Alliance Insurance Company is in the fight of its life, scrambling to block a US$11,7 million arbitration award that the company claims could shake the foundations of the country’s insurance industry.
The insurer argues that the payout is “contrary to public policy,” a last-ditch effort to escape a seemingly onerous insurance claim following a devastating fire at Paramount Exports (Private) Limited.
The garment manufacturer, whose stock was reduced to ashes in a 2023 blaze at its Harare premises, had taken an all-risk insurance policy from Alliance.
But the insurer has balked at Paramount’s US$11,7 million claim, offering a drastically lower figure of US$4 million.
The liability dispute spiralled into arbitration, culminating in a December 10, 2025, ruling by arbitrator Mr Innocent Chagonda that found Paramount’s valuation more credible.
Mr Chagonda was awarded Paramount US$11 682 151, adjusted for shrinkage and obsolescence, and added a 5 percent annual interest dating back to December 4, 2023 — the day of the fire outbreak.
Alliance, however, is far from conceding.
In its application to block the registration of the award with the High Court, the insurer claims the judgment could destroy not only its business but also the broader insurance sector in Zimbabwe.
“This amount has a huge impact not only on the respondent but on the entire insurance industry,” Alliance argued in court papers.
“The award is unsustainable and has the effect of destroying the respondent, which is contrary to public policy.”
Alliance contends that the award, about US$11,7 million, is more than seven times its statutory reserve requirement of US$1,5 million.
It further alleges that Paramount’s claim lacked the necessary documentation, such as stock-account sheets or audit reports, to support the valuation of goods lost in the fire.
“We are being forced to pay an amount that was not substantiated with any proper evidence,” Alliance stated, warning of dire consequences if the award stands.
Paramount, however, has remained steadfast. The garment maker, a critical supplier of clothing to regional and international markets, insists the delay in receiving its due compensation is hindering its ability to recover and rebuild.
Arbitrator Mr Chagonda dismissed Alliance’s attempts to downplay the stock loss, criticising the insurer’s calculations as “unclear and contradictory.”
He ruled that Paramount’s valuation of its stock, US$23,227 million before adjustments, was “more real and plausible” than Alliance’s numbers, which included deductions for undamaged goods and stock for a sister company, Paramount Elastics.
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“The respondent’s figures were inconsistent, making it difficult to determine which calculations should be relied upon,” Mr Chagonda said.
He ordered Alliance to pay the awarded sum, less any partial payments already made, and to cover arbitration costs. The arbitration claim is not the only legal storm engulfing Alliance.
Last week, the High Court delivered a landmark judgment compelling the insurer to rebuild Paramount’s factory, which was also destroyed in the fire.
Justice Maxwell Takuva ruled that Alliance could not renege on its pledge to reconstruct the property under the terms of a US$24 million insurance policy, which the insurer had attempted after months of delays and disagreements over foundational cracks at the factory and incomplete architectural plans.
“Contracts of indemnity give the insurer the option of paying the insured’s loss in cash, reinstating, or replacing the property insured. Once the insurer has made its election, it cannot change its mind,” Justice Takuva ruled, citing principles of Roman-Dutch law.
Alliance had acknowledged liability for the fire damage and initially opted to rebuild the premises located on Stand 3991, Salisbury Township, in Southerton, Harare.
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But after disputes over compliance and safety concerns, the insurer attempted to substitute the reconstruction with a cash settlement of US$3,9 million, a fraction of the US$15 million Paramount claimed was required for a full rebuild.
The court dismissed this manoeuvre, declaring the insurer’s election to rebuild binding.
“Paramount acted reasonably in commissioning independent tests and engaging the City of Harare on safety issues,” the judge stated, rejecting Alliance’s argument that the company’s actions caused delays.
He concluded that Alliance was liable for the consequences of its failure to perform, noting that deficiencies in foundational work did not absolve the insurer of its contractual obligations.
The legal battles have undermined Paramount’s recovery prospects, with management warning that prolonged delays in compensation and reconstruction could jeopardise its competitiveness in regional and international markets.
But for Alliance, the stakes are existential: the US$11,7 million arbitral award and the court-ordered reconstruction threaten not just its survival but could also set a precedent reshaping insurance claims across the country.-herald
