A full bench of the Western Cape High Court ruled on Tuesday afternoon that insurance group Santam had to pay in full the business interruption claims of Ma-Afrika Hotels and Stellenbosch Kitchen, and also pay all of the claimants’ legal costs. The claims were submitted because of the near-total business interruption imposed by the Covid-19 pandemic and the government’s lockdown imposed to counter it. Despite the claimants having infectious and notifiable disease coverage in their policies, Santam has refused to pay out their claims.
The outcome of the case has been welcomed by public loss adjustment company Insurance Claims Africa (ICA), which supported Ma-Afrika Hotels in its case against the insurance giant. ICA currently represents more than 750 tourism and hospitality businesses, most of them small and medium enterprises, in their legal battles to get Santam and other insurers to pay out Covid-19-caused business interruption claims. (A few insurance companies have been paying out.)
“Santam has consistently said that it requires legal certainty in order to honour their customers claims, and most other insurers have followed suit,” pointed out ICA CEO Ryan Woolley. “In our view, [Tuesday’s] judgment from a full Western Cape High Court bench, provides the legal certainty required to finalise all claims relating to business interruption caused by the pandemic. The seismic impact of Covid-19, coupled with insurers’ unwillingness to honour their obligations to their customers, has deepened these businesses’ losses, with some unable to ever recover. We believe it is now time for the insurance sector to step up and display the ethical leadership that has been missing from their response to this crisis so far.”
“We are grateful for the court’s decision in our favour,” said Ma-Afrika Hotel chairman and CEO André Pieterse. “This outcome will greatly assist in allowing ourselves and others in the Tourism and Hospitality sector to weather the ongoing Covid-19 storm. We are also grateful to Santam for the interim relief payments received in August 2020, which allowed us to retain our entire staff compliment of 210 loyal people with more than 1 000 direct dependents. We are hopeful that this decision by the court will terminate the litigation, thereby bringing an end to the insecurity and suffering of many.”
Those insurance companies that have been refusing to pay out Covid-19 business interruption claims have been subject to a number of legal and regulatory actions over the past few months. In July, the Financial Services Conduct Authority ruled that insurance companies had to pay out these claims. And, in that same month, in the case of Cafe Chameleon v Guardrisk, the Western Cape High Court rejected Guardrisk’s argument that the cafe’s business interruption had been caused by the government’s lockdown and not by Covid-19. Guardrisk appealed and the Supreme Court of Appeal will hear the case on November 23. (ICA is also involved in this case.)
“This is a matter of national importance and the judgment reiterates the need to protect the consumer from insurers trying to change the terms of the contract post loss,” highlighted Woolley. “The real question is, are the insurers, which include Old Mutual, Guardrisk, Santam, Bryte, Hollard, F&I, Chubb, TRA, Lombard, AIG and Monitor, truly looking for certainty or simply a way out of their obligations towards their customers?”