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Saturday, November 1, 2008
Prove a loss

Deneys Reitz on insurance case law: Truck and General Insurance Co Ltd v Verulam Fuel Distributors CC 2007
The first respondent carried on business as a fuel distributor and transporter. On two occasions diesel leaked from its tankers and caused contamination and ecological damage. On both occasions the first respondent engaged a contractor to clean up the spillages. In terms of the National Environmental Management Act, 1998 (the Act), the plaintiff was obliged to undertake clean-up operations. The first respondent claimed the costs from the appellant, its insurer, in terms of a policy that indemnified the first respondent against liability incurred by the first respondent towards third parties for damage caused by certain defined events, in the following terms (subsection B):

Any accident caused by or through or in connection with any vehicle described in the schedule or in connection with the loading and/or unloading of such vehicle against all sums including claimants costs and expenses which the insured and/or any passenger shall become legally liable to pay in respect of... (ii) damage to property other than property belonging to the insured or held in trust by or in custody or control of the insured or being conveyed by loaded onto or unloaded from such vehicle...

HELD. For entitlement to claim indemnity under subsection B of the contract the first respondent is required to prove a loss arising from a legal liability to pay money in respect of damage to property other than its own. Section 30(4) of the Act imposes a legal obligation on the responsible person (in this case the first respondent) to contain and minimise the effect of a spillage incident. Such obligation constitutes a legal liability to pay in terms of subsection B if there is damage to property other than the insured’s and the legal liability is in respect of such damage. The words “in respect of” indicate that a direct or causal connection must exist between the costs for which the insured is legally liable and the damage to the third party’s property. It is unnecessary to decide if ecological damage amounts to damage to property, as subsection B makes no distinction between ecological damage and other kinds of damage to property. If the insurer wished to exclude ecological damage from other kinds of damage to property, it should have done so explicitly. The Supreme Court of Appeal held that the first respondent’s claims were covered by subsection B of the policy.
Comments Deneys Reitz, the court seems to suggest that generally speaking, mere ecological pollution of land on its own does not amount to actionable damage to property and it has to be shown that actual damage was suffered as a result of such pollution.

Copyright © Insurance Times and Investments® Vol:21.10 1st November, 2008
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