Fourways Mall owners get one over insurers over R1bn Covid claim

Fourways Mall owners Accelerate Property Fund and Azrapart scored a victory in their R1bn interruption of business claim against some of SA’s biggest insurance groups over lockdown restrictions during the Covid-19 pandemic that wreaked havoc with the economy.

The JSE-listed Accelerate and Azrapart each own 50% in Fourways Mall, SA’s largest mall with a gross lettable area of 178,000m² and more than 350 stores. Gross lettable area is the space in a commercial building that can actually be rented by a tenant.

The two entities dragged AIG SA, Old Mutual Insure, Bryte Insurance and Guardrisk to court demanding they collectively cough up R1bn.

The R8bn Fourways Mall was given a facelift just a year before Covid-19 rocked SA and the world, hurting most consumer-facing businesses. The redevelopment nearly tripled the mall in size, from 64,000m² to 178,000m².

AIG holds 70% of the risk associated with Fourways Mall, while Old Mutual Insure carries 14%, Bryte 8% and Guardrisk 8%.

Accelerate and Azrapart told the court that the insurance companies had all indemnified Fourways Mall against business interruption, which included loss caused by infectious and contagious diseases (ICDs).

The insurance companies’ argument is that the mall was not covered for infectious and contagious diseases.

Azrapart is owned by the family of former Accelerate CEO Michael Georgiou.

Accelerate and Azrapart drew first blood in the dispute on Friday when the high court in Johannesburg ruled on three separate matters.

The three matters that the court ruled on in favour of the Fourways Mall owners include that the contract between parties provided for cover against business interruption as a result of ICDs.

The other matter was that the contract of insurance did not stand to be rectified as pleaded by the insurers and the dispute regarding the premium was decided in favour of the Fourways Mall owners.

The ruling gives Accelerate and Azrapart a fighting chance in their claim, as an adverse ruling would have weakened their case.

Judge Norman Manoim said the crux of the dispute was whether infectious and contagious diseases insurance formed part of the agreement between the parties, and the interpretation of the contract between the parties.

“Between the time that the first request for a quotation was made by Marsh [insurance broker] on July 23 2019, and the time a final policy was signed in March 2020, there had been 10 iterations of the contract, with the term ICD, variously in or out. But on not one occasion were these modifications noticed by the party to whom the document had been sent,” the judgment reads.

“There is a simple explanation for this. Insurance contracts are filled with dense type, most of which is unchanging. What the professionals keep a look out for are the highlighted changes, and then, the exclusions, the premiums, and the limits.

“But where a term is not highlighted and is buried in a long list of densely typed terms, infrequently modified, they remain imperceptible to the quick-look scrutiny that these professionals typically exercise. Such is what happened in this case.”

Manoim further found that there was no dispute between the warring parties about what the term ICD meant.

“This is not a dispute over interpretation. It is a dispute over which is the correct contract. If the plaintiffs are correct, they have cover. If they are not, they have no cover, and it is the end of their claim against the defendants.”

Accelerate last month said it aimed to raise R200m from shareholders via a rights offer, which it wanted to use to pay off debt and reposition its finances, particularly regarding Fourways Mall.

Accelerate also owns other assets in the Fourways node, including BMW Fourways, Cedar Square, The Buzz Shopping Centre and Waterford, as well as Portside in Cape Town.

Correction: May 7 2024 
The previous article incorrectly said the three issues that were in dispute between the parties were separated. Instead, the judge ruled in favour of Fourways Mall owners in all three matters. We regret the error. 

khumalok@businesslive.co.za