🔒 Business interruption insurance expert Ryan Woolley on Covid-19 court victory

Café Chameleon went to court against Guardrisk Insurance this week and won. In this interview with Alec Hogg, Insurance Claims Africa CEO Ryan Woolley discusses the implications for businesses fighting for Covid-19 business interruption pay-outs.

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Well, it’s quite an important day today. Ryan Woolley has been representing about 500 tourism companies and the first of these court challenges has now been settled – and in your favor. Maybe just give us a little bit of background about the company – Café Chameleon – and why it went to court and what it was wanting to get from Guardrisk Insurance.

Café Chameleon is not one of our clients, but it is obviously an interested party. Its insurer – Guardrisk – decided to reject their claim for the lockdown period and refused to make any interim payments. What happened was the restaurant group took on the insurer and, through an urgent application, the insurer argued against the urgency but the Judge ruled that if time was allowed to play out: what would happen is that the company would fold and the claim would die with it. 

So, from an urgency perspective – the Judge allowed that to be heard. Then it went into the detail around whether the lockdown is a separate intervening cause or if it is caused by Covid-19 and Judge Le Grange was absolutely categoric: this causation – legal as well as factual – is because of Covid-19, and has ordered the insurer to pay the claim in full.

I had a chat just last night with the chief risk officer of Santam – the biggest insurance company in South Africa, and – in other words – what he was saying was that it’s government’s fault, not the insurance company’s fault. And as a consequence of that – because it’s government’s fault – insurance companies aren’t going to pay. 

This judgment today, which, in fact, was also with costs – wasn’t just a judgment in favor of the restaurant company. The insurance company has got to pay for the legal counsel of the restaurant. It seems to be pretty comprehensive. However, the Judge did say that he is allowing them to appeal. 

Ryan Woolley
CEO of Insurance Claims Africa Ryan Woolley. 

Yes, I think it’s inevitable. I think Guardrisk are deciding today whether to appeal the matter or not. You know, we anticipate that this is just the first victory that we’re going to take and it will enhance our settlement negotiations with the insurers that the appeal process, depending on how quickly the appeal can happen – still might take a significant period of time. And our clients, again – we can’t wait for it. But the insurers would be very circumspect running the gauntlet at the appeal court when they have already had quite a credible Judge rule quite comprehensively.

You would wonder, as an outsider, what the grounds would be for an appeal for (in other words) going and having the whole thing heard again. Is there anything in here that stands out to you? 

No, nothing. Nothing at all. I think that the Judge has really reasoned it well, and I think that it’s all the points around causation that we have been quite vocal about our view. Santam’s different view has been squashed here, and the fact that they still want to go to court to have their hearing is quite surprising. You know, this is a precedent. The appeal will happen, and then I think from there we’ll see where it goes. 

One of the other defenses that HIC raised (Guardrisk) is that they said that to have these claims paid would open the door and be catastrophic for the industry. Well, we’ve been (also) quite vocal in giving a solution to the insurers in terms of a compromise settlement. And again, we appeal to them – this is the time. Save the industry, save the tourism sector. And let’s walk forward having these claims paid. 

We were on a webinar: yourself and William van der Riet from Cathedral Peak Hotel. And he’s one of your clients who has had a similar action, presumably against Guardrisk. Is he now going forward with it? 

Well, I think that the victory yesterday has definitely made us rethink our legal strategy. So, we’ve still got a few more consultations to have before we decide. William van der Riet is definitely one of our clients that we will consider using as our test case. So, yes, and I think that, you know, in his case (as you’ve heard) he’s got a claim of eleven, twelve odd million. He’s been offered five hundred thousand rand by Guardrisk as a settlement to walk away. And again, we just find that we can’t accept. There’s no compromise at those sorts of numbers. So, we’re definitely going to be pushing forward. 

Ryan, when I was talking with the chief risk officer of Santam last night, the question I put to him was: if all of the claims were met, would that put the insurance industry into bankruptcy? And he said: no, Santam has got plenty of reserves. Even in the worst case scenario, it could manage all of this, but they are fighting it on a position of principle. They don’t believe in pure insurance that they can justify this.

I think that Judge Le Grange has dealt with it very carefully. The other issue that Santam has is that we’ve got an Ebola case that we handled against one of Santam’s companies – Emerald – in 2014 – 2015. And the effects of the Ebola outbreak in Sierra Leone were very similar to what government has done in terms of this Covid-19 outbreak. And there they had no issue paying the claim. So for us, this isn’t an issue about the legal principles. This is an issue of financial issues and financial integrity of Santam. 

And I think that that’s why they’re fighting this as hard as they are. We’ve given all the insurers the opportunity of a compromise. We think that they can do that without their reinsurers. Again, we don’t know why we – South Africa – is bearing the brunt of aggressive reinsurers potentially not wanting to pay their claims. The insurers need to have the courage to stand up to them and to enforce and get them to pay 18 years. 

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