CAPE TOWN - Two clients will be taking on their insurer in the Western Cape High Court on Monday, September 1, to challenge Santam’s refusal to pay their business interruption claims related to the Covid-19 outbreak.
This despite the Financial Sector Conduct Authority’s directive issued on July 18 that insurers must honour claims settlement of certain policy wordings, provided customers can prove their claims.
Insurers say their business interruption policies were not written to cover pandemics and if they are forced to settle such claims, they stand to lose billions. But their clients argue they were sold these specific business insurance policies and insurers are turning their backs on them.
The lockdown has devastated the tourism and hospitality sectors, threatening the livelihoods of more than 600000 direct employees and forcing the closure of 49000 SMEs, according to the Federated Hospitality Association of Southern Africa.
Thomson Wilks director Anel Bestbier said the challenge differed from other legal action because her clients, MaAfrika and Stellenbosch Kitchen are not relying on lockdown as the trigger event. “My clients own hotels and a restaurant in Stellenbosch and Cape Town. Our claim is not based on the facts of the lockdown; we’re not suggesting because there’s a lockdown we are able to claim. We’re saying our policies are very specific, offering infectious disease cover within a radius of 40km of our premises, so we were required to show there was a loss suffered due to a notifiable disease within the radius.”
Professor Birgit Kuschke, the director of the insurance law unit at the University of Pretoria, believes insurers’ first responses to these claims were extremely negative and stressful to the policyholders. “The FSCA only issued a proper directive on June 18, addressing the uncertainty in a limited way. This does change the playing field a little, but not enough,” Kuschke said.
The authority identified six categories of policy wordings: Radius and notification; radius only; notifiable disease; general exclusion; closure and restriction; and closure by order.
It believes insurers should settle claims flowing from the first three categories, but not general exclusion, closure and restriction and closure by order. It does not believe the lockdown could be a trigger for a valid business interruption insurance cover claim. But the lockdown was an inevitable consequence of a pandemic, Kuschke says. “It might not have been insurers’ intention to sell policies covering pandemics, but the insured should not be carrying the risk now that this has happened.”
Kuschke urged those who do not qualify in terms of the FSCA directive, to mail [email protected].
Kuschke is working with a coalition of lawyers and public loss adjuster Insurance Claims Africa to assist commercial insurance clients. She has called for government intervention.
“We don’t need the government to support individuals as much as we need it to keep the companies afloat. As recommended by company law expert, Professor Piet Delport, the government should consider either taking up share capital in insurance companies, or public-private partnerships to assist the insurance companies to survive this catastrophe.”
BUSINESS REPORT