1. In the recent Supreme Court of Appeal decision of AIG South Africa Limited v 43 Air School Holdings (Pty) Ltd and Others [2024] ZAS CA 97, the Supreme Court of Appeal had to determine, as one of the issues before it, whether multiple insureds all enjoyed cover under a single policy arising from a claim made stemming from business interruption due to the impact of the Covid-19 pandemic.
2. In determining whether the Claimants were insured, the Supreme Court of Appeal had to determine whether the cover provided under the policy was joint or composite.
3. Attached* please find a copy of this very useful judgment.
4. Factually, it was common cause that AIG had been the insurer of both Nation Airways Corporation (Pty) Ltd (“NAC”) and 43 Air School (Pty) Ltd for a number of years.
5. The four respondents in this litigation were part of the “43 Air School Group”.
6. The Group consisted of 43 Air School Holdings (Pty) Ltd, 43 Air School (Pty) Ltd, PTC Aviation (Pty) Ltd and Jet Orientation Centre (Pty) Ltd.
7. In terms of the policy wording, AIG also insured the respective:

“subsidiary companies, managed, controlled, member companies, joint venture, sports, social and recreational clubs and societies and any other persons or entities for which they have the authority to insure, jointly or severally, each for their respective rights and interests.”

8. The respondents argued that the insurance policy was a joint one due to:

8.1 the inter-relationship between the various companies within the 43 Air School Group,

8.2 the definition of the terms “insured” and “business” in the policy, and

8.3 the fact that the cover for business interruption in the policy was stated to be a globular amount and that no distinction was made between the different insured entities in respect of that cover.

9. AIG contended that the policy was a composite one in respect of the business interruption cover because the gross profit was the basis of the insurance and the gross profits of each of the respondent entities were separate and distinct.
10. At paragraph 24 of the attached judgment, the Supreme Court of Appeal correctly noted the following:

“Determining whether a policy is joint or composite is a matter of its interpretation and of the nature of the interest(s) of the insured. The definition of “insured” in the policy may indicate whether it is one or the other, but not necessarily so. It may be necessary to consider other clauses or provisions in the policy that could indicate its nature. It is accepted that where a policy covers more than one insured, it may either be joint (which effectively means that there is only one policy), or composite (which means that there is in fact a bundle of policies contained in one document).”

11. Concerning the decision of Samuel Limited v Dumas 1924 AC 431, the court noted:

“There cannot be a joint insurance policy unless the interests of the several persons who are insured in the subject matter are joint interests so that they are exposed to the same risks and will suffer a joint loss by the occurrence of an insured peril.”

12. At paragraph 31, the Supreme Court of Appeal held:

“The authorities referred to above confirm that the mere fact that there are several persons or entities insured under one policy does not make that policy one of joint insurance. Whether it is a joint insurance policy depends on the interests of those persons or entities. If their interest in the subject matter of the insurance is joint, in the sense that they are exposed to the same risk and will suffer the same loss on occurrence of the peril insured against, that may be indicative of the policy being joint. However, where their interests are different, even though it is in respect of the same subject matter, the policy would not be a joint one, but composite, which is intended to insure each of the insured separately in respect of its own interests.”

13. The court went on to conclude that in this instance, the subject matter of the business interruption insurance was the gross profit of each insured entity and that the entities have separate or different interests in their own gross profit. Therefore, the policy in respect of business interruption was composite.
14. This meant that the claim lodged by each one of the entities had to be considered on its own merits.
15. The above is a very important consideration when dealing with claims by multiple entities under a single policy.
16. A policy providing joint cover will deal with such a claim as a single claim. Composite cover, however, requires an insurer to deal with each claim on its own merits.

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