🔒 We call them ‘the offenders’: Umhlanga restaurateur Duncan Heafield on insurance giants

A deeply frustrated Duncan Heafield, owner of Bellézar Beach Café in Umhlanga, speaks to BizNews founder, Alec Hogg, about the bizarre state of affairs the hospitality industry has found itself in since the lockdown was imposed in March. Heafield has submitted claims against Santam, Old Mutual, Hollard and Guardrisk – referred to as ‘the offenders’. All of these claims have been repudiated by ‘the offenders’, who are sticking to their guns that the lockdown was not caused by Covid-19, but rather that it was caused by the government. Having paid monthly premiums for business interruption insurance in excess of R8,500, Heafield cautions anyone considering taking up insurance to understand their policies very clearly and to ask the ‘what if’ questions. – Nadya Swart

Duncan Heafield is the owner of Bellézar Restaurant in Umhlanga in Durban. Duncan, you are on the rampage. Not surprisingly. You had business interruption insurance, which Santam is not paying. Now, we did interview the chief risk officer from Santam a couple of weeks ago and his view is that the insurance companies are not liable – the government is liable. Because Covid-19 isn’t the reason why companies like yours have had to close, it’s the government’s lockdown. 
___STEADY_PAYWALL___

It’s quite exasperating for those of us watching from the outside. But when you’ve got a business that’s been directly affected, of course, it’s a different story. 

Well, Alec, I think you’re absolutely right. Bellézar is a 500 seater restaurant on the Umhlanga promenade in Umhlanga and ourselves and approximately, I would say, about 70 other restaurants in Umhlanga itself have all got business interruption insurance with various insurers. And when all of us started putting in claims – obviously, when the government put us into the self-imposed quarantine – we started getting repudiations from the various insurers. 

I put in a claim against Santam, Old Mutual, Hollard, Guardrisk – I can name all of them. We call them ‘the offenders’ at the present moment, but they all have come back and repudiated our claims, based on the fact that they’re saying that the lockdown was not caused by Covid – it was caused by the government. 

So, in essence, they’re telling us (and there was a motivation given for it as well – issued by Santam) that the government had other options to follow other than the lockdown. And they use Sweden as an example and they use other countries that didn’t enforce the lockdown. In fact, they use the only two countries in the world that were exceptions to the whole world vision of doing a lockdown. 

So, effectively, they were telling us that we had other options and we had other ways of not closing our businesses down. This would mean we would have to defy the government and continue trading in order for us to be able to claim legitimately for a claim from them during this whole pandemic, which was just a bizarre state of affairs. 

I think in Umhlanga you’ve had some very interesting incidents already that we’ve seen on social media of people being arrested in their homes for going to the beach, for instance. So, you can just imagine if you’d opened your restaurant – the cops would have been all over you like a rash. 

The cops have been all over us like a rash since the day of lockdown. In the last few days, the cops have raided a restaurant with a claim of alcohol being served and removed the angostura bitters (which is the stuff that you use for rock shandy) from the restaurant, saying that it was alcohol that was being served to customers. It’s just been a bizarre state of affairs right from day one. 

How much were you paying for this business interruption insurance? And what were you thinking it protected you against? 

My one business: we pay in excess of roundabout R8,500 a month, and we started as an all-risks policy. So basically, we were covered for multiple contingencies that would take place that would protect our business in the event of it happening in terms of insurance claims. One of them obviously being the loss of a tourist attraction. 

Also read: Santam to face flood of litigation in court due to business interruption

So, in other words, if, for instance, the beach closed or the hotel where I’m situated closed or a tourist attraction near me closed – I would be protected against loss of cover. The other one would be loss of access to property. So, where my restaurant is located is on the Umhlanga Beachfront, and during the early stages of lockdown – even after the relaxations were put in place – I’m land-bound between a closed hotel and a promenade owned by the municipality that closed. So, in other words, I would not be able to get access to my property anyway, even in the various stages of the lockdown as they went for level five to level four, etc. 

Since the opening of the exercise window, which was between six and nine in the morning, it effectively meant that my trade of my business was related to six to nine in the morning. So, here I’m caught between having access to my premises between six and nine am in the morning and only being allowed to trade from 9h00 am in the morning. It was a nonstarter. 

What does your broker say about all of this? 

Our broker says that we are 100% in the right. Our broker said that we are a hospitality business and we specifically chose the hospitality policy – which was looked at, it was briefed, it was specifically designed to meet the needs of the hospitality industry during this period of time. 

The other issue, which is the main point of contention, is the infectious disease clause – which is in our policies. And in Santam’s policy, which I’m sure you’ve seen and read, it says that if there’s infectious disease or notifiable disease within a 50 kilometre radius and is deemed so by a local authority and your business is closed as a result of that, you are covered in terms of your business interruption insurance. 

Santam has now changed that and they’ve now gone into various different ways and jargon explaining that it had to be onsite. But our question is: why would you put ’50 kilometre radius’ in a clause in your contract if you intended it to be on the premises of my restaurant and was sold to me in that respect? 

Duncan, just to take it forward a little bit – clearly, if every single one of the businesses who had business interruption claims were to take the insurance company to court, they could probably wait you out. Have you joined with others in a class action? 

Yes, we have. In the beginning stages of this whole situation I obviously sought counsel to go on against Santam on my own back – on the advice of my broker. I went and had consultations with various senior counsel in Durban and specifically insurance specialists that look at policies and deal with the insurance industry. And the original opinions they gave me were that my contract and my policy with Santam was almost iron-clad sound, in that they owed me the claim that I was putting forward. 

And then, obviously a lot of other hospitality institutions in Umhlanga and Durban started reaching out and, through our own internal network, we found out that I’m not the only one. There are hundreds of them out there. So, Whatsapp groups started and eventually we started looking for legal firms and people to represent us. 

But the problem with the legal firms is that it costs a lot of money to take Santam or any of the insurers to court. And, as you said, they can string us out for ages. It costs a lot of money to be able to take on each of us individually. 

There’s a matter in Cape Town that just took place where Guardrisk took on an individual restaurant and the court (I think) awarded the costs to the plaintiff. But it cost the plaintiff a lot of money to get to that stage. Also, with the restaurants being in the beleaguered state that they are in at the moment – and not only restaurants: the hotels, the bed and breakfasts, the coffee shops, the bakeries, the list just continues – they didn’t have the money to each individually go and fight Santam, which (money) Santam might have, and that might be their strategy. 

Also read: FSCA to act against insurers who refuse business interruption claims; Covid-19 soars in Gauteng; JP Markets

So we approached RMB Attorneys and on a contingency basis they agreed – with the assistance of the senior counsel that have given them advice – to represent us with the five main insurers individually and to try and litigate the insurers in precedent matters. 

So, in other words, not only in the case of the Cape Town matter (where it was related to one specific restaurant versus insurer) but to argue more on the principle of what they call a ‘declaratory order’. We hope that has a much wider, broader stroke, which would have a benefit for many more of us – not just one individual restaurant. 

But what happens in the interim? With a 500 seater, are you getting the kind of traffic now that is going to enable you to keep going? 

Well, I’m keeping going due to negotiations with our landlords, negotiations with our suppliers. But we’ve had to put in some staff reductions. We’ve had to put some staff reallocation into motion. We’ve also had to put in staff short timing. 

I think it’s a general standard industry trend that’s going on at the moment to be able to keep going as far as we can to be able to get to the point of getting some point of victory along the way. And I think that that’s the general consensus amongst all hospitality at the moment.

Of your 500 seats, how many are you filling on, say, a Saturday night? 

I’ve posted on an association group: on Friday afternoon at 12h30 we had three people in our restaurant. Normally on a Friday afternoon, we would be having approximately a full restaurant, plus people queuing at the door to get into the restaurant. And we had a total of three people. 

Then on a Saturday afternoon I had a band playing to try and encourage people to come to the restaurant, and we’ve been sitting with 24, 25, 26 people. And in a 500-seater restaurant – you can imagine what 24, 25 people look like. It’s not conducive to the restaurant that we envisaged and have been trading with for the last few years. 

Have you got any upside in all of this? Is there anything you’ve learned from this – apart from not going into the restaurant business, I suppose – that is going to stay with you? 

I think it’s very important that people, especially people that take up policies with their insurers, look and understand the policies very clearly. It’s important that they ask questions related to their policies and ask that ‘what if’ question. And I think a lot of us, especially in the hospitality industry, insurance is not one of the elements we look at in great detail. 

We look at it because we need to have it for our businesses, but we don’t go into the policies and we don’t expect our insurers to say they are insuring us for something when they, in fact, are not insuring us for anything at all. 

It’s quite disappointing at the end of the day to realise that, well – you thought you were insured for something, but, in fact, they are now telling you that you’re not insured for it. And then you ask yourself, well, what have I been paying the R6000 premium for the last X amount of months – something that was actually never insured in the first place? 

How much have you lost? How much is your claim? 

See, it works on a monthly basis. So, it’s the extension of your claims. We are indemnified for 12 months in terms of the Santam policy, and obviously we need to ascertain our losses specifically every single month. But in terms of the Santam calculation of how to work out a claims analysis, it could be anything between R350,000 to R500,000 a month that is lost – just my business alone.