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Impossible to ‘scoop’ … Reporting on an 8-year-old insured loss

11 July 2022 Gareth Stokes

It can be tough for a freelance writer to stay ahead of developments in an industry or sector, and even more so in the environment of virtual meetings and presentations that remains in place six months after the 2020-2021 COVID-19 pandemic and lockdown. You see, dear reader, in the olden days pre-2020, we attended countless face-to-face, in-the-flesh, real-world events where information was shared in earnest conversation, individually or in groups. It was, in my experience, easier to get that lead or nugget of information that delivered the next ‘scoop’. Nowadays, we trawl the internet for this news; or hope that someone lets something interesting ‘slip’ in a presentation chat-box.

Reporting from the source

The trouble with relying on the internet or competitors’ online news sites to generate story ideas is that one always seems to be a step behind the game; rehashing stories already told. One way to avoid this curse is to always report or write from as near to the source as possible, to at least present a clean take on a matter. Case in point: Blackspear Holdings (Pty) Limited v Bryte Insurance Company Limited and Another (26150 of 2020) [2022] ZAGPJHC 308. The non-life insurance matter was heard in the Gauteng High Court, with a ruling handed down on 26 May 2022. Instead of relying on another journalist’s take on the matter, this writer headed to lawlibrary.org.za to unpack the ruling from the ground up. 

The “another” referred to above was none other than Sasria SOC Limited, the state-owned special risks insurer that got hit with ZAR32.8 billion in claims following looting and rioting in parts of Gauteng and KwaZulu-Natal in July 2021. The Blackspear case is totally unrelated; but illustrates how even an apparently cut-and-dried case can end up in the courts. Lawlibrary.org says the case’s principal focus was on the determination of the factual and legal cause of mining equipment submerged and destroyed in a flooded mine. The Judge was tasked with deciding which of the defendants was liable for the loss. “The critical issue is whether Sasria is liable on the basis that the loss of equipment was owing to labour unrest, or Bryte is liable on the basis that the loss of equipment was not the result of labour unrest, its policy being cover for all risks,” he wrote. 

The long, long history of an eight-year-old loss event

Here follows this writer’s fresh ‘take’ on a loss event that played out almost eight years ago. The ruling begins with a simple statement of fact, being that “the assets were lost because they were drowned in the mine” before sharing a lengthy history of the circumstances that led to the loss. Firstly, the Court noted that the mine where the loss had occurred started as an open cast pit, but that an undulating horizontal shaft had followed the coal seam for more than a kilometre underground. The water that seeped into this underground shaft had to be kept in control by pumps, which were meant to operate 24 hours per day, all year round. Likewise, ventilation was required to prevent the build-up of dangerous methane gases. 

The ruling further noted that the pumps, which were supplied by electricity produced by an above-ground diesel generator, were always monitored or operated by a designated employee in attendance on each production shift. “The flooding of the mine shafts and the opencast pit is common cause, as it the loss of the assets as a result of that flooding; the key factual question is to assign legal responsibility for the failure to sustain the pumping out of the water,” noted the Court. 

Two significant events occurred in quick succession, the first being the failure by the mine to pay wages on 25 June 2016, which resulted in workers downing tools, and the second, management’s decision to switch off the diesel generator on 30 June 2016 for what was then contemplated as a temporary cessation of activities. “The most probable reason to swich off the generator is that there was no point in burning fuel to generate electricity if no attendant was at the site of the pumps to operate them,” noted the Judge. Then, on 15 July 2016, the owner of the leased generator removed it from site due to missed lease payments. 

Workers staged a sit-in at the mine from around 31 July until 20 September… Mid-August, a short cessation of the sit-in allowed mine management to enter the shaft for an assessment of the situation, where it was found that “widespread vandalization of various pieces of equipment and, most importantly, of electrical cabling” had taken place. The Court observed that the “destruction of the electrical reticulation infrastructure meant that it was [then] impossible to supply power to the pumps”. It was further noted that by the time funds were secured to resume operations at the mine, it “had been lost to flooding and was not capable of economic rehabilitation; with the loss of the mine, axiomatically went the loss of the insured equipment”. 

What is the legal cause of the damages?

Finally, to the heart of the case, the Court reflected on the factual and legal causes of the damages suffered by the plaintiff. The Judge immediately referenced one of the now-famous business interruption (BI) cases that were decided in the Supreme Court of Appeal in 2021. He referred specifically to paragraphs 37-41 of Guardrisk Insurance Co Ltd v Cafe Chameleon CC 2021 (2) SA 323 (SCA). This article will not examine these paragraphs here, except to say that “factual causation is the first enquiry” and that “the enquiry into legal causation usually follows factual causation”. Instead, this article unpacks how the High Court interpreted the SCA conclusion. 

First, the High Court noted that both Blackspear and Bryte “alleged the cause of the loss suffered was the workers conduct, which was a peril covered by Sasria” whereas the special-risks insurer argued that the cause of the loss was the removal of the main generator. “On the facts described, it is plain that the idea of the removal of the generator as a cause of the loss is unsustainable; indeed, as is amply demonstrated the presence or absence of the generator is irrelevant”. Although the writer agrees, it is interesting that the fact that the generator had been removed from the site was not explored in more detail. It seems fair to conclude that had the vandalism not occurred the mine would have been unable to proceed with pumping… But this argument is moot. 

The factual and legal causes are clear

According to the Judge, the question of who was responsible for the failure to maintain the pumps in operation was clear, and included: “The withdrawal of labour, including the labour of the pump attendants and the prevention of anyone else manning the pumps by denying access and the cutting of the electrical cables, all with the clear intention of hurting the mining operation. In short, the vandalism of the workers rendered the pumping operations impossible which in the chain of causation resulted in the mine being lost to flooding”. Furthermore, there was no case to be made for twin causation, as had occurred in the Guardrisk matter. In that case the SCA determined that the outbreak of an infectious disease and government’s national lockdown constituted a joint cause; in this matter the second defendant appeared to hold that the actions of the insured, by removing the electricity to run the pumps, should also be seen as contributing to the loss. 

The Court did not agree, and since labour unrest was an insured peril on the Sasria Coupon the final ruling was short and sweet. The Judge ordered that the second defendant, being Sasria, was “liable to the plaintiff in the sum of its proven damages” and should “bear the costs of the plaintiff and of the first defendant, including the costs of two counsel where so employed”.

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