The High Court has ordered Alliance Insurance Company to reconstruct a Paramount Exports building that was ravaged by fire, rejecting the insurer's attempt to offer monetary compensation instead.
Paramount Exports had approached the High Court seeking specific performance under its insurance policy with Alliance.
The garment manufacturer accused the insurer of failing to uphold its contractual obligations after a fire destroyed its property in Southerton, Harare.
Justice Maxwell Takuva ruled that Alliance Insurance must reconstruct the building at 14 Plymouth Road within six months.
The order also requires the company to comply with all regulatory requirements set by the City of Harare.
Paramount Exports is engaged in the Manufacture and sale of garments.
On December 4, 2023, a fire broke out at its premises, destroying a building and causing substantial damage to plant, equipment, and stock.
Alliance Insurance acknowledged liability on January 25, 2024 and elected to reconstruct the building.
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Although initially marked "without prejudice," Paramount's acceptance of this election made it binding on the insurer.
Alliance subsequently invited tenders and approved a bid of US$4,6 million from Heritage Construction.
A meeting in August 2024 confirmed the tender process, with reconstruction scheduled to begin on September 1, 2024.
However, Paramount raised concerns about the integrity of the building's foundations and the incompleteness of architectural drawings provided by the city council.
In October 2024, the council directed that new drawings be submitted and used during reconstruction.
Despite initial cooperation, Alliance appeared unwilling to resolve these issues.
On November 13, 2024, the insurer instead offered US$3,8 million in monetary compensation, claiming it was entitled to do so under the policy.
Paramount rejected the offer, arguing the sum was inadequate as the actual reconstruction cost was estimated at US$15 million—still within the insured value of US$24,4 million.
The company maintained that Alliance was legally bound by its election to rebuild and could not unilaterally substitute cash compensation.
Alliance argued that an insured cannot compel an insurer to reinstate property, contending that the only available remedy was damages.
Justice Takuva dismissed this argument, stating that general contractual principles apply to insurance policies.
"When an insurer unequivocally elects to reinstate... it undertakes a contractual obligation to restore the insured property to its pre loss condition," the judge ruled.
He added that the insurer is bound by its election and cannot later change its mind, even if repair costs exceed the policy limit.
The judge further ruled that Alliance's attempt to offer monetary compensation was "wholly inadequate" and would fail to give effect to its binding obligation.
