In this judgment, the relevant insurers relied on a limitation defence against the insured’s claims. All the parties agreed that the claim was in contract and had a limitation period of 6 years under the relevant legislation.
The question was the accrual date of the insured’s cause of action.
The court confirmed that the date of accrual is not the same for all insurance contracts.
In the context of a property damage insurance policy for example, unless the making of a demand is a condition precedent to liability, all the essential facts required to be established by the insured to enforce indemnity would have occurred and the cause of action for unliquidated damages will be complete at the point of property damage. The cause of action accrues on the happening of the property damage that is the insured event. The position is no different in South African law.
The claim under consideration did not concern a property damage policy.
The D&O insurers promised to make payment upon notification rather than upon the insured incurring a loss. On the relevant wording the insurers expected notification before the obligation to pay was triggered:
“The Covers provided under this policy are granted solely with respect to Claims first
made against or by an Insured during the Policy Period … only if such Claims have been notified to the Insurer as soon as practicable …”
The clause expressly limited those circumstances in which an insurer would provide cover to “only” those claims which have been “notified to the Insurer as soon as practicable”. If there is no notification, or tardy notification, then cover will not be provided.
The court said that this was a case where the contract had made notification of loss a condition precedent to the insurers’ liability.
The relevant breach of contract by the insured occurred when the insurer failed to “promptly advance” the indemnified costs after receipt of the invoices concerning a claim that was notified “as soon as practicable.”
No submissions were made as to what was meant by the word “prompt”. The court decided that each breach occurred one month after presentation of invoices.
In the circumstances any payments made earlier than 6 years before the action was instituted were statute time barred by the Australian prescription law.
The result is unlikely to be any different in South African law after three years.