Allianz Insurance Ltd v RHI Refractories Africa (Pty) Ltd

RHI Refractories Africa (Pty) Ltd entered into a construction contract to apply an epoxy lining to parts of an acid plant. During construction, the epoxy lining failed and delaminated, causing physical damage that required repair at a cost of about R9 million. RHI had taken out a construction insurance policy with Allianz Insurance Ltd to cover physical loss or damage to the works. Allianz repudiated the claim relying on an exclusion clause which excluded the cost of rectifying defects in design, materials or workmanship, but provided cover if ‘unintended damage’ resulted from such defects. The dispute centred on whether the damage to the epoxy lining constituted ‘unintended damage’ within the meaning of the exclusion clause.

The appeal was dismissed with costs, including the costs of two counsel. Allianz remained liable to indemnify RHI under the policy.

The case is significant for clarifying the interpretation of exclusion clauses in insurance contracts under South African law, particularly the meaning of ‘unintended damage’. It reinforces the principle that exclusion clauses are interpreted restrictively against insurers and that foreseeability of damage does not equate to intention.