South African insurer ordered to pay pandemic-related claims
A court found Santam liable to pay for business interruption losses related to COVID-19, citing similar cases in the U.S. and U.K.
The South African High Court has ruled against Santam, South Africa’s largest short-term insurer, in a case over the denial of business interruption insurance during the COVID-19 pandemic and the resulting lockdowns.
Ma-Afrika Hotels and Stellenbosch Kitchens, two hospitality companies, joined forces with Insurance Claims Africa (ICA), a public loss adjustment company, against Santam. Since the onset of COVID-19, ICA has been representing hundreds of tourism and hospitality businesses in an attempt to get insurers to pay out business interruption claims.
In a 42-page judgment, the Western Cape High Court agreed with the approach of the UK Financial Conduct Authority in settling business interruption claims resulting from COVID-19 restrictions and found that Santam was liable to pay for business interruption losses related to the lockdown.
The Court ordered Santam to pay the hospitality companies for losses over the 18-month policy period, as well as legal fees. The judgment cited similar COVID-19 and business interruption cases worldwide, including the U.S. and the U.K.
The argument
Santam argued that COVID-19 is not a “notifiable disease,” a disease that is required by law to be reported to government authorities in order to allow for the collection of information and monitoring of the disease and provide early warning of possible outbreaks.
Santam rejected claims from the two hospitality groups resulting from the lockdown, claiming that whether or not there were COVID cases within the insurance coverage radius, the businesses would still have been forced to suspend normal operations. Santam also argued that the policies insured against loss subject to the policies’ specific terms, not “economic hardship as a consequence of the COVID-19 pandemic.”
At trial, attorneys for Ma-Afrika accused Santam of hiding behind semantics on whether COVID-19 is a notifiable disease in order for the company to avoid liability for the many business interruption claims levied against it.
Guardrisk, another South Africa insurer, is in the midst of appealing a ruling that was made against it in a similar matter. Both of these decisions may be used by other insurers in South Africa and beyond to analyze their treatment of business interruption claims related to COVID-19.
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