Time-Bars & Policy Protection Rules

This article was originally published by executiveview.com

In 2007, the South African Constitutional Court put to an end the long debate about the constitutionality of contractual policy provisions which provide that where the insurer rejects liability for any claim made under the policy, the insurer is released from liability unless summons is served within a limited period of the rejection.

The access to courts provision of the Constitution provides that everyone has a right to have any dispute resolved by the application of law decided (section 34) in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal. In Barkhuizen v Napier, 2007 (5) SA 323 (CC) the insured had argued that a 90 day time-bar clause unlawfully deprived him of his right to seek redress in the Courts, that the time-bar provided no useful or legitimate purpose and was contrary to public interest since the 90 day period was unreasonably short. The insured served summons more than 2 years after the rejection.

The Constitutional Court held that:

The principle of sanctity of contract is not a sacred cow that should transform other considerations and is subject to constitutional control; Questions of public policy are rooted in the Constitution and its underlying values; Public policy does not deny, but can limit, the application of the principle of sanctity of contract; Section 34 gives expression to a fundamental value of the right to seek judicial redress and also constitutes public policy; and Public policy requires parties to comply with their enforceable contractual obligations voluntarily and freely undertaken. The time-bar clause did not deny the right to judicial redress but limited the time within which that could be done. Both the Constitution and public policy recognise that there may be circumstances in which it is reasonable to limit the right to seek judicial redress.

If the objective terms of the contract are not consistent with public policy, a second enquiry is directed at whether the terms are contrary to public policy in light of the situation and circumstances of the contracting parties, including inequality of bargaining power.

The Constitutional Court found that the 90 day period was neither unfair nor inadequate. The insured had all the information necessary to institute action timeously.

On the second enquiry there was no evidence to indicate that there was unequal bargaining power or the contract was...