The dismissal by the Supreme Court of Appeal (SCA) of insurer Santam's appeal against the Western Cape High Court ruling in favour of hospitality businesses Ma-Afrika Hotels (MAH) and Stellenbosch Kitchen (SBK) to settle Covid-19 business interruption claims in the tourism and hospitality industry provides much-needed certainty for the finalisation of outstanding claims, says claims preparation specialist company Insurance Claims Africa (ICA) CEO Ryan Woolley.
Businesses in the tourism and hospitality sector have had to wait more than 18 months for valid claims to be settled and the SCA's decision means Santam is obligated to pay MAH and SBK for the full 18-month period of its policies.
“The court’s decision in this matter is crucial for thousands of Santam’s Hospitality and Leisure division’s business interruption policyholders and, once the claims are settled by insurers, funds will flow to assist a desperate sector of the economy,” Woolley says.
"We are most grateful to the honourable judges of the SCA, since Santam had originally argued that it had no obligation in terms of the policy. However, following the judgment in the Cape High Court in November 2020, Santam acknowledged its liability, but argued that it was only liable for three months despite the full bench of the Western Cape High Court having rejected its argument," adds MAH CEO and chairperson André Pieterse.
In a separate statement on October 7, Santam said it accepted the judgment and committed to settling the remaining business interruption claims as quickly as possible. It said the judgment provides legal clarity and finality on the interpretation and application of certain contingent business interruption policies.
The SCA ruled that the longer 18-month indemnity period referred to in the main business interruption section of MAH’s policy that deals with physical damage also applies to the contagious and infectious diseases extension of the contract which Santam argued was three months.
Santam said the judgment affects less than a third of the 3 200 notified business interruption claim. It said it has made significant progress in processing these claims and has, so far, paid out more than R2.1-billion, including more than R1.1-billion since January.
“Covid-19 has had a devastating effect on the economy and, in particular, on businesses. Our clients were affected by the process of attaining legal certainty on this one remaining business interruption matter. This judgment allows us to proceed to finalise all impacted claims as soon as possible in line with the ruling of the SCA,” said Santam Group CEO Lizé Lambrechts.
“The judgment provides the clarity and certainty we and our clients have been looking for. Simultaneously, we will take positive lessons from the process,” she added.
Santam had already put measures in place to ensure the wording of its business interruption policies avoids uncertainty about cover.
“Our business has a proud 103-year history. We will continue to work hard to strengthen our bonds with our clients, intermediaries and all other stakeholders in the industry to ensure that clients recover quickly from the devastating effects of the pandemic.
“We look forward to concluding all business interruption claim payments as soon as possible and to continue implementing our FutureFit strategy, underpinned by our brand promise of insurance good and proper,” said Lambrechts.
Covid-19 was a once-in-a-lifetime event that affected the entire population and economy and also raised key challenges for non-life insurers, regulators, intermediaries and reinsurers globally. Santam, therefore, had to consult widely on how its policies would respond to a pandemic, she said.
“Getting legal clarity in the face of uncertainty about some policies was essential so that Santam could respond to and balance the interests of the full spectrum of clients and other stakeholders.
"While doing this, we also recognised that we needed to respond to immediate needs. We provided significant premium relief and other support to clients totalling R400-million right at the outset,” she said.
“In order to reduce the strain on clients, we paid R1-billion in interim relief to about 2 500 businesses in August 2020, which was done over a few weeks. The payments were received very positively by clients and intermediaries and were in many instances higher than their final assessed claims,” said Lambrechts.
Woolley, however, said there had been endless litigation and slow progress on payment of claims by certain insurers, which had a devastating impact on businesses in a sector that remains severely challenged by the pandemic, affecting the lives of thousands of employees and their dependents.
“The behaviour of insurers throughout this debacle has been a travesty. In essence, they chose to abandon their customers in their darkest time of need. This has impacted not only the reputations of short term insurance companies, but also on insurance as an overall category. Their Stalingrad strategy of deny, delay and defend has eroded the public’s trust in insurance, and we anticipate that it will take significant effort, commitment and time to restore customers' faith in the sector, ” he said.