AIG South Africa Limited and Others v Azrapart (Pty) Ltd and Another

The respondents were co-owners of Fourways Mall who engaged the insurance broker Marsh (Pty) Ltd in July 2019 to secure insurance coverage for the mall. The insurance was to include coverage for business interruption, including Infectious and Contagious Disease (ICD) cover. The first to fifth appellants were insurers with varying risk percentages. Negotiations were conducted through industry standard documents called "Quoting Slips" governed by POLDRA (Drafting Assets All Risks Policies) rules. The initial request for quotation sent by Marsh on 23 July 2019 included ICD cover. However, on 5 August 2019, the lead insurer's representative (Ms Wide) responded with a Quoting Slip that omitted the ICD cover without highlighting or signaling this exclusion as required by POLDRA rules. Throughout negotiations, two different Quoting Slips were used interchangeably - one including and one excluding ICD cover. The fifth appellant joined negotiations later in September 2019 and received the Quoting Slip that included ICD cover. A final Quoting Slip dated 14 November 2019 (without ICD cover) was sent to all parties. The first to fourth appellants signed it, but the fifth appellant did not. Instead, the fifth appellant confirmed its 5% participation by email. On 11 December 2019, the final Placing Slip (including ICD cover) was sent to all parties for signature. The fifth appellant signed it on 13 January 2020. The final insurance contract issued on 12 March 2020 also included ICD cover. When COVID-19 broke out in 2020 and government lockdown regulations caused business interruption, the respondents claimed indemnity under the ICD cover in November 2022. The appellants denied liability and raised a defense of rectification, arguing the ICD cover should be deleted from the contract.

• Whether antecedent insurance agreements were concluded between the appellants and the respondents, and if so, what the terms of those antecedent agreements were
• Whether the insurance contract falls to be rectified by deletion of the Infectious and Contagious Disease (ICD) cover clause
• Whether the written insurance policy correctly reflected the common and continuing intention of the parties
• Whether the fifth appellant proved the five factors required for rectification: (a) agreement reduced to writing; (b) written document not reflecting true intention; (c) intention to reduce agreement to writing; (d) mistake in drafting; and (e) actual wording of true agreement
• What constituted the final insurance contract between the parties - the Quoting Slip or the final policy document

The appeal was dismissed with costs, including the costs of two counsel.

The binding legal principles established by this judgment are: 1. To succeed with a defense of rectification, a party must prove five factors: (a) that an agreement was concluded and reduced to writing; (b) that the written document does not reflect the true intention of the parties; (c) an intention by both parties to reduce the agreement to writing; (d) a mistake in drafting the document; and (e) the actual wording of the true agreement. 2. A party seeking rectification must prove the facts entitling it to that relief "in the clearest and most satisfactory manner" and must show that the written agreement does not correctly express what the parties intended to set out therein. 3. When parties conduct negotiations under industry-standard governing rules (such as POLDRA), those rules form part of the context for determining the parties' intentions and whether a mutual mistake occurred. Failure to comply with procedural requirements in those rules (such as highlighting exclusions or amendments) is relevant to determining whether there was a common intention to exclude a term. 4. Under the Parol Evidence Rule, when a contract has been reduced to writing, the final written document is regarded as the exclusive memorial of the transaction. Earlier unsigned drafts or intermediate negotiation documents cannot be used to contradict or vary the final signed agreement. 5. The relevant documents for determining parties' intentions in insurance contracts are the final signed Placing Slip and the insurance policy itself. These documents must be interpreted to determine whether there exists a "mistake common to the parties" justifying rectification. 6. Silence or failure to object to contractual terms during negotiations, particularly when governing procedures invite parties to highlight concerns, is evidence against a claim that the parties had a common intention to exclude those terms. 7. A party claiming rectification must establish the common and continuing intention of the parties as it existed at the time the agreement was reduced to writing, based on the objective facts and evidence of the negotiations.

While not strictly binding, the Court made several observations of note: 1. The Court noted that it had not been definitively determined why Ms Wide's (the lead insurer's representative) initial Quotation Slip excluded the ICD cover, and that she denied acting deliberately. The Court observed that "contrary to the governing rules, there was no iteration in the document or highlighted portion of the text, to indicate the exclusion of the ICD cover." 2. The Court commented on the separation of issues procedure, noting that the parties had agreed to this approach "on the basis that if any one of the three was resolved in the [appellants'] favour, that would end the claim." The Court considered it "prudent" to grant this order even though the fifth appellant did not consent. 3. The Court observed that the first to fourth appellants had settled with the respondents on the eve of the appeal hearing, withdrawing their appeals, leaving only the fifth appellant to pursue the matter. This suggests the other insurers recognized the weakness of the rectification defense. 4. The Court noted the two-year delay between the claim being lodged (April 2020) and the rectification defense being raised (2022), commenting that this was a relevant factor, though not decisive. 5. The Court commented that the fifth appellant's failure to call witnesses "would have enabled the high court to be better placed to determine Mr Shepherd's intention when he signed the Placing Slip," implying that the absence of such evidence weakened the appellant's case. 6. The judgment contains an implicit criticism of the use of different document formats (Word versus PDF) during negotiations, noting this made it harder to track changes between versions. 7. The Court observed that "the fifth appellant latched on to a defence which the first to fourth appellants have raised," suggesting the fifth appellant's case was derivative and not independently strong.

This case is significant in South African insurance law for several reasons: (1) It clarifies the application of rectification principles in the context of complex commercial insurance negotiations; (2) It emphasizes the importance of industry-standard procedures and governing rules (like POLDRA) in determining the parties' intentions in insurance contracts; (3) It demonstrates the high standard of proof required for rectification - that facts must be proven "in the clearest and most satisfactory manner"; (4) It reinforces the Parol Evidence Rule principle that when a contract has been reduced to writing, the final written document is regarded as the exclusive memorial of the transaction; (5) It highlights that silence or failure to object during negotiations, when governing rules require parties to highlight amendments or exclusions, can be fatal to a later claim of mutual mistake; (6) The case provides guidance on the evidentiary requirements for rectification, particularly the importance of calling witnesses to establish the parties' subjective intentions; (7) It confirms that parties cannot rely on intermediate drafts or unsigned documents to contradict final signed agreements; and (8) The judgment illustrates how courts will scrutinize the chronology and content of negotiations to determine what constituted the parties' common and continuing intention. The case has particular relevance for COVID-19 related insurance disputes concerning infectious disease coverage.