đź”’ Santam in ugly battle against small businesses over Covid-19 business interruption claims. LISTEN!

The reluctance of big insurers to pay for business interruption claims is threatening the livelihood of many small businesses especially in the hospitality and tourism industries. There has been a first victory when a Cape restaurant won a court case against Guardrisk, but Santam insists the lockdown is not covered.  – Linda van Tilburg

Many businesses in the hospitality and the tourism industry are struggling to survive. Adding to their misery: their claims for business interruption are being rejected by many insurers. In dismissing claims insurers have alleged that government regulations in respect of the lockdown are the cause of the loss, and not Covid-19.

This decision has however been challenged in court and the Western Cape High Court has ruled that Guardrisk has to settle claims with a Cape restaurant, Café Chameleon. This has been welcomed by Ryan Woolley, the Chief Executive Officer of Insurance Claims Africa. Ryan Woolley is championing the cause of 500 businesses in the tourism and the hospital sector. He told Biznews that the decision on Café Chameleon is a significant win for the tourism and hospitality industry and that he has no doubt that this is precedent setting. 

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 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 is legal as well as factual, is because of COVID- 19 and has ordered the insurer to pay the claim in full. 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. But the appeal process, depending on how quickly the appeal can happen. It still might take a significant period of time. Our clients  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 if it is 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. I think that it’s all the points around causation and we have been quite vocal about our view. You know, 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. This is a precedent. The appeal will happen and from there, we’ll see where it goes. I think one of the things, the other defences that Guardrisk raised is that they said 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 and have these claims paid.

Santam, that is also being taken to court by its clients, is digging in its heels. Santam’s Chief Executive Officer, Lizé Lambrechts, told an Annual General Meeting that they have taken note of the Guardrisk court case but still believe that the lockdown is an economic loss, not an insured loss. 

We can’t really comment on a ruling or the business of a competitor. But we have seen the ruling. We are busy studying it. It doesn’t really change our view at the moment. The plan is for us to continue with the court case that we have on the 1st of September. We are considering all options. Obviously as Santam we have great empathy for the businesses that have been impacted by this virus.

But we can, as a company only commit to paying claims in line with the policy wording for which the premiums were paid. As a company, we do a pride ourselves in doing insurance, good and proper. We can assure you that all our claims will be treated fairly on those that meet a definition of a loss as in our policies and we will be settled quickly.

We are confident of our interpretation at the moment, that a national lockdown is not covered for these cases. What is good, is that we have the case regarding the business interruption that will be heard in the Western Cape High Court in September and we are actually filing opposing affidavits today. These papers that are being filed ,deal comprehensively with the issues that will have to be considered by the court in this matter. As Santam, we really welcome the opportunity to obtain legal clarity as soon as possible. And we do think that the best way to get clarity on these claims is through an expedited legal process but through the courts of South Africa.

We really believe in expedited court cases and for us it is about not trying to delay the court process, but to get to clarity as soon as possible and it will clear uncertainty for everyone involved. So that is the Santam position.

Santam has also stopped covering pandemics from the 1st of June, which Insurance Claims Africa says is an own goal as it amounts to an admission that their policies covered lockdown claims before that change. 

The fight between restaurants, hotels, B and B owners and retailers could be one of the biggest legal fights in insurance, not only in South Africa, but also in the rest of the world.  A video berating  the insurance companies has been displayed on a giant screen in New York’s Time Square with the slogan, Insurance companies: Do the Right thing. 

This is Linda van Tilburg for Biznews.


Santam SENS: 

Business interruption claims update following the Annual General Meeting

Cape Town, 7 July 2020: In a matter pertaining to its Contingent Business Interruption insurance cover, Santam, through its Hospitality and Leisure insurance division, will today be delivering an opposing affidavit in an application brought against Santam in the Western Cape High Court by an insured hotel group.

Santam understands the financial distress on the businesses and individuals impacted by the National Lockdown to combat COVID-19, and has contributed significant funds towards financial relief during this crisis. Notwithstanding this, Santam can only commit to paying claims in line with its policy provisions. We do also recognise the public interest in this matter and are therefore seeking legal certainty by having this matter speedily determined by the courts of South Africa.

Santam is aware of a High Court judgment in relation to a claim against another insurer, which was handed down in favour of the claimant very recently. We are currently studying the judgement closely. We remain confident of our interpretation of causation as it applies to COVID-19 related business interruption losses, and have made appropriate provisions for such claims. Our balance sheet is sufficiently robust to accommodate either interpretation of cover.

Statement: Just Share

#CorporateUnkindness: Santam board unmoved on Covid-19 claims rejections at AGM

This afternoon, Just Share attended Santam’s electronic annual general meeting (AGM). We asked the insurer’s board about the company’s refusal to pay out hundreds of policyholders from the tourism and hospitality industry for Covid-related losses.

Santam and other insurers are refusing to pay out under business interruption policies that include interruption as a result of an infectious or contagious notifiable disease. The insurer’s view is that the losses suffered by the claimants are a result of the government-imposed lockdown, and not the result of an infectious disease, and that the claims are therefore not valid.

Santam’s position is in stark contrast to CEO Lizé Lambrechts’ statement on the company’s website that Santam is “absolutely committed to playing our part to help alleviate some of the devastating impacts of this virus.”

When asked by Just Share whether it would reconsider its position in light of a recent judgment of the Western Cape High Court against insurer Guardrisk on the same issue, Santam stood firm in its position that it will “seek clarity from the courts of South Africa”. The board also would not commit to a binding arbitration process to expedite the matter.

This is surprising, given that the Western Cape High Court has provided legal clarity already, finding unequivocally in Café Chameleon v Guardrisk Insurance Company Ltd that the Covid-19 outbreak – not the lockdown – is the legal and factual cause of the claimant’s losses, and that the insurer must pay out the claims.

Insurance Claims Africa (ICA), a public loss adjustment firm, is representing approximately 500 of the affected businesses. Collectively, the total value of their claims with all insurers involved, is between R3.5 billion and R4 billion.

At the AGM, Santam’s board reassured shareholders that, should it be required to pay out on Covid-related claims, its balance sheet would be fine.

Many of Santam’s business continuity policyholders, however, are facing imminent closure, threatening the livelihoods of the thousands of people employed by them. Santam has chosen to go to court to obtain “legal certainty” in the interpretation of the disputed policies; unlike the insurer and its immensely deep pockets, these businesses cannot wait months or years for the resolution of a court process. ICA has already approached Santam with a reasonable settlement proposal, but has been turned away.

At the start of the lockdown period, Santam’s CEO said that Santam has “decided to take a decisive stand and do all we can to support efforts to flatten the curve and lessen the economic impact on fellow South Africans”. She described Santam as “a caring South African corporate”, which is working alongside Government and other stakeholders to help alleviate the suffering of fellow South Africans and to minimise the financial impact of this crisis.”

In a SENS announcement released today, Santam says that it “understands the financial distress on the businesses and individuals impacted by the National Lockdown to combat COVID-19”, and that it also recognises “the public interest in this matter and [is] therefore seeking legal certainty by having this matter speedily determined by the courts of South Africa”.

It is hard to reconcile this with the company’s actions, which point to a complete lack of awareness of the impacts of its insistence on taking a lengthy, expensive legal approach. Tshifhiwa Tshivhengwa, CEO of the Tourism Business Council of South Africa, has said that for each day of the lockdown the tourism industry loses approximately R748 million. To date it has suffered losses of more than R72 billion.

Emma Schuster of Just Share says: “At the start of the lockdown, we witnessed an outpouring of grand gestures and public commitments to corporate kindness by big companies. Santam was no exception. If there is legal ambiguity in the clauses of the policies held by these small businesses, Santam should take an approach which is in line with its public claims to care about the impacts of Covid-19 on the South African economy and on its clients’ businesses. Instead, the company seems determined to take a short-sighted approach which is eroding its reputation, and which will contribute to the devastation of a swathe of the small tourism and hospitality businesses which are so essential to the South African economy.”