Firms prepare for action against insurers
CAPE TOWN - A public loss adjuster is planning to go to court on behalf of hundreds of hospitality and travel sector clients whose contingent business interruption claims for the Covid-19 lockdown were declined.
Insurance Claims Africa chief executive Ryan Woolley this week said the leading business interruption claims consultancy was ready to go “all-in” to act on behalf of over 400 claimants, whose claims exceeded R3 billion.
“The insurance industry is kicking back,” Woolley says. It’s not the first time we’re seeing it , but it’s the way they’re doing it, in such a devious way, you can’t help but object.”
The tourism and hospitality sectors, which employ more than 720 000 people directly and feed an estimated one in seven people in the country, have been decimated in recent months.
Contingent business interruption policies would have provided a lifeline to many of these businesses and their dependants. Woolley’s clients, ranging from tea gardens and lodges to large hotels, had hoped their policies would kick in to cushion them from the massive loss of revenue due to the lockdown.
The insurance industry has argued that their policies for specific notifiable disease were never designed to offer coverage for losses related to pandemics and if they were to pay claimants, they would be bankrupted.
Last month a Paris court ordered French insurer AXA to pay a restaurant owner for coronavirusrelated revenue losses. In Britain, the Financial Conduct Authority will be approaching the High Court next month to seek a declaratory order on policy wordings and whether or not they should respond to pandemics.
The Financial Sector Conduct Authority has given insurers in South Africa until Tuesday to submit their policy wordings so it too can decide if High Court action is needed for clarity, which could speed payment of the claims. Insurers, who stand to lose billions should they be forced to pay the claims, are likely to appeal.
Woolley said insurers wrote these policies, put it on the market specifically for hotels, restaurants and lodges, and have now refused to pay claims, arguing that the lockdown regulations and not Covid19 caused the losses.
“It’s a cute sidestep to blame the government for the losses,” Woolley said. “This (infectious disease policy wording) was a throw-away clause, to lure clients to take up their policy.
“And if you look at the various insurers policies, they almost seem copied and pasted throughout the industry.”
Now, at a time when their customers need them the most, insurers are sending out standard rejection letters. Woolley says insurers’ attorneys have gone to the “narrowest, most obtuse definition of the cover” to exclude loss of profit claims.
By relying on technicalities, insurers have given customers a standard market approach. And the insured do not have the means to take them on.
Woolley said insurers’ claims they did not expect to insure a pandemic simply does not wash. He said actuaries factor in catastrophes, and epidemics and pandemics had been around before, with Sars, Mers, Swine Flu and Ebola.
“It’s poor underwriting, but that doesn’t get you out of a contract,” Woolley said. “They are not even trying to look at negotiating. And by dragging it out, the odds are stacked against customers because if your business doesn’t survive, you no longer have a valid claim against your insurance policy. Woolley views the FSCA action as “very positive”.
On Friday, the authority asked the ICA for input from a policyholder perspective.
* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected], tweet her @georginacrouth and follow her on Facebook.