Rectification is a narrow, exceptional remedy. It requires clear proof that the written agreement does not reflect the parties’ common intention at the time of contracting. It is not a way to improve a bad bargain after the fact. On the facts of this SCA decision, the insurance policy matched the signed placing slip and reflected the parties’ intention to include cover for infectious and contagious diseases (ICD). Rectification was refused.
The insureds, co‑owners of Fourways Mall, claimed business interruption losses under an ICD extension. COVID‑19’s status as an infectious & contagious disease was not in dispute. The insurers disputed that the policy was the true agreement and, if it was, they argued that it should be rectified to exclude infectious disease cover. The High Court rejected that bid. Only an underwriting manager persisted with an appeal to the SCA. The SCA rejected the rectification bid, finding that the signed placing slip and the final policy, which both included ICD cover, reflected the true agreement.
The chronology is important. The initial request to quote from the insureds’ broker expressly sought ICD cover and instructed that any restrictive or different terms should be clearly highlighted. This was in line with POLDRA, which comprises drafting instructions used for assets-all-risks placements and binds all participants to a common process. However, over months of back‑and‑forth, the documents exchanged between the broker and the insurers alternately included or excluded ICD cover, largely due to unhighlighted edits in dense text and the use of PDFs versus Word files. The contenders for what was the true agreement between the parties were the following:
- a final quoting slip which the broker sent to all the insurers with ICD excluded, and which all but one of the insurers signed;
- a subsequent placement slip with ICD included which all the insurers signed;
- the policy with ICD included which only the lead insurer signed;
- under POLDRA, the policy had to be drafted in accordance with the signed placing slip, and any deviation required renegotiation and a signed endorsement. None was sought.
The SCA reiterated that a party seeking rectification must prove five things in a clear and satisfactory manner:
- that an agreement was concluded and reduced to writing;
- that the writing does not reflect the true common intention of the contracting parties as it existed when recorded;
- that the contracting parties intended to record their agreement in writing;
- that there was a mistake in the drafting which may be a common error or may be caused by the other party; and
- that the party seeking rectification can show the exact wording of the true agreement.
Against this backdrop, the rectification bid fell short because the appellant underwriting manager:
- was invited to quote on terms that included ICD;
- negotiated participation and monetary limits by email but never objected to ICD;
- did not sign the quoting slip excluding ICD;
- signed the placing slip including ICD and went on risk;
- failed to call witnesses to establish a mutual mistake; and
- raised rectification only two years after the claim was made.
POLDRA’s rules, which bind participants to a common document trail and clear highlighting of changes, cut against the notion of a shared intention to exclude ICD when the agreement was reduced to writing.
The court dismissed the appeal with costs.
For a recap of the High Court judgment, read our Big Read Book summary here.