Andreas Papagapiou v Santam Limited

In June 2002, the appellant (plaintiff) concluded a contract of insurance with the respondent (Santam) covering property at Erf 909, Onderlingstraat, Virginia against loss or damage by fire. In October 2002, the property was extensively damaged by fire and the damage was assessed at R164,149.00. Santam engaged an assessor, Mr André Carstens, to assess the damage. Carstens testified that the plaintiff approached him on two occasions attempting to bribe him to inflate the damage assessment - first offering R50,000 if he assessed the damage at R500,000, and then R10,000 if he assessed it at R165,000. Carstens refused both bribes and assessed the damage at the correct amount of R164,149.00. He reported the bribery attempts to Santam, which then repudiated the claim based on an exclusion clause in the policy. The plaintiff instituted action in the High Court at Bloemfontein claiming indemnification, but Cillie J dismissed the claim with costs, upholding Santam's reliance on the exclusion clause.

• Whether an exclusion clause in an insurance policy that forfeits benefits where 'fraudulent means or devices be used by the insured... to obtain any benefit under this policy' applies to attempted fraud committed before a claim is formally lodged
• The proper interpretation of the exclusion clause in the insurance contract
• Whether the plaintiff's attempted bribery of the assessor constituted use of 'fraudulent means or devices' to obtain a benefit under the policy within the meaning of the exclusion clause

The appeal was dismissed with costs. The court upheld the High Court's dismissal of the plaintiff's claim for indemnification under the insurance policy.

An exclusion clause in an insurance policy that forfeits benefits where 'fraudulent means or devices be used by the insured... to obtain any benefit under this policy' covers attempted fraud committed before a claim is formally lodged. The phrase 'to obtain' in this context means 'in order to obtain', and the provision dealing with fraudulent means or devices is distinct from the provision dealing with fraudulent claims already submitted. An insured's use of fraudulent means or devices (such as attempting to bribe an assessor to inflate damage) to obtain a benefit under a policy falls within the exclusion clause and results in forfeiture of benefits, even if the fraud was unsuccessful and no actual undue benefit was obtained.

The court restated the main principles governing interpretation of insurance policies with reference to Fedgen Insurance Ltd v Leyds 1995 (3) SA 33 (A): ordinary rules of contractual interpretation apply; words should be given their plain, ordinary and popular meaning unless context indicates otherwise; exclusion clauses must be restrictively interpreted; insurers must make clear what risks they wish to exclude; and in case of real ambiguity, the contra proferentem rule operates against the drafter. The court also observed that the third situation covered by the exclusion clause (events occasioned by wilful act or connivance of the insured) had no application in the present matter. On costs, the court commented that the matter was simple and straightforward and did not warrant briefing of two counsel despite involving interpretation of a policy clause in widespread use.

This case provides authoritative guidance on the interpretation of exclusion clauses in insurance contracts, particularly fraud exclusion clauses. It clarifies that such clauses can apply to attempted fraud committed before a formal claim is lodged, not only to fraudulent claims already submitted. The judgment demonstrates the application of standard contractual interpretation principles to insurance policies, including giving words their ordinary meaning where language is clear and unambiguous, and the principle that exclusion clauses must be restrictively interpreted with insurers required to make clear what risks they wish to exclude. The case is significant for establishing that insurers can rely on fraud exclusion clauses even where the attempted fraud was unsuccessful and no actual benefit was obtained by the insured.