GUARDIAN SECURITY (PVT) LTD v GLOBAL INSURANCE (PVT) LTD 2014 (2) ZLR 244 (H) 2014 (2) ZLR p244

Flynote

Insurance — cover note — effect of — whether insured is protected when cover note issued — premium — payment of — failure to pay premium in part or in full — does not necessarily relieve insurer of obligation to protect insured — depends on wording of contract

Headnote

In insurance law a cover note, or certificate of insurance, is part of the contract of insurance. It provides temporary cover until a detailed proposal has been accepted or until the insurer has accepted the insured's proposal. The general practice is that the cover note is issued by the insurer's agent. A cover note records the receipt of a premium from the insured. In consideration the insurer agrees to insure him for the period stated in the note. Once a cover note has been issued, it creates a binding insurance for the period of time specified in it. The temporary cover invariably takes effect at once, since its object is to give immediate protection pending the decision of the insurer and the issue of the policy. Where an insurer issues cover notes and releases them to the insured, it assumes risk. It would be liable to third party claims in terms of Part IV of the Road Traffic Act [Chapter 13:11]. Generally, a contract of insurance is vitiated by the non-payment of the premium. A premium is generally a condition precedent to the existence ofthe contract. Prima facie, the quid pro quo for a premium is an indemnity. The reverse is also true: prima facie, the quid pro quo for an indemnity is the premium which has been paid. The premium is the consideration required of the insured in return for which the insurer undertakes his obligations under the contract of insurance. There is no rule of law to the effect that there cannot be a complete contract of insurance concluded until the premium is paid. It has been held in several jurisdictions that the courts will not imply a condition that the insurance is not to attach until payment, though whether or not a contract of insurance will attach only upon payment will depend on the exact terms of the parties' agreement. Where the agreement clearly states that the prior payment of the premium is a condition precedent to the protection or cover sought by the insured, then, until such payment is made, the policy will be of no effect in protecting the insured.