In a landmark judgement, the Western Cape High Court ruled that insurance giant Santam is liable for the COVID-19 lockdown-related business interruption losses of Ma-Afrika Hotels and Stellenbosch Kitchens.
Restaurants and hotels have been embroiled in legal disputes with the insurance industry over the soundness of their business interruption claims, which were lodged in the wake of the COVID-19 lockdown imposed in March, according to the Daily Maverick.
Many businesses in the hospitality industry have suffered immense financial losses and have had to close down as the lockdown persisted, in varying forms, for the past seven months.
Earlier this year, to litigate Santam, Ma-Afrika and Stellenbosch Kitchens teamed up with Insurance Claims Africa (ICA), an independent company, which has had a hand in settling some of the country’s largest insurance claims.
The two companies have R122-million in business interruption cover between them, according to TimesLIVE.
In the 42-page judgement handed down on Tuesday [November 17], the Court found that Santam was liable to pay for business interruption losses related to the COVID-19 lockdown, citing several similar cases from across the globe, including the United States and the United Kingdom. It also ordered the insurer to pay the businesses for the impact felt over the policy period, which is 18 months, according to News24.
Santam has also been ordered to pay Ma-Afrika’s legal costs.
Santam rejected the lockdown claims made by Ma-Afrika and Stellenbosch Kitchen on the basis that COVID-19 is not a notifiable disease and that the businesses would have been forced to close their doors [during lockdown] regardless of whether or not there were cases of COVID-19 in the remit of insurance coverage.
According to the judgement, the insurer argued that the policies “insured loss, subject to their terms, not economic hardship as a consequence of the COVID-19 pandemic.”
Ma-Afrika CEO André Pieterse thanked Santam for paying out money for interim relief and said that the financial boost allowed the company to retain all 210 members of staff, which have 1000 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,” said Pieterse.
Santam has paid more than R1-billion in interim relief to about 2500 businesses in the hospitality, leisure and non-essential retail service industries that were impacted by the pandemic, according to a media statement released in response to the judgement.
The insurer said that the judgement handed down needs to be carefully considered because of its ‘detailed and complex nature’.
Santam is likely to appeal this ruling by taking its case to the Supreme Court of Appeal (SCA), according to Moneyweb. Guardrisk, another insurer, is currently appealing a similar ruling.
“The Ma-Afrika judgement has arrived in time to provide the SCA from respected Cape High Court judges. This is a matter of national importance and the judgement reiterates the need to protect the consumer from insurers trying to change the terms of the contract post loss,” said Ryan Wooley, the CEO of ICA in a statement.
“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?
“We all know that this was a test case, not just for Santam but for all insurers refusing to pay these claims. 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,” said Woolley
“Failure to do so will ensure they are remembered in history as companies that contributed directly to the demise of thousands of businesses and jobs during the country’s worst economic and social crisis.”
Picture: Wikimedia Commons