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HARARE, IN a ruling that could reshape the landscape of insurance disputes in the country, the High Court has ordered Alliance Insurance Company (Private) Limited to, within six months, reconstruct a factory destroyed by fire just over two years ago, compelling the insurer to honour its commitment under a US$24 million policy.
Justice Takuva on Wednesday last week delivered the ruling, unequivocally affirming the rights of the insured to demand specific performance when an insurer elects reconstruction.
So Alliance has to rebuild the factory on Stand 3991 Salisbury Township, also known as Number 14 Plymouth Road, Southerton, Harare, within six months of the date of the order from Justice Takuva.
The factory, owned by Paramount Exports (Private) Limited, a garment manufacturer, was razed in a fire on December 4, 2023, causing significant damage to its building, equipment and stock.
Alliance Insurance originally acknowledged its liability under the policy and elected to reconstruct the property. However, after months of delays and disputes over foundational cracks and incomplete architectural drawings, the insurer attempted to abandon its commitment by offering cash compensation instead.
Paramount Exports refused the offer, insisting that the agreed rebuilding process proceed. The company argued that the proposed cash settlement of US$3.9 million was grossly inadequate, falling far short of the US$15 million reconstruction cost estimated by independent experts.
In his judgment, Justice Takuva dismissed the insurer’s attempt to renege on its obligations, stating that once Alliance Insurance made its election to reconstruct, it could not later substitute monetary compensation.
“Contracts of indemnity often give the insurer the option of paying the amount of the insured’s loss in cash, reinstating, or replacing the property insured. Once the insurer has made its election, it cannot change its mind,” the judge said, citing foundational principles of Roman-Dutch law.
The dispute revolved around three main issues: whether Alliance Insurance had complied with its contractual obligations, whether Paramount Exports was entitled to compel reconstruction, and whether the insurer could invoke arbitration to avoid court proceedings.
Justice Takuva systematically dismantled the insurer’s defences, ruling that the company had failed to meet its obligations and could not evade the court’s authority by invoking arbitration clauses.
The court found that Paramount Exports had acted reasonably in commissioning independent foundation tests and liaising with the City of Harare to address safety concerns.
These steps, Justice Takuva noted, were necessary to ensure proper reconstruction, rather than being obstructive as the insurer claimed. He rejected Alliance Insurance’s assertion that the applicant’s actions had delayed the process.
“The insurer is liable for the consequences of failing to perform adequately,” the judge ruled, adding that any deficiencies in the foundational work could not absolve the insurer of its responsibilities. Herald
