In this case the insured claimed for damage to rock mass when tunnels for the Gautrain Rapid Rail Systems were constructed. One of the issues in dispute was whether the rock mass surrounding the tunnel void was part of the Property Insured.

It was common cause that the damage occurred and that damage was caused to the rock mass that surrounds the tunnel. Whether or not the rock mass was part of the Property Insured depended on the interpretation of the policy and the answer to the question “what is a tunnel?”

The policy insured “against all such Damage or Liability as herein provided”. Damage was defined to mean “physical DAMAGE” including “physical loss or physical destruction.”

The court said that the Operative Clause, in terms of which the insurer undertook to replace, repair or make good damage to the Property Insured howsoever caused occurring during the Period of Insurance, and the definitions of “Property Insured”, “tunnel works” and “civil works”, were intended to give extremely wide cover to the insured. While a number of the definitions of those terms defined tended to overlap, it was clear that the tunnel works, being permanent works, fell within the definition of Property Insured, and tunnel works specifically include tunnels. The tunnel works were also the subject of specific exclusions and limitations and would only be subject to those exclusions and limitations if they were part of the property insured.

The policy did not however define what was meant by a tunnel. The court had regard to both the dictionary definition and the evidence of the insured’s experts as to what a tunnel is in civil engineering terms. The court held that the context within which the policy and the word “tunnel” appear must be interpreted is a massive civil engineering project involving the excavation of tunnels through rock. When the word “tunnel” was used in the policy it must have been used as a technical, civil engineering term.  Therefore expert evidence was admissible and did not offend the parol evidence rule. 

The experts said that rock mass is an essential component of a tunnel because of its load-bearing capacity. The experts’ evidence was that rock mass as a fundamental component of the tunnel is accepted amongst tunnel engineers throughout the world.  The surrounding rock mass is crucial to the stability of tunnels whether constructed or naturally formed. In civil engineering terms, a tunnel is more than the void left after the excavation process.  It includes the natural support for the void without which there could be no tunnel.  The court accepted the expert evidence that a tunnel such as that with which the case was concerned was therefore a void surrounded by its own load-bearing cylinder of rock of about one tunnel diameter in thickness.

The parties in agreeing to the terms of the policy in relation to the civil engineering project involving the construction of tunnels in rock must have had that concept of a tunnel in mind when they included tunnels as part of “tunnel works” within the property insured. It is not clear why the parties would have had in mind a load-bearing rock thickness of a tunnel diameter.

The court said the contextual evidence of the insured’s experts resulted in a commercially sensible interpretation and found it avoided an absurdity – the contrary interpretation of only a void being part of the property insured  would not make sense because by definition no damage could ever be caused to a void.

The court concluded that the Property Insured included the rock mass that surrounds the void created by the process of excavation, with the result that the relevant excavation disturbance-zone damage caused by the failure to pre-grout the tunnels was indemnifiable as damage to the property insured in terms of the policy.

Zurich Insurance Company South Africa Ltd v Gauteng Provincial Government (Case no. 734/2021) [2022] ZASCA 127 (28 September 2022)