PARAMOUNT Garments has secured a High Court victory after successfully challenging its insurer’s attempt to substitute a cash pay-out for the reconstruction of its fire-damaged factory in Southerton, Harare.
The dispute arose following a fire that broke out at the company’s premises on December 4, 2023, destroying a building and causing extensive damage to plant equipment and stock.
According to court papers, Alliance Insurance Company had issued an insurance policy to Paramount covering loss of buildings, plant and equipment, stock, and business interruption.
On January 25, 2024, the insurer acknowledged liability and elected to rebuild the destroyed structure.
Alliance subsequently invited tenders for the reconstruction project and approved a bid of US$4 684 715 from Heritage Construction (Pvt) Ltd.
A meeting held on August 14, 2024, confirmed the tender process and set September 1, 2024, as the intended commencement date.
The parties also agreed to conduct independent foundation tests and engage the City of Harare over incomplete architectural drawings.
However, Paramount raised concerns about cracks in the foundations and the incompleteness of the architectural drawings provided by the local authority.
The company argued that reconstruction could not proceed safely under those conditions.
Court documents state that on October 11, 2024, the City of Harare directed that new architectural and structural drawings be submitted for approval before reconstruction could proceed.
Paramount, through its lawyers, insisted that the insurer honour its election to rebuild the property.
Alliance, however, claimed that the foundation tests had delayed or altered its original offer.
On November 13, 2024, the insurer offered US$3 898 000 in lieu of reconstruction, arguing that the policy entitled it to provide monetary compensation instead.
Paramount rejected the offer, maintaining that it was grossly inadequate, as the actual cost of rebuilding was estimated at US$15 million, well within the insured value of US$24 435 000.
The company argued that Alliance was legally bound by its initial election to reconstruct the building and could not unilaterally opt for a cash settlement.
In his ruling, Justice Maxwell Takuva found that the insurer had failed to meet its contractual obligations.
He held that Paramount’s concerns regarding foundation cracks and incomplete drawings were reasonable and that the company had taken appropriate steps, including commissioning independent tests and engaging the City of Harare, to ensure proper reconstruction.
The court ruled that these actions did not amount to obstruction of the insurer’s performance and that monetary compensation would be inadequate.
Justice Takuva ordered Alliance Insurance Company to reconstruct the property at Stand 3991 Salisbury Township, also known as Number 14 Plymouth Road, Southerton, Harare, within six months of the order.
He further directed that the insurer comply with all regulatory requirements set by the City of Harare and bear the costs of the suit.
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