Toyota insurer going after one of South Africa’s major provinces for R6.5 billion

Toyota’s insurer, Tokio Marine & Nichido Fire Insurance, is suing the KwaZulu-Natal provincial government, Transnet, and the eThekwini Municipality for R6.5 billion over damages the motor company suffered at its Prospecton plant during the 2022 floods. 

Toyota South Africa Motors’ (TSAM) insurer claims its plant was extensively damaged because the responsible authorities failed to maintain critical flood prevention infrastructure.

According to court papers filed in the Durban High Court showed that the group is seeking R6.5 billion, including R4.5 billion for repair and reinstatement work and R2 billion for business interruption losses. 

Though Toyota South Africa Motors is named as the official plaintiff in the case in the court documents, Craig Woolley, a partner in law firm Norton Rose Fulbright explained that Tokio Fire is the active participant.

“Toyota suffered the loss and the insurers are claiming by virtue of subrogation, which allows the insurer to step into the shoes of the insured for the purposes of a recovery action,” he said.

TSAM said in a statement: “Tokio Marine are the insurers of TSAM, to whom the company submitted its claim in respect of the flood.”

“The litigation proceedings are not being facilitated and/or funded by TSAM. Accordingly, TSAM will not benefit in any way from the subrogated recovery action against these entities.”

The summons, filed by Norton Rose Fulbright, named Transnet, the KZN Department of Transport, and the eThekwini Municipality as defendants. 

The insurer argued that the defendants failed in their duties to maintain key infrastructure that protects the Prospecton Industrial Area from flooding. 

It is alleged that the defendants failed to ensure that these structures were functioning as required, identify the potential flooding of the Prospecton Industrial Area, and take effective steps to mitigate such flooding, the court documents stated.

The plant was inundated after the structural integrity of the Umlaas Canal and the adjacent diversion berm was compromised, leading stormwater to overflow into the area.

The insurer further alleged that Transnet owns the Umlaas Canal and is responsible for its management and maintenance. 

This concrete-lined canal is designed to divert the uMlazi River and, together with the berm, forms an integral part of the flood control and prevention mechanism for the industrial zone, it said. 

The Department of Transport is accused of failing to ensure that the diversion berm functioned as intended, while the municipality was tasked with maintaining the broader stormwater system.

Toyota’s insurer claimed that neglect by all three entities, particularly a failure to repair previous flood damage and conduct routine maintenance, led directly to the flooding. 

As a result of these failures, Toyota was compelled to engage various contractors to repair the damage, including structural damage to the premises, electrical installations, plumbing, air conditioning, and assembly systems, the court documents said.

In addition to physical damage, Toyota’s insurer reported losses due to damaged vehicles, ruined equipment, and office contents, as well as the shutdown of its operations during the restoration. 

The insurer argued that the defendants are jointly and severally liable to compensate the plaintiff for the aforementioned amounts.

The full court document can be read below:

The flood’s destruction 

In April 2022, President Cyril Ramaphosa declared a national state of disaster due to heavy rainfall, severe flooding, and landslides in KwaZulu-Natal.

Among the hardest-hit businesses was Toyota South Africa Motors, whose Prospecton plant in Durban sustained unprecedented damage.

The floods ravaged the 87-hectare facility, damaging critical electrical, mechanical, and IT systems. 

According to Toyota, around 4,300 flood-damaged vehicles, representing roughly 88% of all cars on-site at the time, had to be scrapped. 

“Toyota had to order just over 100,000 new equipment parts to replace the damaged ones,” it said. A top disaster management executive described it as the most extensive global damage to any Toyota production facility.

Despite the scale of the destruction, Toyota’s domestic and global teams moved quickly to restore operations. 

It took over three months of intensive repair work and support from the company’s Japanese head office before production could resume in August 2022. 

Even so, the extended downtime led to the loss of thousands more vehicles that would have been produced during the shutdown.

In response, Toyota South Africa Motors has since invested around R236 million to prevent a similar disaster in future. 

R108 million was dedicated to establishing “proactive monitoring and maintenance systems” to guard against water ingress. 

Measures included installing an early-warning weather monitoring system, constructing perimeter canals, and significantly upgrading the site’s stormwater network.

An additional R128 million was spent on 835 internal interventions to defend the facility even if external systems failed. 

These included building bund walls around critical infrastructure and raising doorways to reduce flood vulnerability.