Santam is to appeal against a court ruling that it must pay a client for Covid-19 related business interruption losses.
Image: Santam

CRA Insurance News – South Africa

By Wendy Knowler

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SA’s largest short-term insurer Santam has, as expected, said it will apply for leave to appeal against a full bench of the Western Cape High Court decision that it is liable to pay a hospitality client their full Covid-19 related business interruption losses, including those related to the lockdown.

Santam and other insurers, which sold business interruption policies with “contagious diseases” clauses, have consistently argued that the policy was not intended to cover a pandemic-related national lockdown, nor did the premiums reflect that extent of risk.

But on Tuesday three judges ruled that Santam was liable to pay Ma-Afrika Hotels and Stellenbosch Kitchen their full business interruption losses, including those related to state restrictions.

The judgment ordered the insurer to pay the entities for the impact of the pandemic over the entire policy period of 18 months, without limitations. Santam was also ordered to pay Ma-Afrika’s legal costs.

Santam on Friday said it would apply for leave to appeal, as it believes that the court “erred in its judgment regarding causation and the insured peril, the trends clause and the indemnity period” and therefore it was “important” to take the matter to the Supreme Court of Appeal (SCA).

The SCA will on Monday hear an appeal of the Guardrisk vs Cape Town restaurant Café Cameleon case, in which Judge Andre Le Grange said Guardrisk was liable to pay Cafe Chameleon’s claim for losses suffered when the lockdown began on March 27.

Loss-adjustment group Insurance Claims Africa (ICA) CEO Ryan Woolley told a media briefing on Wednesday that the Santam ruling would have a huge impact on Monday’s SCA hearing.

He also predicted that Santam would appeal the Ma Afrika ruling. “If so, we hope it happens quickly, he said.

“They’ve already suffered huge brand damage over this matter. By settling valid claims expeditiously, they have the opportunity to contribute to the survival of businesses in this critical sector, and to the preservation of thousands of jobs,” Woolley said.

The combined value of the four claims submitted by Ma-Afrika, and the one claim by Stellenbosch Kitchen, amounted to R122.4m.

Asked about the quantum of claims by all hospitality companies which had the “contagious diseases” clause in their policies, Woolley said ICA represented 850 clients, with total claims of R6bn to R7bn, and that’s only about 30% of the total.

“So it’s huge, but the insurers can make it back via premiums over five to 10 years,” he said.

Santam said on Friday that its reinsurers were key stakeholders in the insurance value chain as they were “in effect insurers to the insurer”.  

“They agree with us on the need to obtain legal certainty from a higher court in this matter,” the insurer said in a statement.

It pointed out that while waiting for the legal process to be concluded, Santam had paid out more than R1bn in interim relief to help almost 2,500 small and medium-sized businesses in the hospitality, leisure and non-essential retail services with CBI cover in the policies.

“These are considered to be advance payments against any finally determined claims, in the event that the courts ultimately rule in favour of the policyholders.

“Should the courts rule in favour of Santam, then the amounts paid will be considered relief payments and will not be recovered from policyholders.”

SA’s hospitality industry employed about 740,000 people at the start of 2020, contributing 8.6% to GDP in 2019, according to the Tourism Business Council of SA.

On Thursday the Financial Sector Conduct Authority (FSCA) responded to the Ma-Afrika Hotels high court ruling by saying it confirmed the regulator’s views on business interruption cover.

“The court found that Covid-19 and the government’s response to it are an inseparable part of the same insured peril,” the regulator said.

“The national lockdown could not be used as grounds to reject a valid claim.”

And it delivered a very strong piece of advice to insurers.

“While the FSCA respects the non-life insurance industry’s right to appeal and notes that there is a pending appeal in the Café Chameleon CC v Guardrisk Insurance Company Ltd matter, the FSCA urges the non-life insurance industry, in the interest of policyholders, to consider paying CBI claims based on the legal certainty that has been provided by the courts thus far, including the full bench of the Western Cape High Court.”

Article Credit to Times LIVE.