Is an insurer liable for a negligent misrepresentation causing pure economic loss?
 The first and second respondents in the appeal, Dippenaar and another, were wheat farmers in the Western Cape who instituted a claim against the appellant, Delphisure. The appellant was an insurance broker that sole crop insurance product known as Farmsure. The claim in the court of first instance was a claim for pure economic loss suffered as a result of misrepresentation by the general manager of Delphisure who misrepresented the product as being in existence and further that it was underwritten by Lloyd’s of London. However, this was not the case and, as a result of the misrepresentation, Dippenaar and the second respondent both cancelled their Mutual & Federal crop insurance policies. After their respective crops failed and when it turned out that the Farmsure product did not exist, Dippenaar and the second respondent claimed from the appellant damages in the amount which they would have recovered from Mutual & Federal, had they, but for the misrepresentation by the general manager of Delphisure, insured their crop with it. In upholding the appeal by Delphisure against the decision of the court of first instance in favour of Dippenaar, the SCA said that it was clear that there was negligence and foreseeability, being two of the elements of a delict which need to be present in the misrepresentation by the general manager of Delphisure. However, the question whether there was wrongfulness (being a further element which needed to be proved) would depend on one 8 important considerations (being a non-exhaustive list) to which regard would be had to determine the wrongfulness of the conduct of the general manager. One defence which is often raised by an insurer in such a case is that there would be so-called “boundless liability” involving unlimited numbers of claimants, should the court come to the aid of the insured. In the present case, the SCA held that the misrepresentation was made to a limited class (being on those farmers to whom the Farmsure product was offered) and that in the circumstances, liability should be imposed for the negligent misrepresentation by the general manager of Farmsure if it caused economic loss to Dippenaar. For reasons not relevant to this discussion, the claim of the other respondent farmer was dismissed. Leander Opperman Partner leander-o@adamsadams.co.za |
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| 3/06/2012 | ||
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