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In a precedent-setting judgement heard earlier this week, the Western Cape High Court ruled in favour of Ma-Afrika Hotels and Stellenbosch Kitchen against insurance beast Santam. It’s a victory worth celebrating, but Insurance Claims Africa CEO Ryan Woolley warns that the fight isn’t over yet. – Claire Badenhorst
The Western Cape High Court’s judgment in favour of Ma-Afrika Hotels is a resounding victory, with Santam being ordered to pay Ma-Afrika’s claims in full (for 18 months), plus legal costs. Santam had been refusing to settle its valid Business Interruption claims, even though it included cover for infectious or notifiable diseases.
“We are grateful for the court’s decision in our favour,” says André Pieterse, Chairman and CEO of the Ma-Afrika Hotel Group. “This outcome will greatly assist in allowing ourselves and others in the tourism and hospitality sector to weather the ongoing Covid-19 storm. We are also grateful to Santam for the interim relief payments received in August 2020, which allowed us to retain our entire staff complement of 210 loyal people with more than 1,000 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.”
While Ryan Woolley welcomes this positive development, he calls on other insurance companies to resolve their claims and restore the industry’s reputation. He also hopes that Santam will actually honour the court’s decision.
“Santam has consistently said that it requires legal certainty in order to honour their customers claims, and most other insurers have followed suit,” he says. “In our view, this judgment from a full Western Cape High Court bench, provides the legal certainty required to finalise all claims relating to Business Interruption caused by the pandemic. The seismic impact of Covid-19, coupled with insurers’ unwillingness to honour their obligations to their customers, has deepened these businesses’ losses, with some unable to ever recover. We believe it’s time for the insurance sector to step up and display the ethical leadership that has been missing from their response to this crisis thus far.”
ICA believes there have been a number of legal and regulatory developments in the last few months that provide additional certainty that insurers are liable for Business Interruption cover, where it includes insurance against infectious and notifiable diseases. In July, the Financial Services Regulatory Authority (FSCA) instructed insurers to pay claims, and in the matter of Café Chameleon v Guardrisk, the Western Cape High Court rejected the insurers’ argument that the losses suffered by the claimant was due to lockdown. Guardrisk’s appeal of this matter will be heard in the Supreme Court of Appeal (SCA), on Monday 23 November.
Woolley’s main concern is that Santam will appeal the court’s judgement and he says that the final decision by the SCA is probably what most insurers are waiting for.
“The Ma-Afrika judgement has arrived in time to provide the SCA with further guidance from respected Cape High Court Judges. Above all, the consumer must be protected. Now, we wait to see whether the insurers, which include Old Mutual, Guardrisk, Santam, Bryte, Hollard, F&I, Chubb, TRA, Lombard, AIG and Monitor, are truly looking for certainty, or a way out of their obligations towards their customers,” says Woolley.
ICA represents around 850 clients in the tourism and hospitality sector, and according to Woolley, this equates to a claim value of about R6bn. “We only represent about 30% of the market which gives you an idea of just how significant this is.”
The tourism and hospitality sector contributes 8.6% to the South African economy. “By settling valid claims expeditiously, the insurers have the opportunity to not only ensure the survival of businesses in this sector, but to contribute to the preservation of thousands of jobs,” Woolley says. “Failure to do so will simply damage their brands and their credibility. They will always be remembered as companies that contributed directly to the demise of thousands of businesses and jobs during the country’s worst economic and social crisis.”
CBI JUDGMENT: MEDIA STATEMENT
SANTAM RESPONDS TO CAPE HIGH COURT JUDGMENT
CAPE TOWN, 18 NOVEMBER 2020 – Santam has taken note of the judgment delivered on Tuesday 17 November by the Cape High Court in the matter between the company and Ma-Afrika Hotels and Stellenbosch Kitchen, related to policies with Contingent Business Interruption (CBI) extensions.
The detailed and complex nature of the judgment, as well as its broader implications, means that it needs to be carefully considered. It will also be important for Santam to discuss the implications of the judgment with all our stakeholders, including reinsurers, in order to arrive at a comprehensive response.
As part of supporting clients while awaiting the outcome of the legal process, Santam has paid more than R1-billion in interim relief to nearly 2 500 small and medium-sized businesses in the hospitality, leisure and non-essential retail services industries that were affected by Covid-19. Additionally, the insurer has to date also committed up to R400-million in Covid-19 funding to provide relief through premium reductions, premium refunds as well as direct support to insurance industry business partners, corporate social responsibility and Government initiatives.
The issues pertaining to CBI are global in nature and are also subject to appeal court proceedings in various countries. The response of the global reinsurers, which are in effect insurers to the insurer, is important in helping us to reach finality on this matter.
We do understand that all parties need finality as a matter of urgency and therefore remain committed to doing our utmost to ensure that we achieve that as quickly as possible.
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