The floodgate of business insurance claims will open after Santam yesterday lost its appeal at the Supreme Court of Appeal (SCA) to pay Ma-Afrika Hotels (MAH) and Stellenbosch Kitchen for the full 18-month period of its policies during the Covid 19 lockdown regulations which devastated the tourism and hospitality industry.
The SCA dismissed the insurer’s appeal and upheld the Western Cape High Court’s finding that Santam was liable to indemnify its clients for the full period business was interrupted due to the lockdown, bringing relief for thousands of Santam’s Hospitality and Leisure division’s Business Interruption policyholders.
In a matter dating back to last year, Santam argued that Covid-19 is not a notifiable disease. It rejected lockdown claims from Stellenbosch Kitchen and Ma-Afrika because whether or not there were Covid-19 cases within the radius the insurer covers, the businesses would have been forced to suspend trade, the insurer said in its court papers.
The earlier judgment noted that Santam had argued the policies referred to “insured loss, subject to their terms, not economic hardship as a consequence of the Covid-19 pandemic”.
In September last year Santam said it had set aside R1.3 billion in the six months to end June for business interruption claims as its “best estimate” – this including the R1bn it was paying out as relief. However, it added that if the court ruled against it in the Ma-Afrika/ Stellenbosch Kitchen case, it was uncertain about what it might have to finally pay up.
MAH CEO André Pietersen said yesterday they were grateful to the SCA since originally Santam had argued that they had no obligation in terms of the policy.
“However, following the judgment in the Cape High Court in November 2020, Santam acknowledged their liability, but argued that it was only liable for three months despite the full bench of the Western Cape High Court having rejected their argument..”
Insurance Claims Africa (ICA) which had joined in litigation with the two businesses said the judgement was a relief for the over 750 tourism and hospitality businesses it represented in a bid to get insurers to pay up business interruption claims.
“We are extremely happy with this decision as it provides much needed certainty for the finalisation of outstanding claims for businesses in the tourism and hospitality sector, who have had to wait more than 18 months for valid claims to be settled,” said CEO Ryan Woolley.
Santam yesterday said it welcome the SCA judgement and would expedite payment of claims, explaining that the judgment affects less than a third of the 3 200 notified CBI claims, specifically some policyholders in the Hospitality and Leisure (H&L) division.
It said it had already made significant progress in processing CBI claims and had so far paid more than R2.1bn, including more than R1.1bn since January 2021.
Santam Group CEO Lizé Lambrechts said the SCA ruled on the the longer 18-month indemnity period referred to in the main business interruption section of Ma-Afrika’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.
Lambrechts said Covid-19 was a once-in-a-lifetime event that affected the entire population and economy which also raised key challenges for non-life insurers, regulators, intermediaries and reinsurers globally.
“We therefore had to consult widely on how our policies would respond to a pandemic,” she said.
Broker SATIB said as a specialist broker in the tourism and leisure industry, it had seen the economic impact first hand, and the uncertainty and delays around the processing of Covid-19 CBI claims exacerbated an already challenging situation and added to clients’ mental load.
“Our first priority has always been to ensure claims are processed quickly and efficiently, are prioritised, and have the best possible outcome for our clients. Today is no different. We’ll be sitting with insurers and loss adjusters as soon as possible to plot the way forward. This includes next steps and time lines,” said Dewald Cillie, SATIB executive head.
The Federated Hospitality Association of South Africa (Fedhasa) chairperson, Rosemary Anderson said: “The very term ‘business interruption cover’ means you will be paid our while there is interruption. Santam and others like them did not honour this and they are very unlikely to be ever forgiven for the arrogant, cruel and damaging stance they took which caused the loss of so many livelihoods and entrepreneurs’ life savings.”
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