The plaintiff in this case, Mr. Thompson, averred that on 29 June 2007 he had sustained injuries after he tripped over an electrical cord at a shopping centre owned by the first defendant, Federated Timbers’ Home Improvement Centre (“the incident”). The first defendant pleaded that it had employed Durban Property Cleaning Services (“DPCS”) as a professional contractor and as a result, joined DPCS to the action. DPSC notified its insurers, Zurich Insurance Company (South Africa) Limited (“Zurich”), of the joinder, claiming indemnity from Zurich on the basis that the incident was a defined event under the policy. Zurich rejected the claim alleging that DPCS failed to comply with the notification provisions of the policy. As a result DPCS joined Zurich as a third party to the action.

The relevant issue to be decided was; at what stage was it reasonably possible for DPCS to have notified Zurich of the event?

The notification clause required DPCS to “on the happening of an event which may result in a claim under the policy, give notice to the insurer as soon as reasonably possible.” Wallis J gave judicial consideration to the term “on the happening of any event.” On an analysis of the term he accentuated that it is qualified by the fact that the notice should be given “as soon as possibly reasonable”, thus the words “on the happening of an event” should be interpreted as if it reads “after the occurrence of any event.”

Wallis J drew attention to the test for reasonableness. Although he noted that it is an objective test, he sent out red flags to insurers when he highlighted the necessity to consider certain subjective elements. The rationale being that an insured may be aware of an event however, may be unaware of the possibility of a claim arising out of that event. The case evidencing the abovementioned scenario was Sleightholme Farms (Pvt) Ltd v National Farmers Union Mutual Insurance Society Ltd 1967 (1) SA 13 (R) where it was held that the insured was unaware of the possibility of a claim arising out of the event, thus there was no breach of the notification clause. Wallis J attached significant weight to the subjective element of “appreciation”. He is of the view that the insured should have an appreciation of the possibility of a claim being made against the insurer. In addition he affirmed that;

“If the failure to appreciate the possibility of a claim is unreasonable, in the sense that a reasonable insured in the same position would appreciate the possibility of a claim, the fact that this particular insured did not cannot, I think, relieve it of the consequences of its failure to notify the insurer of the event.”

It is at this point that Wallis J affords insurers protection. He relies on an objective standard to prevent an “incentive to dishonesty” and to uphold the “reasonable and business - like construction” of insurance policies.

Reference was made to the case of Resisto Dairy (Pty) Ltd v Auto Protection Insurance Co Ltd 1963(1) SA 632 (A) which supports the view held by Wallis J that in terms of the notification clause in issue, all that is necessary to trigger the notification obligation is an appreciation by the insured of the possibility of a claim arising from the incident. On the courts analysis of the evidence it was found that at the time Mr. Judkins, the managing director of DPCS, learnt of the incident he “appreciated that there was a small risk” that the incident might result in a claim against DPCS which would have in turn resulted in a claim against DPCS’s policy, held with Zurich.

DPCS argued that it was aware of the incident, however with regard to the claim it was only aware of “some form of pending claim against Federated Timbers.” The court highlighted that the obligation was to notify Zurich of the “happening of any event” which may lead to a claim against Zurich under the policy. It was not an obligation to notify Zurich only once the claim is made, since that obligation derives itself from a notification clause which is not an issue in casu. This approach is consistent with the case of Snodgrass v Hartman (Santam Ltd, third party) (2001) (1) SA 851.

The court concluded that DPCS was aware of the incident and recognised the possibility of a claim against Zurich for indemnity; however it failed to inform Zurich of the incident and in the circumstances, the court made an order dismissing the claim by DPCS against Zurich, with costs.