South African non-profit shareholder activist organisation Just Share has highlighted local insurance group Santam’s refusal to pay out business interruption claims from policy holders in the hospitality and tourism sector resulting from the impact of the Covid-19 pandemic. This followed Just Share’s raising of the issue at Santam’s electronic annual general meeting (AGM) on Tuesday.
The claimants hold policies from Santam that cover business interruption caused by contagious or infectious notifiable diseases. But Santam, along with other South African insurance groups, argues that the business interruptions have been caused by the government ordered national lockdown (imposed to counter the pandemic) and not by the pandemic itself, thereby making the claims invalid.
“When asked by Just Share whether it would reconsider its position in light of a recent judgment of the Western Cape High Court against insurer Guardrisk on the same issue, Santam stood firm in its position that it will ‘seek clarity from the courts of South Africa’,” reported the activist group. “The board also would not commit to a binding arbitration process to expedite the matter.”
Just Share described Santam’s position as “surprising” as legal clarity on the matter had already been provided by the Western Cape High Court, in the case ‘Café Chameleon v Guardrisk Insurance Company Ltd’. The court had ruled that it was Covid-19, and not the lockdown, that had caused Café Chameleon’s losses and that Guardrisk had to pay out the claim.
The activist group also highlighted that Santam’s position contrasted starkly with the assurance of its CEO, Lizé Lambrechts, posted on the company website, that the insurer was “absolutely committed” to reducing the “devastating impacts” of Covid-19. Furthermore, during the electronic AGM, Santam assured its shareholders that its balance sheet would not be harmed if its was forced to pay out Covid-19 claims.
“Many of Santam’s business continuity policyholders, however, are facing imminent closure, threatening the livelihoods of the thousands of people employed by them,” stressed Just Share. “Santam has chosen to go to court to obtain ‘legal certainty’ in the interpretation of the disputed policies; unlike the insurer and its immensely deep pockets, these businesses cannot wait months or years for the resolution of a court process.”
Santam had, the activist group reported, also rejected a reasonable settlement proposal. “[T]he company seems determined to take a short-sighted approach which is eroding its reputation, and which will contribute to the devastation of a swathe of the small tourism and hospitality businesses which are so essential to the South African economy,” affirmed Just Share responsible investor researcher Emma Schuster.