS< ,n actual claim mi!ht
still be made at some &uture timeB and i& so all correspondence must be &or)arded to
insurers to deal )ithC
Insurers mi!ht also re5uire some action to a1oid similar accidents in &utureC
3: Co!1an+ P "u"1ect" that it" "tore!an i" cheatin& with the order"5 2ut there i" no
1roof of thi": The+ allow hi! to continue5 in the ho1e that the+ can o2tain 1roof:
0riefl+ di"cu"" how thi" affect" their fidelit+ in"urance:
Company X must !i1e insurers immediate notice o& the circumstancesB because these are
likely to result in a claimC I& they &ail to do soB the losses )ill not be co1eredC 0he
storeman should be suspended &rom duty pendin! the outcome o& in1esti!ationsB or at
least be asked to accept a temporary trans&er to another line o& )orkC
,: EA1lain wh+ in"urer" !i&ht not alwa+" in"i"t that a fidelit+ lo"" 2e re1orted to the
1olice:
Sometimes an employeeB con&ronted )ith the &actsB )ill admit !uilt and o&&er to repay the
amount stolenC "n the other handB &raud in1esti!ations by the police take timeB and mi!ht
pro1e inconclusi1eC 0here is then little chance o& a reco1ery bein! madeC
1-: 6e"cri2e wh+ a ca"h>in>lieu "ettle!ent of a !otor clai! !i&ht 2e allowed5 and
outline the 1o""i2le 1ro2le!":
,n older 1ehicleB althou!h only super&icially dama!edB mi!ht be uneconomical to repair
pro&essionallyB o)in! to the hi!h cost o& spares and labourC 0his can cause hardship to
the insuredB because the economic bene&it o& the 1ehicle is !reater than the market 1alue
insurers )ill pay as a H)rite>o&&IC Possible disad1anta!es to a cash>in>lieu settlement
include=
, sal1a!e contractor may ha1e undertaken to take o1er all the insurer8s H)recksIB and &eel
that insurers should not be allo)ed to choose )hich 1ehicles are o&&eredB and )hich are
notC 'e&ore !rantin! &urther co1er on the 1ehicleB insurers )ill )ant to kno) that repairs
ha1e been properly done ;so that they do not end up payin! t)ice &or the same repairs<
and that the 1ehicle is in a road)orthy conditionC
BN"IN#
2&&
Module 1'< South African S1ecial Ri"*"
In"urance A""ociation .SASRIA/
Learnin& Outco!e"
List the type o& S,S4I, coupons a1ailableG
:3plain )hich S,S4I, co1ers re5uire an underlyin! policyG
:3plain )hich S,S4I, co1ers do not re5uire an underlyin! policyG
%escribe )hen S,S4I, co1er may be issued and take e&&ectG
'rie&ly e3plain the operation o& N,S4I,C
BN"IN#
2&'
0ac*&round
S,S4I, )as &ormed a&ter the 1$/( So)eto 4iotsC Insurers realised that they could no lon!er
under)rite the losses arisin! &rom the political riots o& the timeB as it )as almost e5ual to !i1in!
co1er &or ci1il )ar risksC
0he aim o& the riotin! )as to chan!e social and political conditions and this )as there&ore a
&undamental type o& riskB )hich a&&ected e1eryone in the countryC
,s a resultB S,S4I, )as &ormedC It opened its doors &or business on 1 ,pril 1$/$C
T+1e" of Co4er
"ri!inally only political riot )as co1eredB but today non political riot and strike is also co1ered as
reinsurers )ithdre) their support &or the non>political co1ers in 1$*/C 2ar risks are still e3cludedC
S,S4I, is &or risks in South ,&ricaC , similar arran!ement ;N,S4I,< applies in NamibiaC In other
territoriesB normal insurers can issue riot co1er i& they are prepared to do soC
0he !o1ernment does not under)rite S,S4I,B but a board o& directors controls the companyC
)unctionin& of SASRIA 0u"ine""
S,S4I, &unctions 1ery similarly to other classes o& insurance as &ar as the insured is concernedC
0here are t)o )ays in )hich it di&&ers in administrati1e procedures and these are=
the issuin! o& the couponG
the settlin! o& claimsC
0he direct insurance companies issue the documentation or coupons pro1idin! S,S4I, co1er as
a!ents &or S,S4I,C ;S,S4I, co1er is limited to 4S,<C 0here is a similar arran!ementB called
N,S4I,B &or NamibiaC
BN"IN#
2&(
T+1e" of Cou1on"
0here are &our types o& S,S4I, co1er a1ailableC Co1er is issued and the insured is pro1ided )ith
the appropriate coupon to pro1e that co1er e3istsC
S,S4I, documentation comprises a certi&icate and a policy )ordin!C It is normal in the insurance
industry to re&er to them as couponsC
0he types o& co1er are as &ollo)s=
T+1e of Co4er Ri"* Co4ered
Material 6a!a&e
0his is the coupon used to co1er all risks other
than those listed belo)C
Contract Bor*" and L or Con"truction
Plant
0his co1ers some o& the en!ineerin! type risksC
Con"e7uential Lo"" 0his is &or the 'usiness Interruption SectionC
Motor Polic+ 0his is &or all types o& motor 1ehiclesC
Marine and Inland Tran"it
0here are special arran!ements &or S,S4I,
co1er &or this type o& risk as marine insurance
normally co1ers strikeB riot and ci1il commotionC
.arine?9oods in 0ransit are mentioned separately only because a special scale o& rates applies
to theseC
%nderl+in& Polic+
In the case o& all the co1ers > e3cept motor > there must be an underlyin! policyB issued throu!h
an insurerC
0he insurer )ho issues the underlyin! policy must also issue the S,S4I, couponC
Pre!iu! Accountin&
Premiums must be paid o1er by insurers )ithin 4# days o& the month in )hich co1er be!insC
Penalties are char!ed )here the member &ails to obser1e this re5uirementC
BN"IN#
2&)
Accountin& Return" to SASRIA
4eturns must be submitted to S,S4I, t)ice yearlyC 0he member8s auditors must 1eri&y themC 0he
periods are &rom 1st Panuary to 0th Pune and 1st Puly to 1st %ecemberC 0he purpose is to
certi&y that the premiums due to S,S4I, ha1e been paidC
Certi&icates must be submitted no later than 4# days a&ter the end o& each periodC Penalties are
imposed i& the conditions are not metC ,ll spoilt certi&icates > as they are numbered se5uentially >
must also be kept and accounted &orC
Value Added TaA .VAT/
,ll premiums and sums insured are inclusi1e o& 6,0C Commissions payable to members and their
intermediaries are also inclusi1e o& 6,0C 0he coupons and policies issued ser1e as 6,0 in1oicesC
Monthl+ Pre!iu!"
S,S4I, premiums are normally annual premiumsG ho)e1er because o& the 1olume o& monthly
policies todayB there is a &acility &or a monthly S,S4I, policyC
0his is a1ailable to clearly identi&iable !roup schemesB or a clearly identi&iable !roup o&
indi1idual policiesC
It is only a1ailable &or true monthly policies and not &or annual policies paid monthlyC
, coupon is issued at the end o& each monthB pro1idin! details o& the a!!re!ate sum insured
and?or the total number o& 1ehicles listedC 4ecords o& indi1idual underlyin! policies )ill only be
re5uired by S,S4I, in the e1ent o& a claimC
Pro Rata Pre!iu!"
Pro rata premium applies the &irst time the insured takes out S,S4I, co1erC ,t e1ery subse5uent
issue > &or instance at rene)al o& the underlyin! policy > the &ull annual premium is payableC
, pro>rata premium may also be char!ed to enable the period o& insurance to be adAustedB so that
the rene)al date o& both the underlyin! policy and S,S4I, policyB &alls in line )ith the insured8s
&inancial yearC
BN"IN#
2&*
Cancellation of SASRIA
S,S4I, coupons may be cancelled &or a 1ariety o& reasonsB but premium may only be re&unded
under certain circumstancesC 0hese are=
)hen the interest o& the insured in the property ceasesB because o& the sale o& the
propertyB insol1ency or any other reasonG
)here the member cancels the underlyin! policy due to ad1erse claimsG
)here the member re>issues the underlyin! policyG
in terms o& a &inal trans&er in terms o& a take o1er certi&icate or similar le!al trans&er o& riskB
then the premium adAustment pro1isions o& the underlyin! policy )ill applyG
i& the insurer chan!es mid>termC
S,S4I, is not rene)ableB but members may send out e3piry notices to remind clients to re5uest
the co1er &or the ne) period o& insuranceC
Clai!"
Insurance companies also handle S,S4I, claims on behal& o& S,S4I,C %irect insurers do ha1e
limited authority to settle claimsC 0hey may settle motor claims up to an amount o& 4# 000C
,ll other claims are there&ore sent to S,S4I,C 0he procedure &or this is that they are channelled
throu!h the head o&&ice o& the memberB unless prior arran!ement has been madeC
Clai!" Procedure"
0he insurer must treat all S,S4I, claims as i& they )ere their o)nC
'e&ore submittin! a claim the insurer must check to see )hether it is e3cluded in terms o&
any other policy in &orce at the time o& the lossC
,ll in&ormation must be treated as strictly con&identialC I& a loss adAuster is appointed it
must be emphasised that no details can be released to the insuredB or the intermediary
)ithout prior consentC
Claims must be reported to S,S4I, as soon as reasonably possibleC
Su&&icient documentation and in&ormation to enable S,S4I, to open a &ile must
accompany potential claimsC
"nly a .otor ,ccident claim &orm or a 9eneral Claim &orm is acceptableC
BN"IN#
2&+
Clai! 6ocu!entation
"nly ori!inal documentation should be &or)arded to S,S4I,C 0he &ollo)in! are essential )hen
submittin! a S,S4I, claim=
, preliminary claims ad1ice &ormC 0his must be attached )ith a co1erin! letter &rom the
insurerG
, copy o& the S,S4I, coupon?policyC 2here the claim is in the name o& a subsidiary
company the name o& the subsidiary must &ollo) the name o& the holdin! company on the
claim &ormG
0he basis o& ratin! the policy?coupon must be detailedG
, claims estimate must be submitted to enable S,S4I, to raise the correct estimateC
Ad8u"ter" Lo""
For claims in e3cess o& 41 #00 a loss adAuster must be appointedC 0he intermediary is not
allo)ed to appoint the loss adAusterC
Claim &orms must be submitted as normalC
Pre"cri1tion Period
0he prescription period in terms o& S,S4I, claims &ollo)s that o& the underlyin! policy and
insurers are e3pected to adhere strictly to itC
In the case o& motorB )here there is no need &or an underlyin! policyB the prescription period is
t)el1e monthsC
VAT< Clai!"
2hen the chosen method o& settlement is cash S,S4I, include the 6,0 component irrespecti1e
o& )hether the insured is a 1endor or non>1endorC
2hen the article is repaired or replaced then S,S4I, )ill settle the account )ith the
repairer?supplierB includin! 6,0C
BN"IN#
2',
9a!i2ian S1ecial Ri"*" In"urance A""ociation .9ASRIA/
S,S4I, operates only in respect o& risks )ithin the 4epublic o& South ,&rica and its territorial
)atersC , similar arran!ementB called N,S4I, ;Namibian Special 4isk Insurance ,ssociation<
operates in NamibiaC 0o make thin!s easier &or holiday makers and others=
6ehicles re!istered in the 4epublic o& South ,&ricaB and insured )ith S,S4I,B may tra1el
in Namibia )ithout the need &or separate co1erG
Property in transit &rom South ,&rica to Namibia remains co1ered includin! the return
AourneyB but co1er ceases i& it is permanently handed o1er to anyone in NamibiaG
Co1er &or South ,&rican !oods imported or e3ported throu!h Namibia may be issued
throu!h S,S4I,C
0his is so that one does not need to take out t)o couponsB S,S4I, and N,S4I,B to co1er the
same AourneyC Similar arran!ements apply to 1ehicles and property insured )ith N,S4I,B and
passin! throu!h South ,&ricaC
BN"IN#
2'$
In"truction"
0he kno)led!e sel& assessment consists o& multiple choice 5uestions as )ell as one lon!er
)ritten 5uestionC ,ns)er all o& the 5uestions to assess )hether you ha1e mastered the
kno)led!e componentC .odel ans)ers ha1e been pro1ided )hich you can use to assess your
ans)ersC
1: SASRIA 1olicie"< True )al"e
A are issued on an annual basis only
0 co1er both political and non>political riot and strike
C all ha1e a prescription period o& 12 monthsB durin! )hich claims must
be submitted
6 include a 6,0 component
E may be cancelledB but no premium is re&undable
: Audited accountin& return" for SASRIA !u"t 2e "u2!itted True )al"e
A )ithin 0 days o& the month in )hich co1er incepted
0 )ithin (0 days o& the end o& the month in )hich co1er be!an
C t)ice yearly
6 annually
$: 0riefl+ di"cu"" the 1rocedure for dealin& with SASRIA clai!": Includin& the "u11ortin&
docu!entation re7uired:
OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
BN"IN#
2'2
Module 15
1: SASRIA 1olicie"< True )al"e
A are issued on an annual basis only P
0 co1er both political and non>political riot and strike P
C all ha1e a prescription period o& 12 monthsB durin! )hich claims must
be submitted
P
6 include a 6,0 component P
E may be cancelledB but no premium is re&undable P
: Audited accountin& return" for SASRIA !u"t 2e "u2!itted True )al"e
A )ithin 0 days o& the month in )hich co1er incepted P
0 )ithin (0 days o& the end o& the month in )hich co1er be!an P
C t)ice yearly P
6 annually P
$: 0riefl+ di"cu"" the 1rocedure for dealin& with SASRIA clai!": Includin& the "u11ortin&
docu!entation re7uired:
0he insurer must treat all S,S4I, claims as i& they )ere their o)nG
'e&ore submittin! a claim the insurer must check to see )hether it is e3cluded in terms o&
any other policy in &orce at the time o& the lossG
,ll in&ormation must be treated as strictly con&identialC I& a loss adAuster is appointed it
must be emphasised that no details can be released to the insuredB or the intermediary
)ithout prior consentG
Claims must be reported to S,S4I, as soon as reasonably possibleG
Su&&icient documentation and in&ormation to enable S,S4I, to open a &ile must
accompany potential claimsC
"nly ori!inal documentation should be &or)arded to S,S4I,C 0he &ollo)in! are essential
)hen submittin! a S,S4I, claim=
, preliminary claims ad1ice &ormC 0his must be attached )ith a co1erin! letter &rom the
insurerG
, copy o& the S,S4I, coupon?policyC 2here the claim is in the name o& a subsidiary
company the name o& the subsidiary must &ollo) the name o& the holdin! company on the
claim &ormG
0he basis o& ratin! the policy?coupon must be detailed by the memberG
, claims estimate must be submitted to enable S,S4I, to raise the correct estimate and
to realise the &ull potential o& their liabilityC
BN"IN#
2'%
Module 1#< Co!1en"ation for Occu1ational
In8urie" and 6i"ea"e" Act .COI6A/
Learnin& Outco!e"
'rie&ly outline the reasons &or the ,ctG
%escribe the e1ents that are co1ered under C"I%,G
List the classes o& bene&its under C"I%,G
%escribe the limitations o& bene&itG
"utline the obli!ations and ri!hts o& the employer under C"I%,G
"utline the assessment o& employers under C"I%,G
List the risks that are co1ered under C"I%,G
%iscuss inAury related bene&its under C"I%,G
%iscuss death bene&its under C"I%,G
%iscuss occupational diseases under C"I%,C
BN"IN#
2'&
Rea"on" for the Act
0he Compensation &or "ccupational InAuries and %iseases ,ctB 10 ;C"I%,< )as si!ned into
South ,&rican la) e&&ecti1e &rom 1 .arch 1$$4B to pro1ide compulsory compensation &or all
employees under contract o& employment ;)ith a &e) e3ceptions< &or death or personal inAury
su&&ered in the course o& their employmentC It replaced the 2orkmen8s Compensation ,ct 1$41
;No 0 o& 1$41<C 0he ,ct is desi!ned to o&&er protection &or all )orkers under a contract o&
employmentB and pro1ides &or the payment o& bene&its to the )orker or his dependants i& he is
inAured or dies in the course o& his dutiesC 0he inAury or illness or death must arise &rom an
accidentC
InitiallyB the need &or such an ,ct arose &rom technolo!ical de1elopments and the use o& labour to
per&orm )ork on behal& o& employersC , hundred years a!o there )as 1ery little support a1ailable
to )orkers )ho )ere inAured or killed on dutyB or )ho contracted diseases in the course o& their
employment directly related to the )ork they didC "&ten employees )ho )ere unable to continue
to )ork as a result o& an accident )ere discarded &rom the labour marketB and &ound themsel1es
unable to earn a li1in! throu!h ill>health or Aust throu!h lack o& suitable )ork opportunitiesC Some
employers did little to help employeesB but the position )as especially bleak &or underpri1ile!ed
dependants o& inAured or ill )orkersB such as orphansB )ido)s and the elderlyC
In :uropeB as a direct result o& the Industrial 4e1olutionB by )hich many chan!es to methods o&
)ork )ere made by the introduction o& machinery in place o& human labourB the need &or
compensation &or )orkers became more apparentC SoonB chan!es throu!hout the )orld resulted
in many countries &ollo)in! the same pathC
In South ,&ricaB prior to the Second 2orld 2arB and as a result o& the e&&ects o& the 9reat
%epressionB the State looked 1ery closely at the need &or implementin! a State>controlled
protection &or )orkers in the &orm o& &inancial assistance &or losses arisin! &rom accidents to the
)orkersC , &uller duty )as placed on employers to pro1ide &undin! &or these bene&itsC
,s the %epression dre) to a close and industry and commerce started to de1elop a!ainB more
and more )orkers )ere dra)n into the employment netB and the State &ound a need e3isted &or
these )orkers to be protectedC In the pre1ious t)o centuries the United +in!dom had
commenced a le!islati1e process to pro1ide bene&its &or Qordinary8 )orkers )ho had lon! been
e3ploited by employersC 0his e3ploitation arose in the &orm o& )orkhousesB the use o& child labour
in di&&icult )orkin! conditionsB and the threat o& debtor8s prison &or those unable to pay their )ay in
li&eC In 1$11 the National Insurance ,ct )as passed in 'ritainB and this ,ct )as used as a broad
&oundation &or the introduction in 1$41 o& the 2orkmen8s Compensation ,ct 1$41C ,t its &irst
introductionB the ,ct did not make pro1ision &or all )orkers in all industriesC
,t common la) any indi1idual has the ri!ht to sue another &or losses arisin! to himsel& and
caused by any )ron!&ul act committed by the other party that causes such lossC Prior to the
implementation o& the 2orkmen8s Compensation ,ct o& 1$41B le!al options a1ailable to those )ho
su&&ered loss ;in the &orm o& occupational inAuryB death or the contractin! o& a disease< )ere
limited in terms o& indi1idual e3pense and the amounts o& a)ardsB i& anyC
Under the terms o& the 2orkmen8s Compensation ,ctB 1$41B there had also been speci&ic ma3ima
applied to compensation bene&its recei1ed by employees )ho su&&ered an accident in the
)orkplaceC 0his meant that only those )hose annual earnin!s )ere lo)er than the prescribed
ma3imum )ere co1ered &or accidents in terms o& the ,ctC 0hose employees earnin! more than
the prescribed limit )ere then not classi&ied as )orkmenB and could recei1e no compensation &or
accidentsC
BN"IN#
2''
0hese employees had to rely on restitution under common la)B )hich means that they had to rely
on the courts to recei1e compensation &or accidents caused by the ne!li!ence o& the employerB or
to pro1ide their o)n personal accident co1er &or accidents occurrin! )ithout this ne!li!enceC
2hether the employer pro1ided this co1er or notB basic protection &or employees a!ainst
accidents arisin! in the )orkplace )ere e3pensi1eB and o&ten co1er pro1ided )as insu&&icientC 0he
implementation o& C"I%, did a)ay )ith this split de&inition o& )orkmenB to broaden the base o&
compensationB both in terms o& bene&its and assessment contributionsC Under the 2orkmen8s
Compensation act 1$41B and C"I%,B the ri!hts o& all employees at common la) to pursue
reco1eries &or accidents a!ainst their employer )ere )ithdra)nC
From time to time C"I%, may be amended by parliament to cater &or chan!es to the )ork
en1ironment that may impact on bene&its needed &or employees or on assessment rates &or
employersC
0he State sou!htB 1ia the implementation o& appropriate le!islationB to redress this untenable
situationB and made employers responsible &or pro1idin! bene&its to be payable to )orkersB in the
e1ent o& an accident that impacted on the )orker8s ability to per&orm his tasksC 0he State re5uired
employers to contribute to an accident &und by )ay o& assessments le1ied on themC 0hese
assessments le1ied )ere related to the type o& industry in )hich the employer operatedC 0he
le!islation then remo1ed the ri!ht o& indi1iduals to seek le!al redress &or losses su&&eredB other
than 1ia means o& bene&its a1ailable to )orkers under the ,ctC 0he State throu!h the 2orkmen8s
Compensation Commissioner then dealt )ith the payment o& compensation to )orkers &or losses
su&&eredB e&&ecti1ely takin! responsibility &or this pro1ision o& compensationB &unded by employersC
0here e3ists a three>)ay in1ol1ement in the process o& compensation &or accidental illnessB inAury
or death o& )orkers= 0he StateB as o1erseer and administrator o& assessments and compensationG
0he :mployer as contributorB by )ay o& assessments le1ied at prescribed rates ;dependin! on
class o& occupation and loss history< o& &undin! &or the compensationB and the :mployee as
bene&iciary o& the co1erC
InitiallyB o)in! to the di1ersity o& industrial and commercial operations in South ,&ricaB the term
)orkmen )as not easily de&inableC 0he State then prescribed a certain income limitB belo) )hich
any personB irrespecti1e o& his occupationB )as classi&ied as a )orkmanB and so 5uali&ied &or
compensation bene&its under the &undC
In 1$*B the .achinery and "ccupational Sa&ety ,ct )hich also &ocuses on the scope o&
)orkmen8s compensationB made pro1ision &or the health and sa&ety o& 1irtually e1ery classi&ication
o& )orkmenB but still subAect to an earnin!s limitC 2orkers )hose earnin!s )ere abo1e the limitB
and there&ore ineli!ible &or compensation bene&its under the ,ctB retained the ri!ht to sue their
employer &or losses su&&ered as a result o& accidents in the )orkplaceC
0he Compensation &or "ccupational InAuries and %iseases ,ct o& 1$$4B ;,ct 10 o& 1$$<
;C"I%,< commencin! 1st .arch 1$$4B repealed the 2orkmen8s Compensation ,ctB and pro1ided
bene&its to all )orkmenB ;)ith a &e) e3ceptionsC< In essenceB the ,cts are 1ery similarB and the
process o& pro1idin! &undin! &or and compensation &rom the accident &und remains the sameC
0he &ollo)in! processes and re!ulations apply to the application o& C"I%,=
C"I%, is administered by the State
0he rates o& contributions and bene&its are determinedB and may be alteredB by the State
:&&ecti1elyB as the &und is controlled by the StateB the sol1ency o& the &und is !uaranteedC
It is compulsory that all employers and employees Aoin the schemeB subAect to certain
e3ceptions
BN"IN#
2'(
0he rates o& contributions 1aryB but are standard bet)een minima and ma3ima )ithin the
same occupational class or industry
0here is minimal indi1idual under)ritin! o& risksB e3cept in the case )here a particular
employer or occupational classi&ication re5uires ratin! adAustmentsC
%isputes are handled in the &irst instance by the CommissionerB and not by the courtsB
althou!h cases may be re&erredC
C"I%, is under the control o& the %irector>9eneralB )ho dele!ates many o& his &unctions to a
Commissioner &or compensationB )hose duties include=
0o recei1e notices o& accidents and occupational diseases and claims &or compensation
0o in5uire into accidents and occupational diseases
0o adAudicate on claims
0o issue an order &or the payment o& compensation in respect o& an a)ard made by him
0o decide )hether a person is an employeeB an employerB a mandator or a contractor
0o decide any 5uestion relatin! to a ri!ht to compensationG the submissionB consideration
and adAudication o& claims &or compensationG the calculation o& earnin!sG the de!ree o&
disablement o& any employeeG the amount and manner o& payment o& compensationG the
a)ardB )ithholdin!B re1ie)B discontinuanceB suspensionB increase or reduction o&
compensationG the liability &or payment o& compensation
0o decide )hether a person is a dependant o& an employee andB i& soB the e3tent o&
dependency upon the employeeB andB in the case )here there is more than one
dependantB )hich shall recei1e compensation
0o decide upon the need &orB and the nature and su&&iciency o&B medical aidG the
reasonableness o& the cost o& medical aidB and the amount and manner o& payment o&
such cost
0o decide upon the liability &or assessmentB tari&&s o& assessmentB the amounts o&
assessmentsB the manner o& payment o& assessments and related matters
0o decide upon any other 5uestion &allin! )ithin his &unctions
0o administer the compensation &und and the reser1e &und
0o reco1er amounts due to the compensation &undB includin! amounts )hich should not
ha1e been paid out or )rite o&& such amounts i&B in his opinionB they cannot be reco1ered
,&ter the conclusion o& each &inancial year to submit a report to the .inister re!ardin! the
administration durin! the year
0o record statistics and in&ormation re!ardin! the occurrence and causes o& accidents and
occupational diseasesB and the a)ard o& bene&its
0o institute such in5uiries and per&orm such other &unctions as may be prescribedB or as
he may deem necessary
BN"IN#
2')
E4ent" Co4ered %nder COI6A
:mployees and their dependants are entitled to compensation under C"I%, &or accidents out o&
and in the course o& their employmentB )hich cause=
0he death o& the employee
0he temporary total or temporary partial disablement o& the employee
0he employee to be permanently disabled
0he employee to re5uire medical aid
0he employee to contract an occupational disease
, notice o& an accident must be submitted by the employee to the employer as soon as possible
a&ter the accident occursC 7erea&ter the employer mustB )ithinB / days o& recei1in! a notice o& an
accidentB or ha1in! learned in some other )ay that an employee has met )ith an accidentB report
the accident to the %irector>9eneral or mutual association in the prescribed mannerC 2ithin a
&urther / daysB ;iCeC )ithin 14 days o& recei1in! ad1ice o& an accident< the employer must pro1ide
&ull details o& the accident to the commissionerC "n receipt o& all in&ormation relatin! to a claim &or
compensationB the %irector>9eneral may make an en5uiry into the accident to determine the
co1er under C"I%,C 7e may re5uire the employee to submit to a medical e3aminationC
0o become entitled to bene&its under C"I%,B the employer8s assessment contribution must ha1e
been madeB and there must be no doubt that the accident arose out o& and in the course o&
employment and that the employee )as not )il&ully ne!li!ent in causin! the accidentC In any
e1entB all claims must be submitted )ithin a period o& 12 months o& the date o& accidentC I& notB
the ri!ht to bene&its under the ,ct )ill lapseC
Cla""e" of 2enefit" under COI6A
Compensation bene&itsB based on the earnin!s o& the employee at the time o& the accident are
payable under C"I%, in respect o&=
6eath of the E!1lo+ee
In respect o& a &atal accident to an employeeB compensation is payable &rom the compensation
&und as a lump sum to the employee8s dependants the amount payable is determined based on
the le1el o& compensation payable had the employee been rendered totally disabledC In additionB
monthly pensions are payable to )ido)s and )ido)ers o& the employee and to his childrenC "ther
members o& the employee8s &amily )ho are dependent on the employee8s earnin!s are also
entitled to compensation dependin! on their de!ree o& dependency on the employeeC
Compensation in respect o& &uneral e3penses is also reco1erable &rom the &undB subAect to limitsC
Per!anent 6i"a2le!ent resultin! in the employee bein! rendered unable to per&orm his usual
duties in the )orkplace under all circumstancesC ,n e3ample o& permanent disability )ould be the
loss o& a limbB the eyes or hearin!C In terms o& C"I%, disablement is !raded in terms o& the inAury
su&&ered by the employeeC
BN"IN#
2'*
0he loss o& a limb is !raded at a hi!her percenta!e o& disablement than is the loss o& a toe or
&in!erC Loss o& total si!ht is !raded hi!her as a percenta!e disablement than is the loss o& si!ht o&
one eyeC
Te!1orar+ 6i"a2le!ent
2here an employee is pre1ented by inAury or illness &rom per&ormin! his re!ular duties &or a timeB
and )here there is an e3pectation that he )ill reco1er &ully in timeB he )ill be entitled to recei1e
compensation &or the time he is temporarily disabledC 0emporary disablement can be either total
or partialC ,n e3ample o& total temporary disablement )ould be a state o& unconsciousness or
comaB )hereas broken limbs or a period o& con1alescence )ould be partial disablement o& a
temporary nature
Medical Aid
:mployees are entitled to recei1e bene&its in respect o& medical aid arisin! &rom an accidentC
0he period o& compensation is &or not lon!er than t)o years &rom the date o& an accident or the
commencement o& a diseaseB and compensation )ill be &or reasonable cost o& medical aid
necessitated by such accident or diseaseC I& &urther medical aid could reduce the disablement o&
the employeeB the %irector>9eneral may pay the additional medical costsC
Occu1ational 6i"ea"e
Under this bene&it classB employees are entitled to recei1e compensation &or contractin! and
occupational diseaseB or a disease other than an occupational disease i& such disease has arisen
in the course o& his employmentC 'ene&its are calculated based on the outcome o& the diseaseB
)hether this is deathB permanent disablement or temporary disablementC 0he commencement o&
a disease )ill be the date on )hich a medical practitioner dia!nosed that disease &or the &irst
timeC
The E!1lo+ee
Co1er &or compensation bene&its &or the employee are automatic and !uaranteed by C"I%,B
subAect to certain limitationsC I& an employee meets )ith an accident resultin! in his disablement
or death the employee or his dependants are entitled to the bene&its pro1ided &or and prescribed
in C"I%,C 0he accident must arise out o& the employee8s employmentB )hich includes tra1ellin!
to and &rom )ork on transportation pro1ided &ree by his employerC
Li!itation" are 1ro4ided for a" follow"<
I& an accident is attributable to the serious and )il&ul misconduct o& the employeeB no
compensation bene&its are payableB unless the accident results in serious disablementB or the
employee dies lea1in! a dependant or dependants &inancially dependent upon himC :1en soB the
employee may still be entitled to compensation bene&its under medical aidC
BN"IN#
2'+
I& the accident does not arise out o& the course o& the employee8s employment contractC C"I%,
de&ines the course o& employment i& it is in the normal &unctions o& his employmentC I& the
employee )as actin! contrary to the rules o& his employment or he )as actin! )ithout any order
o& his employerB but the %irector>9eneral deems the employee )as actin! in connection )ith the
business o& his employerB compensation bene&its )ill be payableC
Upon commencin! employmentB the employee must disclose in&ormation re!ardin! his current
state o& healthB inAuries su&&ered &rom at the time or pre1iously and i& he under!oin! treatment &or
any illnessC In terms o& an accident arisin!B the employee must ad1ise his employer as soon as
possible a&ter the occurrence o& the incidentC 7e must also submit himsel& to a medical
e3amination to determine the e3tent o& any inAuriesC
Compensation bene&its may be )ithheld i& it )as determined that the employee )as responsible
&or the accidentB as result o& bein! under the in&luence o& alcohol or dru!sB or that he acted
recklessly and )il&ullyC
:mployees also ha1e compensation ri!hts )hile attendin! trainin! pro!rammes on behal& o& his
employerC
0here is a duty o& the employee to o&&er &ull in&ormation about his state o& health and mobility at
the time o& commencin! employmentB or durin! any course o& his employment contractC C"I%,
may )ithhold payment o& compensation bene&its i& the employee at any time represented to his
kno)in! the in&ormation to be &alseB that he )as not then su&&erin! &rom or had not pre1iously
su&&ered &rom a serious inAury or occupational disease or any other serious diseaseC I&B in the
opinion o& the %irector>9eneralB the death or disablement )as causedB prolon!ed or a!!ra1atedB
by the unreasonable re&usal or )il&ul ne!lect o& the employee to submit to medical aid in respect
o& any inAury or diseaseB )hether caused by the accident or e3istin! be&ore the accidentC
No bene&its are payable i& any inAury or illness is deliberately caused by the employeeB or i& any
claim is in any )ay &raudulentC
The E!1lo+er
0he employer has a ri!ht to=
'e &airly assessed &or contributions to the &und
7a1e his )ork &orce &ully compensated &or accidents arisin! to them in the )orkplace
4ecei1e bene&its in the &orm o& reduced assessments )here he has taken steps to ensure
a hi!h le1el o& sa&ety in the )orkplaceB and )here is claims ratio has been e3emplaryC I& in
the opinion o& the %irector>9eneral the business o& an employer is desi!nedB e5uippedB
or!anised or conducted in a manner )hich is calculated to pre1ent accidents and the
number o& accidents are less than those usually occurrin! in comparable businessesB the
%irector>9eneral may assess that employer at a lo)er tari&&C
Pro1ide accident and illness co1er ;and attendant bene&its< to his employees under an
insurance policyB &or limits o& compensation under C"I%,B rather than re!isterin! under
C"I%,C
BN"IN#
2(,
,s all the initial &undin! &or the compensation &und is deri1ed &rom contributions by )ay o&
assessments &rom the employerB his participation in C"I%, is subAect to strict obli!ations=
,n employer carryin! on business in the 4epublic must re!ister )ith the %irector>9eneralB
and ad1ise the %irector>9eneral o& the details o& his businessC 0hese particulars include
details o& type o& operations and risks attendantB sta&& numbers and cate!oriesB and the
total amount o& earnin!s &or all sta&&B includin! trainees and apprenticesC
0he employer must pro1ide in&ormation separately in respect o& each type business
in1ol1edC I& an employer is operati1e in minin!B construction and the motor industryB &or
e3ampleB he must pro1ide details &or all three cate!ories indi1iduallyC
%etails o& any chan!es to the in&ormation pro1ided must be &or)arded to the %irector>
9eneral )ithin / days o& these chan!es takin! placeC
Forei!n companies operatin! in South ,&rica must pro1ide to the %irector>9eneral the
address o& its head o&&iceB and the name and address o& its chie& o&&icer in the South
,&ricaC
:mployers are re5uired to keep a re!ister o& )a!esB time )orkedB payment &or piece)ork
and o1ertime &or each employeeC 0hese records ha1e to be retained by the employer &or a
period o& not less than &our years a&ter the date o& the last entry in the re!isterC ,n e3ample
)ould be that records &or )a!es paid to and time )orked by each employee &or the year
1$$* must be a1ailable &or inspection until the end o& 2002C
:mployers must declare to the commissioner on the 1st .arch each year in&ormation
re!ardin! the amount o& earnin!s paid by him to his employees durin! the period )ith
e&&ect &rom the &irst day o& .arch o& the pre1ious up to the last day o& February o& the
current yearC
I& an employer carries on business at more than one place or i& he carries on more than
one class o& businessB he must pro1ide separate in&ormation &or each place or classC
I& the employer &ails to comply )ith these re!ulationsB he )ill be !uilty o& an o&&enceB and
may be liable to a &ine or penalty imposed by the %irector>9eneralC
I& an employer &ails to &urnish a return or i& the estimate o& the earnin!s )hich an employer
e3pects to pay durin! a particular period is in the opinion o& the %irector>9eneral too lo)B
the %irector>9eneral may estimate the earnin!sB and assess the employer accordin!lyC
BN"IN#
2($
A""e""!ent" of E!1lo+er"
,n employer is assessed by the %irector>9eneral accordin! to the tari&&s o& assessment &or any
class o& occupation and takin! into account the loss ratio o& that industry or o& the indi1idual
employerC 0he assessment contribution is based on a percenta!e o& total earnin!s paid by the
employer in the year 1st .arch to February o& the immediately precedin! yearC 0he %irector>
9eneral may also le1y a minimum assessment in respect o& a particular employer or cate!ory o&
employersC
Certain employers are e3empt &rom assessmentC ,ll employers other than those listed belo) are
compelled to pro1ide &undin! 1ia assessment contributionsC No contributions need be made in
respect o& employees o&=
the StateB includin! Parliament and the pro1incial authoritiesC
a local authority )hich has obtained a certi&icate o& e3emption &rom C"I%,
,n employer )ho has taken out an insurance policy &or the &ull e3tent o& his potential
liability to all employeesC 0his policy )ould be in the &orm o& a !roup personal accident and
illness policy under)ritten by a mutual association
0he employer must pay assessments to the %irector>9eneral )ithin 0 days a&ter the date o& the
assessmentC 0he %irector>9eneral may allo) the employer to pay assessments in instalmentsC I&
an employer &ails to pay assessmentsB the %irector>9eneral may impose a &ine on himC I& an
employer &ails to re!ister )ith the %irector>9eneral and &urnish him o& particulars o& his businessB
and an employee in his employ su&&ers a loss as a result o& an accident in the )orkplaceB the
%irector>9eneral mayB in addition to any other penalty to )hich such employer may be liableB
impose a &ine e5ual to the &ull amount o& the compensation payable in respect o& such accidentC
7o)e1erB i& the %irector>9eneral belie1es that the &ailure to comply by the employee )as due to a
cause beyond the employer8s controlB or that payment o& the &ull amount o& the capitalised 1alue
o& a pension payable as compensation to the employee )ould probably lead to the insol1ency o&
that employer the %irector>9eneral may )ai1e any &ine imposed by himB in )hole or in partC 0he
%irector>9eneral may also allo) the employer to pay the penalty in instalmentsC
In respect o& employers )ho de&ault in payin! any amount due to the %irector>9eneralB )hether in
terms o& not re!isterin! &or assessments or o& not payin! assessments or &ines imposed by the
%irector>9eneralB the %irector>9eneral is allo)ed under C"I%, to pursue the matter in the courtsC
BN"IN#
2(2
Ri"*" under COI6A
0he risks co1ered under C"I%, arise &rom a number o& issues surroundin! the )orkplace
acti1ities o& employersC 0hese risks arise &rom=
the actual occupation o& indi1idual employersC 0hese may take the &orm o& particularly
haKardous occupations such as asphalt &actoriesB oil and !as drillin!B e3plosi1es and
matchesB &ire)orks &actoriesB oil re&ineriesB petrochemical )orksB paper and plasticsG to
beni!n occupations such accountantsB banks and other chie&ly administrati1e acti1itiesC
0he occupation o& !roupin!s o& employeesB such a deep sea di1ersB minersB smeltersB and
others do)n to clerical and o&&ice )orkersC
0he siKe o& the or!anisation in terms o& sta&& numbersC 0he !reater the sta&& numbers in
any cate!oriesB particularly in haKardous occupationsB the !reater the risk to be co1eredC
0he amount o& )a!es paidC 0he hi!her the earnin!s paidB the !reater )ill be bene&its
payable to employees &rom accidentsC
4isks to the )orkplace 1ary as )ell &rom di&&erent perilsC 4isks o& e3plosionB &ireB inhalation
o& &umesB collapseB su&&ocation and asphy3iationB and road accidents amon! others
determine the potential e3tent o& lossC
0he employer8s &ocus on sa&ety measures to combat risk also a&&ects the potential &or lossC
In8ur+ Related 0enefit"
0he purpose o& C"I%, is to pro1ide &or employees )ho are inAuredB killed or in the course o& their
employmentB to compensate them &or loss o& earnin!sB the need &or medical assistanceB or to
assist their dependants to )ith on!oin! care or li1in! e3pensesC
,lthou!h it is not possible to compensate &ully anyone )ho has su&&ered a disablin! inAury or
illnessB the payment o& money &or determined inAury or illness is an attempt to o&&er some &orm o&
indemni&ication in respect o& losses su&&eredC In terms o& C"I%, compensation limits and !rades
are pre>determinedB and bene&its are matched to these limits and !radesC
,ny employee )ho is inAured or contracts an illness in the course o& his )orkplace duties is
entitled to be compensated &or these inAuries or illness &rom the compensation &undC In the e1ent
o& his deathB his dependants are entitled to recei1e compensation as a result o& his accidental
death )hile per&ormin! his occupational tasksC
It is important to note that this compensation is automatically pro1ided &or in terms o& C"I%,B
subAect to certain restrictionsC Limits o& compensationB dependin! on the nature o& the inAury or
illness are prescribed )ithin C"I%, and may not be reduced or e3ceededC
Compensation is payable to employees or their dependants &or=
%eath o& the employee
Permanent %isablement )hich is the permanent inability o& an employee to per&orm any
)ork or as a result o& and accident or occupational diseaseC ,n e3ample o& permanent
disability )ould be the loss o& a limbB the eyes or hearin!C
BN"IN#
2(%
0emporary %isablementC 2here an employee is pre1ented by inAury or illness &rom
per&ormin! his re!ular duties &or a timeB and )here there is an e3pectation that he )ill
reco1er &ully in timeB he )ill be entitled to recei1e compensation &or the time he is
temporarily disabledC 0emporary %isablement is &urther cate!orised as either total
disablement ;&or e3ample bein! comatose< or partial ;losin! the use o& an arm &or a time<C
Funeral e3penses are paid up to the actual amount o& the costsB or to the ma3imum
amount in place at the timeB )hiche1er is the lesserC
,ll compensation is based on the earnin!s o& the employee at the time o& the accident !i1in! rise
to the claim &or compensationC :arnin!s include the 1alue o& any &ood and lod!in! pro1ided by
the employerB as )ell as the amounts paid to the employee &or re!ular o1ertime )ork per&ormed
by himC :arnin!s do not include any intermittent o1ertime )orkedB or any payments recei1ed &or
occasional and non>recurrent ser1ices per&ormedB or any e3>!ratia payments made by the
employer or any other personC
0he duties o& employees in reportin! accidents to their employer are that the employer must be
ad1ised o& any claim &or compensation as soon as possible a&ter the accident occursC 0his
determination o& the reportin! procedure on the part o& the employee allo)s &or the &act that the
inAury or illness o& the employee may make it impossible to report any incidents immediatelyC In
any e1entB the employee must report the occurrence o& an incident resultin! in a claim &or
compensation )ithin 12 months o& the incident arisin!B or the bene&its payable )ill lapseC No
claims )ill be considered i& they are not reported )ithin 12 months a&ter the occurrenceC ,&ter 12
months claims not reported )ill lapseC
2ithin / days a&ter recei1in! notice o& an accident to an employeeB his employer must submit a
claim to the Commissioner &or compensationC 2ithin a &urther period o& / daysB ;iCeC )ithin 14
days o& the incident< &ull and appropriate details o& the incident must also be pro1ided by the
employerC Failure to do this may make the employee liable to a &ine or other penaltyC
0he bene&its payable as compensation are detailed in Schedule 4 o& C"I%,C
Te!1orar+ Total 6i"a2le!ent .TT6/
0he ,ct de&ines 0emporary 0otal %isablement as &ollo)s=
Temporar% total disablement# in relation to an emplo%ee# means the temporar% total inabilit%
of su!h emplo%ee as a result of an a!!ident or o!!upational disease for whi!h !ompensation
is pa%able to perform the wor+ at whi!h he was emplo%ed at the time of su!h a!!ident or
o!!upational disease or wor+ similar thereto.
0emporary 0otal %isablement is there&ore the inability o& an employee to per&orm any part o& his
)ork as result o& an accidentC ,n e3ample )ould be )here an employee is in a comatose
condition a&ter an accidentC 7e is immobile and cannot )orkC ,s lon! as he is unable to per&orm
his )ork &ully he is temporarily totally disabledC
00% is payable &or a period o& 12 months a&ter the accidentC 00% lastin! less than three days is
not claimableC For 00% lastin! loner than 24 monthsB the %irector>9eneral may determine that a
permanent disability e3ists and pay compensation accordin!lyC
BN"IN#
2(&
Compensation &or 00% is payable at /#F o& the employee8s earnin!s at the time o& the accident
&or as lon! as the condition e3istsB but subAect to the time limitations as describedC
E/ample5
9eo&&rey su&&ered an inAury to his le!sB )hen he )as inAured in a collapse o& a brid!e he )as
)orkin! onC 7e )as hospitalised &or t)o monthsB under!oin! numerous operationsC 7e )as
unable to )alk &or a &urther month a&ter bein! dischar!edC 7is earnin!s at the time o& the accident
)ere 44 100 per month plus 4 400 per month &ood allo)anceC
In terms o& C"I%, he )as entitled to a bene&it payment o& 410 12#
44 100 \ 4 400 X months X /#F [ 410 12#
Te!1orar+ Partial 6i"a2le!ent< .TP6/
0he ,ct ;Section 1< de&ines 0emporary Partial %isablement as &ollo)s=
Temporar% partial disablement in relation to an emplo%ee# means the temporar% partial
inabilit% of su!h emplo%ee as a result of an a!!ident or o!!upational disease for whi!h
!ompensation is pa%able to perform the whole of the wor+ at whi!h he was emplo%ed at the
time of su!h a!!ident or o!!upational disease or to resume wor+ at a rate of earnings not
less than that whi!h he was re!eiving at the time of su!h a!!ident or o!!upational disease.
(Se!tion '(A) of A!t 6' of '(())
0emporary Partial %isablement di&&ers &rom 0emporary 0otal %isablement in that the employee is
not pre1ented &rom per&ormin! his )ork in &ull as a result o& inAuryC No bene&its are payable &or
temporary partial disablement that lasts less than daysC In terms o& Section 4/ o& C"I%,B the
employer is re5uired to make 00% and 0P% payments to the employee &or the &irst three months
o& such 0P% occurrin!C 0herea&ter he )ill be re&unded by the compensation &undC Payments &or
temporary total or partial disablement )ill cease to be payable on the termination o& such
disablement or i& the employee resumes the )ork upon )hich he )as employed at the time o& the
accident or resumes any other )ork at the same or !reater earnin!s or i& the employee is
a)arded compensation &or permanent disablementC
Per!anent 6i"a2le!ent .P6/
Permanent %isablement is a condition )here an employee has lost permanent use o& a physical
&acilityB such as use o& the limbsB the 1isual or aural sensesB or any permanent loss o& mobilityB &or
e3ampleC In terms o& C"I%,B permanent disabilities are !raded in terms o& se1erityB and are
detailed in Schedule 2 to the ,ctC
Compensation is paid dependin! on the de!ree o& disablementB in &our cate!oriesC
0hese are=
Permanent disablement o& 0F ;Section 4$;1<<=
o In the case o& permanent disability o& 0FB the compensation is re5uired by item 2
o& Schedule 4 )hich prescribes the nature o& the bene&it as a lump sum e5ual to
1# times the monthly earnin!s o& the employee at the time o& the accidentB subAect
to a minimum and ma3imum compensation o& 4104 44# and 420 *# respecti1elyC
BN"IN#
2('
Permanent disablement o& less than 0F ;Section 4$;1<<G
o In the case o& permanent disablement o& less than 0FB the compensation is
!o1erned by item o& Schedule 4C 0he nature o& the bene&it is a lump sumB the
amount o& )hich bears to a lump sum calculated under item 2 ;abo1e<B the same
proportion as the de!ree o& permanent disablement to 0FC
Permanent disablement o& 100F ;Section 4$;1<<G
Permanent disablement o& less than 100FB but more than 0FC
E/ample5
Pasper su&&ered the loss o& all o& the toes on his ri!ht &oot )hen a coal truck dro1e o1er his &oot at
his )orkplaceC 7is earnin!s at the time o& the accident )ere 42 $#0 per monthC FirstlyB his
de!ree o& disablement must be establishedC Since he has lost limbsB his disablement is
permanentC 0he e3tent o& his disablement is determined &rom Schedule 2C 0he loss o& the bi!
toeB both phalan!es is /FB and the loss o& &our other toes is a &urther /FB !i1in! a total o& 14FC ,
0F disablement )ill result in a lump sum o& 1# times the monthly earnin!sB or an amount o&=
1# 3 42 $#0 [ 444 2#0 ;item 2<
7o)e1erB since the employee su&&ered a permanent disablement o& 14FB and not 0FB this lump
sum must be adAusted as re5uired by item =
Lump sum payment
[
14
3 444 2#0 [ 420 (#0
0
6eath
%eath bene&its are payable in the &ollo)in! manner ;items #B (B /B *B $B 10<=
a lump sum e5ual to t)ice the amount payable &or 100F disability ;;item (< Schedule 4<G
plus
40F o& last monthly salary per month as a )ido)8s?)ido)er8s pension ;;item /<
Schedule 4<G
20F o& last monthly salary per month to each dependant child ;;item *< Schedule 4<G
Funeral costs ;item 10<C
E/ample5
'ert )as killed at )orkC 7e )as marriedB )ith no childrenC 7is salary at the time o& his death )as
4 4#0C Compensation in 'ert8s case is !o1erned by Section #4;1<;,< o& the ,ctC 0he
compensation consists o&=
, lump sum set out in item (B Schedule 4C In terms o& this itemB an amount e5ual to t)ice
3 /#F 3 monthly salary or
[ 2 3 0C/# 3 4 4#0
[ 4# 10
7is )ido) is entitled to a pension e5ual to ;item /< 40F o& /#F o& his salary=
[ 40 3 0C/# 3 4 4#0
[ 41 0# per month
Funeral costs to a ma3imum o& 4/ $#C
BN"IN#
2((
E!1lo+ee re7uirin& con"tant hel1
I& the inAury in respect o& )hich compensation is payable causes disablement o& such a nature
that the employee is unable to per&orm the essential actions o& li&e )ithout the constant help o&
another personB the %irector>9eneral mayB in addition to any other bene&its payableB also !rant an
allo)ance to)ards the cost o& such helpC
0enefit" to 6e1endant"
%ependants o& an employee are described in terms o& C"I%, as=
a )ido) or )ido)er )ho at the time o& the employee8s death )as married to the employee
accordin! to ci1il la)
a )ido) or )ido)er )hoB at the time o& the employee8s death )as a party to a marria!e
accordin! to indi!enous la) and customB i& neither the husband nor the )i&e )as a party to
a subsistin! ci1il marria!e
i& there is no )ido) or )ido)erB a )oman or man )ith )hom the employee )as at the time
o& the employee8s death li1in! as husband or )i&e ;common la) )i&e or husband<
, child under the a!e o& 1* years o& the employee or o& his or her spouseC 0his includes a
posthumous childB a step>childB an adopted child and child born out o& )edlock
a child o1er the a!e o& 1* years o& the employee or o& his or her spouseB and a parentB a
brotherB a sisterB a hal&>brother or hal&>sisterB a !randparent or a !randchild o& the
employee
,ny person )ho )as actin! in the place o& the parent and )ho )as &inancially dependent
upon the employeeC
BN"IN#
2()
,ll o& the abo1e dependants must be partly or )holly &inancially dependant upon the
employee
I& an employee dies as a result o& an inAury caused by an accidentB and he lea1es
dependantsB they are entitled to compensation as &ollo)s=
I& the dependant is the )ido) or )ido)er and there are no children bene&its are payable
as a lump sum o& 1# times the employees monthly earnin!s plus the 1alue o& /#F o& the
amount payable had the employee been rendered 100F disabledC In additionB the
dependant in this instance )ould be entitled to a monthly pension o& 40F o& the
employee8s earnin!s at the time o& the accidentB subAect to a ma3imum amount prescribed
by the .inister by notice in the 9o1ernment 9aKette &rom time to timeC , pension payable
to a )ido) or )ido)er ends on the last day o& the month in )hich she or he diesC
I& the employee lea1es a )ido) or )ido)er and a child or children )ho is unable to earn
an income o)in! to a physical or mental disabilityB a pension o& 20F o& the employee8s
&inal earnin!s is payable to each childC
I& the employee does not lea1e a )ido) or )ido)er or )here such a )ido) or )ido)er
later diesB but there are children as described abo1eB the a!!re!ate amount o& the
pensions payable to dependants may be increasedC 0he total amounts o& pension payable
may not e3ceed the amount that )ould ha1e been payable to the employee in the case o&
100 per cent permanent disablement
0he pension payable to child dependants )ill cease at the end o& the month in )hich the
child reaches 1*B or dies or marries be&ore reachin! 1*C
In the case o& children )ho are unable to earn an income o)in! to a physical or mental
disabilityB the pension payable )ill cease on a date decided by the %irector>9eneral )hen
it may reasonably ha1e been e3pected that the employee )ould no lon!er ha1e
contributed to)ards the maintenance o& that child
i& the employee lea1es no dependants other than a parentB brotherB sister etcB as re&erred
to abo1eB a monthly pension based on 40 F o& the pension )hich )ould ha1e been
payable to the employee &or 100 per cent permanent disablement )ill be paid to the
dependant
I& the employee lea1es only a dependant )ho )as actin! as a parentB this dependant )ill
recei1e a percenta!e o& the ma3imum lump sum determined &rom time to timeB and
dependin! on the de!ree o& dependencyC
%ependants )ill recei1e compensation bene&its &or the &uneral costs o& an employee
0he %irector>9eneral also retains control o1er payments to dependantsB and may order
that compensation be paid to the dependants in instalmentsC
"n the death o& the employee or a dependant o& an employee the unpaid balance o& any
compensation a)arded shall not &orm part o& his estate and )ill then be paid to other such
dependants as the %irector>9eneral may desi!nateC
BN"IN#
2(*
)atal Accident"
, &atal accident is one that results in the death o& an employeeC I& the end result o& an accident
results in the death o& an employeeB )ithin 12 months o& the occurrenceB then it is deemed to be a
&atal accidentC In any one incidentB a sin!le employee could be a&&ected by temporary total
disablement )hich could continue into a permanent disability and then to deathC ,n e3ample
)ould be an employee )ho is rendered comatose by an accidentC 7e could then be disco1ered to
ha1e permanently lost the use o& some o& his &unctionsC I& he later dies &rom his inAuryB the basis o&
compensation )ill be &or death &rom a &atal accidentC
6eath 0enefit" under COI6A
I& an employee dies as a result o& an inAury caused by an accidentB compensation is payable as
&ollo)s=
I& the employee lea1es a )ido) or )ido)er and there are no childrenB a lump sum
calculated at t)ice the amount payable &or 100F disablement ;bein! 1# times the
employee8s last monthly earnin!s< )ill be payable as a lump sum to the )ido) or )ido)erC
In additionB a monthly pension e5ual to 40F o& the employee8s last monthly earnin!sC
I& the employee lea1es a )ido) or )ido)er and a child or children then in addition to the
amounts described abo1e the children )ill each recei1e 20F o& the employee8s &inal
monthly earnin!s as pensionC 0he total amount payable as pensions may not ho)e1er
e3ceed 100F o& the amount that )ould ha1e been payable had the employee su&&ered a
permanent disability o& 100FC
I& dependants are members o& the &amilyB but not )ido)sB )ido)ers or childrenB then the
bene&its are payable as &or disablement claimsC
I& there is no )ido) or )ido)er or i& there is a )ido) or )ido)er )ho later diesB the total
amount o& the pensions payable to the children may be increasedB at the discretion o& the
%irector>9eneralC
Pensions payable to children )ill cease i& the child reaches the a!e o& 1*B or i& the child
dies or marries be&ore the a!e o& 1*C
I& there are no dependantsB other than those described abo1eB )hen an employee diesB
then compensation bene&its )ill be paid into the deceased employee8s estateC
In addition to lump sum and pension payments payable to dependants o& a deceased
employeeB compensation in respect o& &uneral e3penses is also madeC 0he actual amount
o& the &uneral costsB or the limit applicable to &uneral costs under C"I%, at the time o& the
accidentB )hiche1er is the lo)erB )ill applyC
Increased compensation due to ne!li!ence o& employer=
o :mployees )ho die or are inAuredB or )ho contract an occupational disease as a
result o& an accident arisin! out o& the ne!li!ence o&
o the employer
o an employee in a mana!ement position &or the employer
o an employee )ho hires or dismisses employeesB ;&or e3ample 7uman 4esources
mana!ers<
o en!ineers and assistants in char!e o& machinery
BN"IN#
2(+
o any person in char!e o& machinery in terms o& the "ccupational 7ealth and Sa&ety
,ctB 1$$ ;,ct *# o& 1$$<
o 0he term ne!li!ence applies to any act or omission on behal& o& the employer or
his representati1es as described abo1e and includin!=
o a patent de&ect in the place o& employmentB e5uipmentB material or machinery
used in the businessC
:mployees or their dependants are re5uired to submit claims &or increased compensation )ithin
24 months o& the accidentC 0his period may be e3tended by a &urther 12 monthsC
Increa"e of !onthl+ 1en"ion"
From time to timeB the .inister may increase the amounts o& pensions paid to dependants o&
employees )ho ha1e died as a result o& an accident in the )orkplaceC Notice o& increases )ill be
published in the 9o1ernment 9aKette (0 days be&ore the increases take e&&ectC
Ad4ance" on co!1en"ation
I& the %irector>9eneral decides that the interests o& pressin! needs o& dependants o& an
employee )arrant specialB he may make an ad1ance payment o& such compensation to themC 7e
)ill only make ad1ance payments i& compensation is payable in any e1entC
Pen"ion" out"ide South Africa
,n employeeB or dependant o& an employee )ho is entitled to a pension &ollo)in! the death o& the
employeeB and )ho li1es out o& South ,&ricaB or )ho lea1es South ,&rica &or more than ( months
)ill recei1e a lump sum in lieu o& such pensionC "nce such a lump sum payment has been made
no &urther payments as pension )ill be madeC
Calculation of Earnin&"
,s all bene&its payable arisin! &rom the death o& the employee are based on the &inal monthly
earnin!s o& the employee ;the monthly earnin!s at the time o& the accident< C"I%, prescribes the
method o& determinin! earnin!sC
:arnin!s include=
the monthly earnin!s paid by the employer
&ood or 5uarters supplied by the employer
"1ertime payments &or re!ular )ork ordinarily per&ormedC
BN"IN#
2),
:arnin!s e3clude=
payment &or intermittent o1ertime
payment &or non>recurrent occasional ser1ices
amounts paid by an employer to an employee to co1er any special e3penses
:3 !ratia payments )hether by the employer or any other personC
I& an employee )as employed my more than one employer his earnin!s are calculated as i& he
)as paid in &ull by the employer &or )hom he )as )orkin! at the time o& the accidentC
Occu1ational 6i"ea"e"
In terms o& C"I%,B compensation bene&its are payable &or disease contracted by an employee
)hich is directly attributable to his employmentC In additionB i& the employee contracts a disease
)hich is not related to his )ork acti1itiesB but is pro1ed to ha1e arisen in the course o& his
employmentB he )ill be entitled to compensation under C"I%,C 0he ,ct itsel& describes the
process as &ollo)s=
,n employee shall be entitled to the compensation pro1ided &or and prescribed in this ,ct i& it is
pro1ed to the satis&action o& the commissioner=
;a< that an employee has contracted a disease set out in Schedule and such disease has
arisen out o& and in the course o& his employmentG or
;b< that an employee has contracted a disease other than a disease set out in Schedule and
such disease has arisen out o& and in the course o& his employmentC
0here is &urther co1er under the bene&its payable &or occupational diseasesC 0his &urther co1er
may include treatment &or other diseases that are not classi&ied as occupational diseasesB )here
the employee su&&ers &rom t)o diseases at the same timeC I& one o& the diseasesB not
occupationalB is delayin! the employeeNs reco1ery &rom an occupational diseaseB the %irector>
9eneral may authorise the payment &or treatment o& both diseasesC 0hese additional bene&its are
payable in respect o& a !eneral reco1ery &rom the disease or in respect o& temporary total
disablement prolon!ed by the non>occupational diseaseC
0his is a 1ery important bene&it as it presumes co1er in respect o& 7I6?,I%SB and other diseases
not co1ered by the schedule o& occupational diseases described in Schedule set out hereunderC
,s an e3ampleB an employee )ho )as in&ected by the 7I6 1irus at his )orkplaceB by any
accidental means ;not by )il&ul e3posure such as se3ual contact or dru! use< )ould be entitled to
recei1e bene&its under this sectionC I& he )as in&ected by blood samplesB employed as a health
care )orker in a medical &acility o&&ered &ree by his employerB the contractin! o& 7I6 )ould be
deemed to ha1e arisen out o& the course o& his employmentC :5uallyB i& he su&&ers say &rom
asbestosis contracted at his )orkplace and is also in&ected )ith 7I6 and his in&ection by the 7I6
1irus is retardin! his treatment &or asbestosisB he may be eli!ible &or treatment o& 7I6 as )ellC
,!ainB the bene&its )ould be payable in respect o& medical costs and temporary total
disablementC
BN"IN#
2)$
0his also includes permanent disablement in the &ollo)in! &orm as described by C"I%,=
I& an employee has contracted an occupational disease resultin! in permanent disablement and
some other disease a!!ra1ates that diseaseB the %irector>9eneral may in determinin! the de!ree
o& permanent disablement ha1e re!ard to the e&&ect o& such other diseaseC
0he employee must brin! the disease to the attention o& his employerB the %irector>9eneral or the
mutual association )ithin 12 months &rom the commencement o& the diseaseC 0he
commencement date o& the disease is the date on )hich a medical practitioner &irst dia!noses the
diseaseB or an earlier date determined by the %irector>9eneral i& more &a1ourable to the
employeeC
I& an employee )ho has contracted an occupational disease )as employed in any )ork
mentioned in Schedule in respect o& that disease C"I%, creates a rebuttal presumption that
such disease arose out o& and in the course o& his employmentC
Compensation &or occupational diseases is calculated on the basis o& the earnin!s o& the
employee at the time o& contractin! or dia!nosis o& the diseaseC I& an employee is no lon!er in
employment at the time o& the commencement o& the diseaseB his earnin!s are calculated on the
basis o& the earnin!s that he )ould probably ha1e been earnin! had he still been )orkin!C
0he employee must !i1e notice on any disease contracted in the )orkplace to his employer as
soon as possible a&ter the commencement o& the diseaseC 0he employer must report to the
%irector>9eneral in the prescribed manner )ithin 14 days o& recei1in! noti&ication &rom the
employeeB )hether or not he belie1es the disease to ha1e risen out o& the employee8s
employmentC 0he employee may also !i1e notice to a pre1ious employerB i& the disease )as
contracted durin! such pre1ious employmentC 0he pre1ious employer must then report in the
same )ayC
The Cour"e of E!1lo+!ent
0he employee is considered to be in the course o& his employment )hen he is actually
per&ormin! the tasks &or )hich he )as employedC In additionB any associated or related &unctions
are deemed to be in the course o& his employmentC 0here may sometimes be circumstances
under )hich the employee is not actually attendin! to speci&ic )ork &unctions at his )orkplace on
behal& o& his employerC ,ccidents occurrin! in these situations are catered &or under C"I%, in the
&ollo)in! )ays=
, claim &or compensation bene&its as a result o& personal disablement may be submitted i& at the
time o& the accident the employee=
)as an apprentice or in the process o& bein! trained in any tradeB occupation or pro&ession
)as under the a!e o& 2( years
BN"IN#
2)2
In determinin! the amount o& the bene&it payable as compensation to an employee in trainin! the
%irector>9eneral )ill pay &or earnin!s calculated=
on the basis o& the earnin!s to )hich a recently 5uali&ied person
or a person in the same occupationB trade or pro&ession )ith &i1e years more e3perience
than the employee )ould ha1e been entitled at the time o& the accident
Payment )ill be made to apply )hiche1er bene&it is more &a1ourable to the employeeC
In the case o& an employee youn!er than 2(B compensation )ill be based on
the earnin!s to )hich a person o& 2( years o& a!e )ould normally ha1e been entitled i& at
the time o& the accident he had been per&ormin! the same )ork as the employee
the earnin!s o& a person in the same occupationB trade or pro&ession )ith &i1e years more
e3perience than the employee
0he compensation )ill be made on )hiche1er o& the abo1e bases is more &a1ourable to the
employeeC
In addition to the abo1eB the &ollo)in! circumstances are also deemed by C"I%, to constitute
&unctions )ithin the course o& an employee8s employmentC 0he ,ct determines that the employee
)as actin! in the scope o& employmentB i& the employee )as at the time o& the accident=
actin! contrary to any la) applicable to his employment
actin! contrary to an order by his employer
actin! )ithout any order by his employer
0he yardstick here is that the %irector>9eneral )ill deem the abo1e to be )ithin the scope o&
employment only i& he is satis&ied that the employee )as still actin! )ithin the scope o& the
business o& the employerB e1en thou!h he )as i!norin! re!ulationsB or that he had recei1ed or
i!nored an instruction &rom his employerC
In this re!ardB C"I%, states=
For the purposes of this A!t an a!!ident shall be deemed to have arisen out of and in the
!ourse of the emplo%ment of an emplo%ee notwithstanding that the emplo%ee was at the time
of the a!!ident a!ting !ontrar% to an% law appli!able to his emplo%ment or to an% order b% or
on behalf of his emplo%er# or that he was a!ting without an% order of his emplo%er# if the
emplo%ee was# in the opinion of the 0ire!tor;@eneral# so a!ting for the purposes of or in the
interests of or in !onne!tion with the business of his emplo%er.
0he employee is also deemed to be in the course o& his employment )hile he is tra1ellin! in any
1ehicle pro1ided &ree by the employer to transport employees to )ork and backC ,n e3ample
)ould be an employer that pro1ides a truck to collect employees &rom home and then transports
them home a!ain a&ter )orkG he does not char!e employees &or this ser1iceC
BN"IN#
2)%
Additional trainin& acti4itie"
I& an employee meets )ith an accident )hileB )ith the consent o& his employer he is bein! trained
in or!anised &irst aidB ambulance or rescue )orkB &ire>&i!htin! or any other emer!ency ser1iceB he
is deemed to be in the course o& his employmentC In additionB )hile he is on the premises on a
mineB )orks or premises and under!oin! trainin! or practisin! in or!anised &irst aidB ambulance
or rescue )orkB &ire>&i!htin! or any other emer!ency ser1iceB he is still actin! )ithin the course o&
his employmentC 2hile the employee is acti1ely en!a!ed in any o& the abo1e acti1itiesB he is also
actin! )ithin the scope o& his employmentB and is entitled to compensation &or accidents su&&eredC
%nderwritin& Criteria
,ssessments o& contributions by employers are based on a 1ariety o& under)ritin! criteria=
0he class o& business under )hich the employer per&orms
0he !eneral loss ratio &or this !roupin! o& occupations
0he earnin!s paid to all employees in a companyB described )ithin the manpo)er and
earnin!s bud!et o& the employerB as submitted to the %irector>9eneral
0he actual loss ratio &or the employer
0he speci&ic actions taken by the employer to mana!e risks to the employees o& his
business
0he employer is assessed calculated on the basis o& the annual earnin!s o& his employeesC
0he %irector>9eneral )ill le1y a minimum assessment in respect o& a particular employer or
cate!ory o& employersC In determinin! the tari&& o& assessment the commissioner shall pro1ide &or
the capitalised 1alue o& pensionsC
Variation of tariff of a""e""!ent
I& the %irector>9eneral determines that the business o& an employer is conducted in a manner
)hich is calculated to pre1ent accidents and the number and costs o& accidents are less than
those usually occurrin! in comparable businessesB the %irector>9eneral )ill assess that employer
at a lo)er tari&& o& assessmentC
,lsoB i& the accident record o& an employer durin! a particular period is )orse than those o&
employers in comparable businesses the %irector>9eneral )ill assess the employer at a hi!her
tari&& o& assessmentC SimilarlyB employers )ith !ood loss and accident records )ill recei1e
assessments at a lo)er tari&& than those in the same business )ith poor recordsC
BN"IN#
2)&
Clai!" Ratio"
0ari&&s or premiums are determined by a number o& &actorsB as )e ha1e seenC In addition to those
stated abo1eB one &actor ha1in! a distinct e&&ect on the le1els o& premiums is that o& claims loss
ratiosC In accordance )ith !eneral insurance principlesB abnormally lar!eB or catastrophe losses
are met &rom the !eneral poolC Premium rates are calculated per indi1idual member )ithin each
occupational !roupC 0hese occupational classes are !rouped by )orkin! en1ironment and risk
pro&ileC
Claims &orecasts are based on historical e3perience o1er the pre1ious three yearsB and the
premium rates are based on the three years a1era!e claims costC No one occupational class
should subsidise the claims &or anotherC
, &a1ourable claims e3perience may result in a re)ard &or the employer by )ay o& a rate
reductionB and those )ith an un&a1ourable e3perience may be re5uired to contribute a hi!her
amountC
Claims loss ratios are determined by the &ormula=
0otal claims paid X 100
0otal premiums paid 1
,n e3ample )ould be a claims amount o& 4 1$/ ##* related to premiums o& 42 4#0C 0he loss
ratio is *42B4(FB indicatin! a serious state o& a&&airs &or this employerC 0ari&&s or premiums are
based on statistical data collected &or employersB classes o& business and the incidence and
se1erity o& claimsC Premiums are determined to produce loss ratios that are consistent )ith
pre1ious losses in certain industries or &or certain employers ;in other )ordsB to cater &or claims
that can be reasonably e3pected to occur based on past loss e3perienceC< 2here these
e3pected ratios are e3ceededB or are reduced as a result o& superior risk mana!ement by the
employerB the %irector>9eneral may increase or reduce the assessment tari&&sB as he sees &itC
In"urance 2enefit"
C"I%, e&&ecti1ely pro1ides co1er across &i1e classes o& insurance=
%eath bene&its in respect o& deceased employeesC 0hese may take the &orm o& lump sum
paymentsB or as pension paymentsC In the insurance industryB these risks are )ritten in the
lon!>term sector ;li&e and pensionsterm industry under personal accident
and stated bene&its policies
'ene&its &or 0emporary PartialB 0emporary 0otal and Permanent %isablementC 0hese are
short>term insurance risksB ;stated bene&its and personal accident<C 0hey are also o&&ered
in the lon! term market as income protection co1ersB or permanent health co1ers
.edical :3penses are )ritten either in the short>term market as an adAunct to stated
bene&its and personal accident co1erB or in the healthcare sector as medical aids
"ccupational %isease co1er is )ritten in the short>term market &ollo)in! stated bene&its or
personal accidentB or in the lon!>term market as dread disease and li&e co1er and as
permanent health co1er
Funeral co1er is o&&ered in the lon! term marketB as a separately )ritten class o& business
BN"IN#
2)'
COI6A and co!!on law
In terms o& C"I%,B all bene&its under the ,ct are automatic and cannot be )ithdra)n or re&used
by any employerC 0hese bene&its may also not be=
alienated or reduced
ceded or pled!ed
capable o& attachment or any &orm o& e3ecution under a Aud!ement or order o& a court o&
la)
subAect to income ta3
Set o&& a!ainst any debt o& the person entitled to the compensationC
Part o& his estateC
,s a result o& the implementation o& the ,ctB !eneral ri!hts to employees under common la) to
sue their employers &or losses su&&ered in the course o& their employment ha1e been remo1edC
0he ,ct is 1ery clear on this and contains the &ollo)in! sectionB )hich states that these ri!hts
ha1e been remo1edB and that the only recourse in respect o& these losses is by means o& C"I%,C
0he ,ct states=
7o a!tion shall lie b% an emplo%ee or an% dependant of an emplo%ee for the re!over% of
damages in respe!t of an% o!!upational in>ur% or disease resulting in the disablement or
death of su!h emplo%ee against su!h emplo%eeJs emplo%er# and no liabilit% for !ompensation
on the part of su!h emplo%er shall arise save under the provisions of this A!t in respe!t of
su!h disablement or death.
9e&li&ence of the E!1lo+er
Compensation bene&its are payable to employees as a result o& accidents arisin! in the
)orkplaceB and causin! deathB disablement or diseaseC 0he ,ct pro1ides &or these bene&its in
ordinary circumstancesB )here the accident )as un&oreseenB and suddenB and )hether or not
ne!li!ence could be determined on the part o& the employerC 0he ,ct also pro1ides !uidelines and
rules &or dealin! )ith increased compensation )here the %irector>9eneral decides that the
accident )as caused by ne!li!ence on the part o& the employerC It is not only the direct employer
)ho may be deemed to ha1e committed an act o& ne!li!enceB but also=
,n employee authorised by the employer to mana!e or control the business or any branch
or departmentC 0his means that all directorsB mana!ersB superintendentsB super1isors and
team leaders are deemed to be the employerB should they commit an act o& ne!li!ence or
omission that causes the death or disablement o& an employee or causes them to contract
a diseaseC
,n employee )ho is responsible &or hirin! or dischar!in! employees on behal& o& the
employerB such as personnel in1ol1ed in 7uman 4esources .ana!ementC
,n en!ineer appointed to be in !eneral char!e o& machineryB or o& a person appointed to
assist such en!ineerC
BN"IN#
2)(
, person appointed to be in char!e o& machineryC
In the e1ent that such accident is caused by the ne!li!ence o& any o& the abo1e personsB the
employee may apply to the commissioner &or increased compensation in addition to the
compensation normally payable in terms o& the ,ctC
6eter!ination of 9e&li&ence
0he ,ct states that an accident or occupational disease shall be deemed to be due to the
ne!li!ence o& the employer i& it )as caused by a ob1ious de&ect in the condition o& the premisesB
place o& employmentB e5uipmentB material or machinery used in the business concernedB and
)hich the employerB ;or other persons described abo1e< kno)in! o& the de&ect has &ailed to
remedy or caused to be remediedC 0hese de&ects could ran!e &rom the seemin!ly innocuous
loose tile in a toiletB to the unsa&e condition o& cuttin! machineryC "ther de&ects may arise in
stora!e practices or risk mana!ement acti1itiesB unroad)orthiness o& 1ehicles or &ire protection
e5uipmentC
Mi"conduct on the 1art of the E!1lo+ee
0he ,ct re&ers to the matter o& dealin! )ith serious and )il&ul misconduct on the part o& the
employee as &ollo)s=
Serious and )il&ul misconduct means >
bein! under the in&luence o& into3icatin! li5uor or a dru! ha1in! a narcotic e&&ect
a contra1ention o& any la) &or the protection or the health o& employees or &or the
pre1ention o& accidentsB i& such contra1ention )as committed )il&ully or )ith a reckless
disre!ard o& the pro1isions o& such la)
any other act or omission )hich the commissioner ha1in! re!ard to all the circumstances
considers to be serious and )il&ul misconductC
In the e1ent that the %irector>9eneral decides that any accident in the )orkplace arose out
serious and )il&ul conduct on the part o& the employeeB no payment o& compensation bene&its )ill
be madeB in most instancesC
0here are ho)e1erB certain circumstances in )hich the %irector>9eneral may consider paymentsB
e1en thou!h the accident arose &rom )il&ul misconduct o& the employeeC
I& an accident is attributable to the serious and )il&ul misconduct o& the employeeB no
compensation is !enerally payableB unless=
the accident results in serious disablement
the employee dies and lea1es dependants )ho are totally &inancially dependent upon himC
BN"IN#
2))
0he %irector>9eneral may also order the employer to pay the employee the cost o& medical aid in
respect o& inAuries su&&ered by himC
"ther actions o& )il&ul intent on the part o& the employee include=
i& the employeeB kno)in!ly submitted &alse in&ormation that he )as not then su&&erin! &rom
or had not pre1iously su&&ered &rom a serious inAury or occupational disease or any other
serious diseaseC I& he su&&ered an accident or contracted a diseaseB and such an accident
or death resulted &rom or such inAury or diseaseB the commissioner may re&use to a)ard
compensation to him or his dependantsC
i& death or disablement )as caused or a!!ra1ated by the )il&ul ne!lect o& the employee to
submit to medical aid in respect o& any inAury or diseaseB )hether caused by the accident
or e3istin! be&ore the accidentB an a)ard &or compensation may be deniedCC
BN"IN#
2)*
In"truction"
0he kno)led!e sel& assessment consists o& multiple choice 5uestionsB multiple true and &alse
5uestionsB as )ell as lon!er )ritten 5uestionsC ,ns)er all o& the 5uestions to assess )hether you
ha1e mastered the kno)led!e componentC .odel ans)ers ha1e been pro1ided )hich you can
use to assess your ans)ersC
1: The contri2ution rates for COI6 True )al"e
A are set as a &lat rate per insured person and do not 1ary
0 are indi1idually set accordin! to the speci&ics o& the insured
C 1ary bet)een minima and ma3ima )ithin occupational classes or
industry
6 1ary accordin! to the insured8s income ;salary< cate!ory
: Clai!" under COI6A !u"t 2e "u2!itted within True )al"e
A one month
0 si3 months
C t)el1e months
6 t)enty &our months
$: Co!1en"ation under COI6 for temporary total disability i" 1aid
for 1 !onth" at the rate of
True )al"e
A 0F o& earnin!s
0 2#F o& earnin!s
C /#F o& earnin!s
6 100F o& earnin!s
4: Bhich one of the followin& correctl+ define" the for!ula u"ed to
deter!ine a 2u"ine""F clai!" ratio under COI6AC
True )al"e
A 0otal claims paid in the year?total premiums paid 3 100
0 0otal premiums paid in the year?total claims paid 3 100
C 0otal claims paid in the year?total claims paid in the pre1ious year
6 0otal claims paid in the year?number o& employees insured under the
scheme
BN"IN#
2)+
': Arnold "uffered the lo"" of three of the toe" on hi" ri&ht foot
when a 1iece of hea4+ !achiner+ fell on hi" foot at wor*: Bhich
one of the followin& 2e"t de"cri2e" the clai! for 2enefit" under
COI6C
True )al"e
A 7e )ill not be paid a bene&it as this )ould not si!ni&icantly a&&ect his
ability to )ork
0 7e )ill be paid a monthly amount based on his earnin!s &or up to 12
months
C 7e )ill be paid a monthly pension &or li&e based on the de!ree o&
disability deemed to e3ist
6 7e )ill be paid a lump sum bene&it based on the de!ree o& disability
deemed to e3ist
Multi1le True L )al"e =ue"tion"
#: The co!1en"ation 2enefit" under COI6A are 2a"ed on the
in"uredF" inco!e at the ti!e of the accidentLillne"" ta*in& 1lace:
The calculation of inco!e include"
True )al"e
A earnin!s &rom a second ;part time< e1enin! Aob held by the insured at
the time
0 payments &or occasional o1ertime in the 12 months prior to the
accident?illness
C payment &or re!ular o1ertime )orked by the insured prior to the
accident?illness
6 the 1alue o& &ood and accommodation pro1ided to the insured by
his?her employer
(: %nder COI6A5 the dutie" of the Co!!i""ioner for co!1en"ation
dele&ated 2+ the 6irector>General include
True )al"e
A adAudicatin! on claims
0 settin! the le1els o& contribution
C in5uirin! into occupational accidents
6 administerin! the compensation &und
E under)ritin! the risk
BN"IN#
2*,
3: 6e"cri2e the different t+1e" of infor!ation that an e!1lo+er !u"t 1ro4ide to the
Co!!i""ioner for co!1en"ation each +ear under COI6A:
,: Titu"5 an e!1lo+ee at the Rand Manufacturin& Co!1an+5 arri4ed at wor* one da+
under the influence of alcohol: Ke wa" ordered to &o ho!e and to a11ear 2efore a
di"ci1linar+ en7uir+ into hi" 2eha4iour the neAt da+: Kowe4er5 Titu" decided in"tead
to &o u1"tair" to confront hi" line !ana&er a2out an incident that had occurred the
da+ 2efore: Ke "li11ed on the "tair" and fell5 cau"in& an in8ur+ to hi" 2ac*:
Co!!ent on thi" incident a" it relate" to the COI6A:

1-: Althou&h the COI6 2enefit" for occu1ational di"ea"e" are re"tricted to di"ea"e"
cau"ed 2+ the in"uredF" wor* "ituation5 there i" an eAce1tion where the 6irector>
General !a+ a11ro4e 2enefit 1a+!ent" for an illne"" which i" not wor* related:
6e"cri2e thi" eAce1tion and &i4e a 1ractical .reali"tic/ eAa!1le of where it !a+
a11l+:
BN"IN#
2*$
Module 16
1: The contri2ution rates for COI6 True )al"e
A are set as a &lat rate per insured person and do not 1ary P
0 are indi1idually set accordin! to the speci&ics o& the insured P
C 1ary bet)een minima and ma3ima )ithin occupational classes or
industry
P
6 1ary accordin! to the insured8s income ;salary< cate!ory P
: Clai!" under COI6A !u"t 2e "u2!itted within True )al"e
A one month P
0 si3 months P
C t)el1e months P
6 t)enty &our months P
$: Co!1en"ation under COI6 for temporary total disability i" 1aid
for 1 !onth" at the rate of
True )al"e
A 0F o& earnin!s P
0 2#F o& earnin!s P
C /#F o& earnin!s P
6 100F o& earnin!s P
4: Bhich one of the followin& correctl+ define" the for!ula u"ed to
deter!ine a 2u"ine""F clai!" ratio under COI6AC
True )al"e
A 0otal claims paid in the year?total premiums paid 3 100 P
0 0otal premiums paid in the year?total claims paid 3 100 P
C 0otal claims paid in the year?total claims paid in the pre1ious year P
6 0otal claims paid in the year?number o& employees insured under the
scheme
P
BN"IN#
2*2
Module 16 - cont
': Arnold "uffered the lo"" of three of the toe" on hi" ri&ht foot
when a 1iece of hea4+ !achiner+ fell on hi" foot at wor*: Bhich
one of the followin& 2e"t de"cri2e" the clai! for 2enefit" under
COI6C
True )al"e
A 7e )ill not be paid a bene&it as this )ould not si!ni&icantly a&&ect his
ability to )ork
P
0 7e )ill be paid a monthly amount based on his earnin!s &or up to 12
months
P
C 7e )ill be paid a monthly pension &or li&e based on the de!ree o&
disability deemed to e3ist
P
6 7e )ill be paid a lump sum bene&it based on the de!ree o& disability
deemed to e3ist
P
#: The co!1en"ation 2enefit" under COI6A are 2a"ed on the
in"uredF" inco!e at the ti!e of the accidentLillne"" ta*in& 1lace:
The calculation of inco!e include"
True )al"e
A earnin!s &rom a second ;part time< e1enin! Aob held by the insured at
the time
P
0 payments &or occasional o1ertime in the 12 months prior to the
accident?illness
P
C payment &or re!ular o1ertime )orked by the insured prior to the
accident?illness
P
6 the 1alue o& &ood and accommodation pro1ided to the insured by
his?her employer
P
(: %nder COI6A5 the dutie" of the Co!!i""ioner for co!1en"ation
dele&ated 2+ the 6irector>General include
True )al"e
A adAudicatin! on claims P
0 settin! the le1els o& contribution P
C in5uirin! into occupational accidents P
6 administerin! the compensation &und P
E under)ritin! the risk P
BN"IN#
2*%
Module 16 - cont
3: 6e"cri2e the different t+1e" of infor!ation that an e!1lo+er !u"t 1ro4ide to the
Co!!i""ioner for co!1en"ation each +ear under COI6A:
:mployers must submit details o& earnin!s paid to employees durin! the year ;to 1
.arch<C 2here the employer carries on more than one class o& businessB or carries on
business in more than one locationB this in&ormation must be split accordin!lyC
;:mployers must also pro1ide details o& chan!es to the initial in&ormation !i1en at the time
o& re!istration )ith the %irector>9eneral )ithin / days o& the chan!e but this is not part o&
the re!ular annual returns to the CommissionerC<
,: Titu"5 an e!1lo+ee at the Rand Manufacturin& Co!1an+5 arri4ed at wor* one da+
under the influence of alcohol: Ke wa" ordered to &o ho!e and to a11ear 2efore a
di"ci1linar+ en7uir+ into hi" 2eha4iour the neAt da+: Kowe4er5 Titu" decided in"tead
to &o u1"tair" to confront hi" line !ana&er a2out an incident that had occurred the
da+ 2efore: Ke "li11ed on the "tair" and fell5 cau"in& an in8ur+ to hi" 2ac*:
Co!!ent on thi" incident a" it relate" to the COI6A:
Compensation bene&its may be )ithheld i& the inAured person )as under the in&luence o&
alcohol at the time o& the accidentC 7o)e1erB since there is no concrete proo& o& this in this
caseB it is doubt&ul that this )ill holdC 7o)e1erB 0itus8 action )ould be deemed to be H)ill&ul
and recklessI or actin! a!ainst an order o& his employer and the bene&its )ould be
)ithheld any)ayC
1-: Althou&h the COI6 2enefit" for occu1ational di"ea"e" are re"tricted to di"ea"e"
cau"ed 2+ the in"uredF" wor* "ituation5 there i" an eAce1tion where the 6irector>
General !a+ a11ro4e 2enefit 1a+!ent" for an illne"" which i" not wor* related:
6e"cri2e thi" eAce1tion and &i4e a 1ractical .reali"tic/ eAa!1le of where it !a+
a11l+:
2here an employee is su&&erin! &rom t)o illnesses at the same time and )here the cause
o& one o& them is directly related to the )orkplace but the other is not but is a&&ectin! the
condition o& the insured by pre1entin! or retardin! the treatment o& the condition arisin!
directly &rom the )ork situationB the treatment o& the non>)ork related condition may also
be co1eredC ,n e3ample o& this may be )here a person is 7I6 positi1e and )here this
condition is a&&ectin! the e&&iciency o& the treatment &or a mali!nancy o& the lun! caused by
asphalt or bitumen in a road )orkerC
BN"IN#
2*&
A
A2andon!ent the !i1in! up by an insured to the insurer o& dama!ed property
)hen a total loss is claimedC
Acce1tance an absolute and un5uali&ied a!reement to the terms o& an o&&erB so
creatin! a contractC
Accident an un&oreseen and unintended e1ent or occurrenceC
Acco!!odation 0u"ine"" normally unacceptable business taken by an insurer as a !ood)ill
!esture in the hope that &urther business )ill materialiseC
Act of God an e1ent that is the result o& natural &orces and )hich arises )ithout
human inter1entionC
Ad8u"ta2le Polic+ a policy )here the e3act e3tent o& the 1alue at risk cannot be
kno)n in ad1ance ;eC!C !oods in transit insurance<C , pro1isional
premium is char!ed and adAusted at the end o& each period o&
insuranceC
Ad8u"terLA""e""or see LOSS A6I%STERLASSESSORC
A&ent a person )ho acts on behal& o& another and in the case o&
insurance is the intermediary bet)een the proposer and the
insurerC
A&reed Value the sum to be paid in the e1ent o& a total loss under a 1alued policyC
Ar2itration a means o& settlin! disputes le!ally )ithout !oin! to court )here
the issue concerns the amount o& a claim and not liabilityC ,
5uali&ied person or persons )hose appointment has been a!reed to
by the parties in1ol1edB )ill hear the case and !i1e a decisionC
A""et a property or &inancial commodity )hich canB i& necessaryB be
con1erted into cashC
A""urance a term interchan!eable )ith insuranceB )hich is o&ten used in the
case o& Li&e and .arine businessC
Atte"tation the si!nin! clause in a contract o& insuranceC
A4era&e in !eneral insuranceB this is a policy pro1ision that has the e&&ect o&
reducin! a claim payment )here under>insurance is disco1eredC
BN"IN#
2*'
0
0alance of Third Part+ the terms used in South ,&rica &or the &orm o& motor insurance
)hich co1ers the insured8s liability &or=
i< inAury to passen!ers not co1ered in terms o& the 4oad ,ccident
,ct 1$$(G and
ii) damage to the propert% of third parties !aused b% the
vehi!le.
0etter!ent the 1alue o& the impro1ement in an insured property )hen it has
been repaired or rebuilt &ollo)in! loss or dama!eC
0lan*et Polic+ a policy co1erin! se1eral items under one sum insuredC
0ordereauA the sheets o& in&ormation prepared by an insurer detailin! cessions
under reinsurance treatiesC
0ro*er a pro&essional &ull>time independent a!ent or intermediaryC
0ro*era&e the commission or &ee paid to the brokers by the insurers &or
placin! business )ith themC
0urnin& Co"t" method o& calculatin! the insurance premium ;especially in
reinsurance< takin! account o& pre1ious claimsC
0u"ine"" Interru1tion
In"urance the class o& insurance )hich pro1ides co1er &or conse5uential loss
arisin! directly &rom another loss ;eC!C loss o& pro&its &ollo)in! &ire
dama!e<C
BN"IN#
2*(
C
Cancellation Clau"e the class o& insurance )hich pro1ides co1er &or conse5uential loss
arisin! directly &rom another loss ;&or e3ampleB loss o& pro&its &ollo)in!
&ire dama!e<C
Ca1ti4e In"urance an insurance company set up by a parent company in order
Co!1an+ to recei1e that parent8s insurance businessC
Cata"tro1he Co4er a &orm o& e3cess o& loss insurance )hich protects the insurer
a!ainst losses arisin! &rom maAor catastrophesC
Certificate of In"urance a document issues by an insurer )hich is used mainly in the marine
market to certi&y that co1er is in &orceC
Ce""ion that part o& an insurance trans&erred to a reinsurerB the trans&er o&
ri!htsB title and interest under a contractC
Chance the probability or likelihood that an e1ent )ill occurC
Clai! a demand made by the insured &or payment a&ter the occurrence o&
loss or dama!e co1ered by the policyC
Clai! )or! a &orm supplied by an insurer to enable an ensured to lod!e a claim
in terms o& the policyC
Clai! )ree Grou1 the term used in motor insurance to indicate into )hich o& the ratin!
!roups a policy holder )ill &allB accordin! to his or her claims
recordC
Clai!" Ration see LOSS RATIOC
Co>In"urance the di1ision o& a risk bet)een t)o or more insurersB )here each is
indi1idually liable to the insured &or their proportion o& claimsC
Co>In"urer an insurer )ho shares )ith others in co>insuranceC
Collecti4e Polic+ policy issued by the leadin! insurer on behal& o& all the insurers
)ho share a risk by )ay o& co>insuranceC
Co!!i""ion the payment made to intermediaries by insurers &or placin!
business )ith themC
Co!!on Law the part o& the country8s le!islation built up &rom customs and
usa!es that ha1e been reco!nised by its courts and thereby !i1en
the &orce o& la)C
Co!1o"ite In"urance an insurer undertakin! both li&e and non>li&e businessC
Co!1an+
BN"IN#
2*)
Co!1rehen"i4e Polic+ a policy co1erin! a )ide 1ariety o& perilsG part o& a contract that
must be complied )ith by one party or anotherC
Con"e7uential Lo"" a loss directly arisin! &rom another lossC 0he term is used to
describe the class o& business also kno)n as LOSS O) PRO)ITS
or 0%SI9ESS I9TERR%PTIO9 I9S%RA9CEC
Con"ideration the payment or promise o& payment &or !oods or ser1icesB this
bein! the premium in the case o& insuranceC
Contin&enc+ an un&oreseen occurrenceC
Contin&enc+ )und monies put aside by a company in order to pay &or une3pected
lossesC
Contract an a!reement made by t)o or more parties )ith the intention o&
creatin! a le!al obli!ation bet)een themC
Contract of In"urance an a!reement bet)een insurer and insured )herebyB in return &or
the payment o& a premiumB the insurer undertakes to indemni&y the
insured upon the happenin! o& a speci&ied e1entC
Contra .roferentum any ambi!uity in contract )ordin!s is construed a!ainst the
Rule dra&ter o& those )ordin!sC
Contri2ution the principle )hereby t)o or more insurers co1erin! the same risk
contribute proportionately to any lossesC
Co4er the protection pro1ided by insuranceC
Co4er 9ote temporary e1idence o& the !rantin! o& insuranceC
6
6a!a&e" an amount o& money claimed by or a)arded to a third party as
compensation &or inAury or lossC
6eclaration the statement on a proposal &orm si!ned by the proposer certi&yin!
the truth&ulness and accuracy o& the in&ormation suppliedC
6eclaration Polic+ a policy re5uirin! the insured to declare periodically the 1alue o&
&luctuatin! itemsB such as stocks or !oods>in>transitB to enable the
insurer to adAust the premium accordin!lyC
6educti2le an ,merican termB similar in meanin! to e3cess and bein! the &irst
portion o& a loss payable by the insuredC
BN"IN#
2**
6ele&ated Authorit+ the authority !i1en to an a!ent o& an insurer to act on his or her
behal& in acceptin! risks )ithin a!reed !uidelinesC
6e1o"it Pre!iu! an ad1ance payment made by the insured be&ore the actual
premium has been decidedC
6e1reciation the e3tent to )hich ;insured< property has diminished in 1alue due
to &actors such as )ear and tearC
6irect In"urance an ori!inal insurance contract bet)een insurance and insuredC
6irect In"urer an insurer in contact )ith insurin! members o& the public or
corporationsC
6i"clo"ure the duty o& the parties to a contract o& insurance to re1eal all
material &acts to each other be&ore it is concluded and prior to each
rene)alC
E
Earned Pre!iu! that part o& a premium relatin! to a completed or e3pired period o&
riskG the actual premium char!eable under an adAustable policyC
Endor"e!ent documentary e1idence o& some alteration to a policy o& insuranceC
E"calator Clau"e the clause in a policy that allo)s the sum insured on the property to
rise throu!hout the period o& insurance in step )ith the assumed
rate o& in&lationC
E/ 9ratia Pa+!ent a payment made to an insured )here there is no liability under the
policyC
EAce1tion a peril speci&ically e3cluded &rom the insuranceC
EAce"" that part o& a loss &or )hich the insured is liableC
EAce"" of Lo"" a &orm o& insurance )here the reinsurer a!rees to pay the
Rein"urance balance o& any losses e3ceedin! a stated monetary amountC
EAecutor the person named in a )ill )ho has a!reed to carry out its termsC
EA1en"e Loadin& that part o& the premium that meets the policy holder8s share o& the
insurer8s administrati1e costsC
BN"IN#
2*+
)
)ire the accidental or &ortuitous i!nition o& somethin! that should not be
on &ireC
)ir"t A!ount Pa+a2le the amount payable by an insured in the e1ent o& a claimC
)ir"t Lo"" Polic+ an insurance policy )here the insurer pays all losses up to a !i1en
limitC
)leet In"urance a motor policy co1erin! a !roup o& 1ehicles )ith the premiums
calculated on an e3perience basisC
)ranchi"e the amount o& a loss at or belo) )hich no claim is payable by the
insurerC ,bo1e that amountB the loss )ill be met in &ullC
)und the common pool into )hich premiums &or each class o& insurance
are paidB and &rom )hich losses are metC
G
General In"urance insurance that is not lon!>term businessC
Good )aith see under U-E33MA F0ESC
K
KaOard a physical or moral &eature that a&&ects the likelihood o& a loss
occurrin! or has an in&luence on the siKe o& the lossC
BN"IN#
2+,
I
Incurred 2ut not claims that ha1e occurredB but are not yet reported to
Re1orted .I09R/ the insurersC .any !o1ernments re5uire that
Clai!" insurers establish reser1es to co1er such lossesC
Inde!nit+ the placin! o& the insured in the same &inancial position a&ter
a loss as he or she )as in immediately prior to the
occurrenceC
IndeAin& a method o& adAustin! sums insured to pro1ide &or
in&lationary increases in 1aluesC
In"1ector an o&&icial o& an insurance company )hose duties in1ol1e
the sellin! and ser1icin! o& its policiesB either directly to the
publicB or throu!h intermediariesC
In"ura2le Intere"t the principle that re5uires a person e&&ectin! insurance to
ha1e a le!ally reco!nised relationship to the subAect matter
o& the insuranceC
In"urance a risk trans&er a!reement )hereby the responsibility &or
meetin! losses passes &rom one party ;the insured< to
another ;the insurer< on payment o& a premiumC
In"urance Polic+ a document that is e1idence o& a contract o& insuranceC
In"ured a person or or!anisation purchasin! insuranceC
In"urer a company or society transactin! insurance businessC
Inter!ediar+ a person )ho arran!es insurance on behal& o& anotherC
K
Knoc* for Knoc* A&ree!ent an a!reement bet)een motor insurers )hereby &ollo)in! a
collisionB each pays the cost o& repairs to its o)n policy
holder8s 1ehicleB re!ardless o& &aultB pro1ided that the
1ehicles in1ol1ed are all insured &or accidental dama!eC
BN"IN#
2+$
L
La1"e the termination o& an insurance contract throu!h the non>payment
o& the premiumB or by the insurer8s decision not to in1ite rene)alC
Law the rules enacted or customary in a country orderin! or prohibitin!
certain actionsC
Leadin& Ca"e a le!al case )here the decision has been )idely &ollo)edC
Leadin& In"urer the insurer )ho accepts a share o& risk on a co>insurance
a!reement - o&ten the one )ho &irst si!ns a broker8s slipC
Letter of Acce1tance a letter &rom an insurer to a proposer indicatin! that his application
&or co1er has been acceptedC
Lia2ilit+ a claim upon one8s assets by another personC
Li!it of Lia2ilit+ the ma3imum amount that an insurer )ill pay &or one loss in terms
o& a liability policyC
Line a share o& an insurance that is di1ided amon! t)o or more insurersC
Llo+dF" the corporation that or!anises the market o& indi1idual under)riters
in London ;but accepts business introduced by brokers &rom all
parts o& the )orld< and pro1ides a &ull ran!e o& ancillary ser1icesC
Loadin& those elements added to a premium to allo) &or insurer8s
e3pensesC
Lo"" Ad8u"ter L A""e""or an independentB 5uali&ied person )ho assesses the siKe or 1alue o&
a loss on behal& o& an insurerB but )ho may also be employed by an
insured to look a&ter his interests in a loss settlementC
Lo"" of Profit" In"urance see 0%SI9ESS I9TERR%PTIO9 I9S%RA9CEC
Lo"" Pre4ention acti1ities undertaken to pre1ent losses &rom occurrin!C
Lo"" Ratio the ratio o& claims to premiumsC
BN"IN#
2+2
M
Mar*et Value the price at )hich an in1estment can be sold or bou!ht at any
speci&ic timeC
Material 6a!a&e be&ore interruption insurance is e&&ecti1eB a material
Barrant+ dama!e claim under other property insurances must ha1e been
admittedC
Material )act anythin! that )ould a&&ect the Aud!ment o& a prudent under)riter in
acceptin! or decidin! terms &or a riskC
Mi"de"cri1tion a &alse description o& a material &actC
Mi"re1re"entation a &alse statement o& a material &act that can be innocent or
&raudulentC
Mort&a&e 0ond a loan made &or the purpose o& purchasin!B addin! to or impro1in!
propertyC
Mutual In"urance an insurance company o)ned by its policy holdersB that is
Co!1an+ it has no shareholdersC
9
9a!e an under)ritin! member o& Lloyd8sC
9e&li&ence &ailin! to act in )hat the la) considers to be a reasonable mannerC
9et Clai! the insurer8s o)n share o& claim payments a&ter deduction o& the
amount payable by the reinsurersC
9ew for Old insurance )here the replacement 1alue o& the property that has
been lost or dama!ed is payable )ithout deduction &or
depreciationC
BN"IN#
2+%
O
Offer the communication o& the proposed terms o& a contract by one
party to anotherC
O1erati4e Clau"e the clause in a policy that sets out the circumstances in )hich the
insurers )ill make claim paymentsC
Out"tandin& Clai!" the &unds put aside by insurers to co1er claims that ha1e been
Re"er4e" incurredB but not yet paidC
Out"tandin& Lo""e" claims not yet paidB )here estimated &i!ures are used in the
insurer8s accountsC
P
Pac*a&e Polic+ a policy into )hich se1eral di&&erent types o& insurance ha1e been
combinedC
Peril a contin!ency or &ortuitous happenin! that could cause lossesC
Polic+ )ritten e1idence o& the terms o& an insurance contractC
Polic+ Kolder the insured personC
Poolin& the basis o& insurance )hereby premium contributions are &unded
and used to pay lossesC
Prea!2le Clau"e the clause in a policy that sets out the essential elements o& the
contractC
Pre!iu! the money paid by the insured to the insurer &or co1er as pro1ided
in the policyC
Pre!iu! Rate the price per unit o& insuranceC
Princi1al a person instructin! an a!ent to act on his behal&C
Pro Rata Pre!iu! the premium based on the len!th o& time &or )hich the insurer )as
actually on riskC
Pro2a2ilit+ the chance o& an e1ent occurrin!C
Profe""ional Rein"urer a reinsurance company not transactin! any direct insurance
businessC
BN"IN#
2+&
Pro1ortional reinsurance )here reinsurers take a !i1en proportion o&
Rein"urance the direct insurer8s premiums and lossesC
Pro1o"al )or! an application &or insurance that seeks to obtain &rom the proposer
all the in&ormation relatin! to the riskC
Pro1o"er the indi1idual or or!anisation seekin! insuranceC
Pro1rietar+ Co!1an+ a company o)ned by its shareholdersC
Pro4i"o a policy condition )hose obser1ance is essential &or the
en&orcement o& the contractC
ProAi!ate Cau"e the direct cause o& a loss uninterrupted by any other e1entC

=
=uota Share proportional reinsurance )here the reinsurer accepts a &i3ed
percenta!e o& e1ery risk )ritten by the cedin! companyC
R
Rate the sum char!ed per unit o& e3posure by )hich the premium is
calculatedC
Rated %1 the term applied to insuranceB )here the premium is hi!her than
usualC
Rein"tate!ent the makin! !ood o& dama!ed propertyG the restoration o& the sum
insured a&ter settlement o& a loss on payment o& an additional
premiumC
Rein"tate!ent of Su! the restoration o& the sum insured a&ter it has been reduced
In"ured throu!h the payment o& a claimC
Rein"ured an insurer )ho e&&ects and is entitled to be indemni&ied under a
contract o& reinsuranceC
Rein"urer an insurer or reinsurance company that accepts contracts o&
reinsuranceC
BN"IN#
2+'
Renewal the process &or continuin! an insurance &or a &urther period a&ter the
&irst or current period o& co1er has endedC
Renewal 9otice the notice issued by a short term insurer to remind a policy holder
that his or her contract )ill shortly terminateC
Re1lace!ent Co"t the 1alue o& property as indicated by the current purchase price o& a
similar articleC
Re1re"entation a )ritten or spoken statement made durin! contract ne!otiationsC
Retention Li!it the ma3imum liability that an insurer )ishes to keep &or his o)n
account in respect o& a particular riskC
Ri"* a< a situation that cannot be controlled or per&ectly &oreseenG
b< the subAect matter o& an insurance contractC
Ri"* Mana&e!ent the business discipline applied by lar!e commercial and industrial
or!anisations to mana!e those risks that can cause lossesC
S
Sal4a&e )hate1er is reco1ered o& an insured itemB or part thereo&B on )hich
a claim has been madeC
Schedule the list o& personal details o& the insured and the subAect matter o&
the insurance in a policyC
Self>In"urance insurance that a business or!anisation &inances internally by
establishin! a &und to meet lossesC
Short>Period Rate the rate o& premium applied to insurances in &orce &or periods o&
less than t)el1e months and )hich is hi!her proportionately than
the annual rateC
Short Ter! In"urance insurance that operates on a year to year basisB and )hich may be
terminated by the insurer or the insuredC
Sli1 a &orm submitted by a broker to under)riters containin! particulars
o& the risk proposed &or insuranceC
Sol4enc+ Mar&in the minimum siKe o& the shareholders8 &unds re5uired by the
super1isory authoritiesC
S1ecial Peril" e3tra risks added to a policy to !i1e co1er not pro1ided in terms o&
the basic )ordin!G the term usually applies to stormB )aterB )ind
and impact dama!e added to a &ire policyC
S1ecification the &orm on )hich details o& lar!e risks are set out and appended to
the policyC
BN"IN#
2+(
Statute Law la)s promul!ated by the !o1ernment o& a countryC
Sto1 Lo"" Rein"urance a &orm o& reinsurance used as a means o& limitin! a!!re!ate net
losses on a particular class o& business in any one year o& accountC
Su2ro&ation the ri!ht o& one party to stand in a place o& another and take up the
latter8s le!al ri!hts a!ainst a third partyC
Su! In"ured the monetary limit o& the insurer8s liability under a policyC
Sur1lu" that part o& the sum insured that the insurer does not retail and
conse5uently reinsuresC
T
Tar&et Ri"* the main risk )here the client has more than one premisesC 0his is
the risk that i& dama!edB )ill a&&ect the insurer the mostC
Third Part+ a person )ho is not a party to a contractC
Third Part+ In"urance motor insurance co1er pro1idin! compensation &or inAury to
.Motor/ third parties and dama!e to their propertyC
Third Part+ )ire and third party insuranceB plus co1er &or &ire dama!e toB and the
Theft In"urance .Motor/ the&t o&B the insured8s o)n 1ehicleC
Treat+ Rein"urance a contract bet)een an insurer and a reinsurin! company under
)hich the &ormer a!rees to !i1e and the reinsurer a!rees to accept
reinsurance &or risks &allin! )ithin the terms o& the a!reementC
BN"IN#
2+)
%
Uberrima Fides the duty o& !ood &aith imposed on both parties to an insurance
contract to disclose all material &actsC
%nder In"urance insurance &or a sum insured less than the 1alue at riskC
%nderwriter an insurerG a person )ho makes decisions on )hether or not to
accept insurance businessC
%nderwritin& the process o& assessin! a proposal &or insurance to decide on its
acceptabilityB and i& soB on )hat termsC
%t!o"t Good )aith see %0ERRIMA )I6ES ;HUtmostI has been ruled to ha1e no
particular meanin! in South ,&rica<C
V
Valuation" a list o& property )ith 1alues allocated to each item as the basis o&
insuranceC
Valued Polic+ a contract in )hich the insurers a!ree to pay the sum stated in the
e1ent o& total lossB )ithout the usual allo)ance &or depreciation or
appreciationC
Void Contract a contract that cannot be en&orced by either partyC
Voida2le Contract a contract that one party can choose not to en&orceC
BN"IN#
2+*
B
Barrant+ a condition that must literally be complied )ithC
Brite .In"urance pro1ide insurance co1erC
0u"ine""/
_______________________________________________________________________________________
E96
BN"IN#
2++

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LEVEL 4 SKILLS PROGRAMME

Self Study Guide

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