New business interruption policies are likely to have narrower parameters for what will be covered as insurers face hefty payouts after a high court judgment this week.
The Western Cape High Court this week instructed Santam to pay hotel group Ma-Afrika R122m for losses caused by infectious or notifiable diseases. And though the outcome of another case, between Café Chameleon and Guardrisk General Insurance, to be heard in the Supreme Court of Appeal (SCA), is still to be decided, insurers are no doubt already revising their business interruption policies.
Walter Cronje, executive for conventional risk at Guardrisk General Insurance, said that though the wording in its policy already describes the cover provided accurately, they have started making changes to be clearer.
Old Mutual, Bryte, Santam and Hollard declined to comment on whether they will revise their business interruption policies.
Many insurers have rejected claims from companies forced to shut due to lockdown, saying the cover was for a contagious disease that affected the business directly, not for a national pandemic.
Ryan Woolley, CEO of Insurance Claims Africa (ICA), said insurance companies have disputed claims on the basis that they require legal certainty — the high court ruling against Santam now provides that certainty. ICA, a public loss adjustment firm, is representing more than 750 businesses in the hospitality sector in their battle to get large insurers to pay out.
The judgment ordered Santam to pay Ma-Afrika business interruption losses including the impact of the government's response to Covid-19 for the entire policy period of 18 months, and Ma-Afrika’s legal costs.
Woolley said the 18 months is significant as insurers capped claims at three months.
Santam will apply for leave to appeal against the judgment, saying it believes the high court erred in regard to causation and the insured peril, the trends clause and the indemnity period, and it is important to take the matter to the SCA.
Elna du Toit, COO of Ma-Afrika Hotels, said the appeal will further delay the final outcome and will again postpone payment of the claim.
Tomorrow, the case between Cape Town restaurant Café Chameleon and Guardrisk will be heard in the SCA after Guardrisk appealed against a Western Cape High Court ruling in July instructing it to pay Café Chameleon for losses due to lockdown.
Cronje said the Santam judgment has not changed Guardrisk’s stance and the company will continue with its SCA appeal.
Other insurance companies are keeping a close watch on such cases. Garth Napier, MD of Old Mutual Insure, said it is important the court process is respected, and it is waiting for judgment in the Guardrisk case. This and the Santam case will provide “much-needed clarity on specific policy wording”.
Warwick Bloom, GM of marketing at Hollard insurance, said: “The [Santam] judgment handed down is an important development in the process of establishing legal certainty, both for insurers and insurance customers, when it comes to business interruption claims related to lockdown. We are studying the judgment and await the outcome of related cases currently before the courts both in SA and abroad.”
In July, the Financial Services Regulatory Authority instructed insurers to pay claims, and some payments have been made. Santam said it has paid more than R1bn in interim relief to nearly 2,500 small businesses.
Bryte has paid more than R200m towards about 5,300 valid Covid-19 claims. Napier said Old Mutual has set aside R650mfor “legitimate business interruption claims, which fall within the ambit of our policy wording, and we are busy settling these”. Cronje said Guardrisk had received about 500 claims, with 443 offered settlements worth R359m.
Woolley said ICA’s challenge is the endless budgets insurers have for protracted court cases. ICA’s clients have neither the luxury of time nor money, he said.
