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Santam has offered to pay up to three months of business interruption cover but that’s not the deal that was agreed when many of its clients signed up for the insurance. Meg Fargher, co-owner of 18-room five-star boutique hotel and fine dining establishment Budmarsh, in the Magaliesburg, has been fighting to preserve the jobs of more than two-dozen staff after Covid-19 disruption hammered the business. In this interview, she tells the story of how Santam has ducked, dived on paying out for business interruption cover. To add insult to injury, and also stress levels, while she tries to keep the place running with no income, she has to keep paying her business interruption cover to Santam – or she will automatically lose the right to claim the insurance. This is a story that is playing out across South Africa as small businesses struggle to survive the pandemic. – Jackie Cameron
Meg Fargher on her business and what happened when Covid-19 struck:
18 years ago, we started with just six rooms and it slowly grew to 18 rooms over the years. It was a fine dining establishment, really catering to a niche market, two small conference rooms – a lot of executive conferences were held there. Just a niche hotel in the Magaliesburg area. We employed 30 staff, directly from the area – waiters, housekeepers, chefs. We hoped to increase skills and provide jobs.
Business was difficult in the year before Covid, our economy was shot. But we were fine. We certainly didn’t expect things to get so damaged, so quickly by Covid. The President, quite rightly, had to call the lockdown as he did. Suddenly, we had bills to pay. You have to pay your staff. So just to keep a place running – with no guests – you’ve got all this outflow of capital but nothing coming in. That was quite a shock to the system and to survive, we obviously had to get into personal savings, because we wanted to keep the place going.
On her business interruption insurance:
Covid hit and the national lockdown was called. We had business interruption insurance and one of the clauses – various business interruptions – and one of the extensions was business interruption extension specifically for contagious disease, within a 50 km radius of your premises. Well, thank goodness. We’ve got this very specific contagious disease cover. We phoned our broker, who said ‘we’re so relieved you’ve actually got this extension, you guys are going to be fine’. We spoke to someone at Santam, who said ‘just give us the weekend, we’ll have it all sorted’.
We actually felt quite safe. We thought, ‘we’re going to get through this next little hurdle.’ We didn’t hear anything back from them. I wrote to Lizé Lambrechts directly, the CEO. Prior to that, I contacted a person we were dealing with at Santam. Our broker gave us his name. He said, ‘just hold on, we’re having a meeting over the Easter weekend. I’m sure I’ll be able to get back to you after the board has met.’ So after the Easter weekend, they came back and said ‘no, we’re not going to pay you out.’ I wrote to Lizé Lambrechts directly. I got a very curt email back from them – obviously not from her, from somebody representing her. I would love to give that email to a business school, to show how not to speak to your customers. The gist of the email was, ‘if you don’t like our decisions, sue us in a court of law.’
In a crisis, [that’s] not how you want to speak to your clients, especially not from a South African company that has got rich on the back of ordinary South Africans. When a crisis hits, you expect these big companies to actually rise to the occasion. I hope that South Africans don’t forget that Santam has not risen to the occasion. It’s been a seven month runaround. We are still waiting for Santam to honour the business interruption claim and of course, they’re waiting for more and more of us to fall. Because then they don’t have to pay out.
On Santam reputation:
That’s what they’re relying on. They’re relying on the fact that memory is short and there will be the next crisis. For me, it’s a much deeper issue. I might be very unwise saying this, but I think that Santam has lost a much bigger opportunity, where we are in South Africa. It might be a very, very unpopular view. I think Santam has proved that it’s aggressive, but also arrogant. Because big business makes a lot of noise about providing jobs – and every president has tried to say that jobs are going to save the country – and while that may be debatable, it’s small business that is actually proving those jobs.
Small business is actually the spine of the country. Big business is just not stepping up to the plate. Santam is one of our biggest businesses. It’s almost as if they’ve lost touch with the common man. Why I say that they’ve lost an opportunity, is that there’s this obsession in South Africa of how to preserve wealth. Instead of saying, ‘if we share wealth – if we really look after people – how can we actually preserve a future for the whole country, instead of preserving what is ours?’ I think that Santam is limiting, certainly an echelon, of society in South Africa.
On how business interruption claims work:
If your business no longer exists – if you had to close – you cannot claim your business interruption insurance. So you’ve lost out on what you have legitimately been paying for years. So it’s a very clever tactic – and a very cruel tactic. A dishonourable one, quite frankly. It’s not insurance good and proper. The more people – and people are getting desperate now with the alcohol ban. We don’t blame government. We understand that they have got to try and do something.
It’s becoming increasingly difficult for these businesses to survive. If they just had some help, some assistance – it’s not assistance out of good, it’s assistance from being pro-active, from having taken out insurance. They would be able to survive a little bit longer, they would be able to pay staff a little bit longer. As it is, people have had to cut down staff. We’ve had to change how we operate, because we’re desperate to try and survive, hoping that Santam will pay out our valid claim. But if we don’t exist anymore, they don’t have to pay us out. It’s a clever policy of Santam’s. More and more people are going under and they have to honour fewer claims.
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Insurance Claims Africa media statement:
ICA: Santam agrees to settle Covid-19 Business Interruption claims, but there’s a catch
Specialist public loss adjuster, Insurance Claims Africa, is unsurprised but disappointed by Santam’s decision to limit its full and final settlement offers to 3 months, while there is an appeal pending at the SCA in respect of the indemnity period. ICA anticipates that insurers will be very aggressive on quantum in an attempt to limit what they owe claimants.
The indemnity period is the period of time for which policyholders can claim for losses.
After almost seven months of legal wrangling, constant delays and Santam’s dogged refusal to pay its customers Business Interruption claims, Santam has conceded it is liable and that it will commence the process of assessing claims. However, Santam has said it will offer its Hospitality & Leisure customers a full and final settlement of only 3 months of losses, despite many policyholders having indemnity periods of 6 -, 12-, and 18-months in their contracts with the insurer.
Ryan Woolley, CEO of Insurance Claims Africa, says, “The problem for Santam is that they have a judgment against them in the Ma-Afrika matter, which orders the insurer to pay for the full indemnity period of 18 months. This should not be ignored. The only way for them to treat their customers fairly is to offer an interim payment of 3 months, and leave the balance to be dealt with after the SCA appeal.
“By offering 3 months in full and final settlement, and forcing their customers to sue them for the balance is grossly unfair and unconscionable. These actions suggest that it is no longer legal certainty that Santam seeks, but that it is in fact trying to take advantage of vulnerable clients who are desperate for funding.
Santam and other insurers have argued that it was the Government imposed lockdown, and not Covid-19, that caused the losses, however, the courts have found that the two events are linked: a lockdown would never have occurred without Covid-19. In November 2020, the Western Cape High Court ordered Santam to pay Ma-Afrika Hotels and Stellenbosch Kitchen for the full 18-month period of its contract, but Santam has now said it will concede liability and only appeal the question of the indemnity period at the Supreme Court of Appeal. It will argue for leave to appeal on 16 February 2021.
“While we are encouraged by Santam’s acknowledgement that legal certainty has been established, they continue to pick and choose what suits them in the court rulings. Santam’s Stalingrad strategy of delay, deny and defend has put its customers under excruciating financial stress. The real tragedy is that if these businesses are forced to shut down as a result of Santam’s non-payment, their claim against the insurer is extinguished. Offering a full and final 3-month settlement on a valid 18-month contract is unacceptable. Shareholders should be questioning who has given this strategy to Santam as it demonstrates a lack of respect for their customers, the South African judiciary, and the FSCA, and displays a level of arrogance that no matter how poorly you treat your customers they will remain loyal.”
Santam has said that each policyholder will need to take it to court individually to challenge the indemnity period beyond the 3 months it is willing to pay.
“This latest cynical and devastating move proves how disingenuous Santam is. Policyholders, who are already financially decimated, will now have to find the money to fight the insurer in court to enforce the indemnity periods contained in their contracts,” says Woolley.
Old Mutual, Bryte remain silent
“While it’s clear that Hollard, Santam and Guardrisk have finally recognised the legal certainty provided by 8 High Court and 5 Supreme Court judges, there is deafening silence from Bryte, Old Mutual Insure and Factory & Industrial in respect of these judgments.
“Business interruption insurance exists to help businesses survive following an unanticipated event. Thousands of businesses bought these policies, which included cover for infectious, contagious and notifiable diseases, but when the pandemic occurred, the insurance industry turned their back on their customers, claiming all manner of excuses to wriggle out of their obligations,” says Woolley.
Meanwhile, the tourism and hospitality sector, which employs 1.5 million people and contributes 8.6% to the South African economy, has all but collapsed as the country continues to buckle under the strain of COVID-19. Thousands of jobs have been lost, families destroyed and businesses have been forced to close their doors, a consequence that could have been avoided if insurers had met their legal obligations to their customers from the outset.
Woolley says that ICA will continue to fight for these businesses which are in a desperately vulnerable sector.
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