News Coronavirus watch18 Nov 2020

South Africa:Insurer liable to pay landmark COVID-19-related claim

| 18 Nov 2020

The Western Cape High Court has ruled in favour of Ma-Afrika Hotels and Stellenbosch Kitchen in the high-profile COVID-19 business interruption (BI) claims battle against South Africa's largest non-life insurer Santam.

The two entities have joined with loss-adjusting company Insurance Claims Africa (ICA) in litigation against Santam which had refused to settle their BI insurance claims even though their policies included cover for infectious or notifiable diseases. 

In a 42-page judgement handed down on 17 November, the court found that Santam was liable to pay for BI losses related to the pandemic lockdown. The judgement ordered the insurer to pay Ma-Afrika for the impact over the policy period of 18 months, without limitations. It also ordered that Santam should pay Ma-Afrika's legal costs.

According to the judgement, the combined total of BI cover for loss of revenue under four policies held by Ma-Afrika Hotels, and another policy held by the restaurant, amounted to ZAR122.43m ($7.9m).

While Santam is likely to follow its industry peers such as Guardrisk in appealing a similar ruling by taking its case to the Supreme Court of Appeal (SCA), this latest judgement represents yet another blow to short-term insurers not wanting to pay out such claims.

In the last few months there have been a number of legal and regulatory actions that have provided additional certainty that insurers are liable for BI cover, where it includes insurance against infectious and notifiable diseases, said media reports. For example, in July, the Western Cape High Court, in the matter of Cafe Chameleon v Guardrisk, rejected the insurers’ argument that the losses suffered by the claimant was due to the lockdown. Guardrisk’s appeal of this matter will be heard in the SCA on 23 November. ICA has partnered with Cafe Chameleon in this matter.

ICA CEO Ryan Woolley said, “The Ma-Afrika judgement has arrived in time to provide the SCA with further guidance 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.”

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