CAPE TOWN - South Africa's biggest short-term insurer, Santam, has stuck to its guns and insisted that the Covid-19 lockdown and not the pandemic itself had caused businesses to suffer losses, and therefore it could not be held responsible for business interruption claims.
Santam said in its answering affidavit filed this week on a challenge brought by Ma-Afrika Hotels and Stellenbosch Kitchen that business interruption policies covered localised events and were never intended for outbreaks of this magnitude. The case is to be heard in September.
Santam said assertions that Covid-19 was a notifiable disease were misguided.
The insurer's head of the hospitality and leisure division, Juan Owen Coetzee, argued that only the local authority and not national governments or international agencies could declare the pandemic a notifiable disease.
“The applicants have failed to establish that the insured events that they rely on were the proximate cause (or dominant or effective cause) of the interruption to their business and loss of revenue,” Coetzee argued.
Santam said even if the two cases within the two establishments’ 40km radius had not occurred, a state of disaster would still have been declared in the country and a lockdown would have occurred anyway.
Santam’s insistence comes in the wake of a ruling in the Western Cape High Court, in which another insurer, Guardrisk, suffered a bruising loss over its refusal to pay a business interruption claim.
On Monday, the ruling, delivered by Judge André le Grange last month, was circulated on a private Facebook group of aggrieved insurance clients.
Le Grange found Guardrisk liable for Plattekloof-based Café Chameleon’s losses due to Covid-19. He also made a cost order against the insurer.
The ruling, which was hailed as precedent-setting, is not binding in other jurisdictions until the Supreme Court confirms it.
Thomson Wilks director Anel Bestbier said her clients’ policies were clear, offering notifiable disease cover within a radius of 40km of their premises.
In law, proximate cause is the primary cause of the injury or loss.
Bestbier said Santam’s affidavit contained nothing new. “Santam has spent quite a bit of time focusing on the global nature of the pandemic and making reference to what happened in other countries,” Bestbier said.
“Time is of the essence. We would try to expedite any appeal process, should that happen. I’m concerned about bankruptcies and prescription: the policy wording is clear about the time periods to institute litigation and we need to watch the prescription issue very carefully.”
On Tuesday, shareholder activist group Just Share attended Santam’s annual general meeting, where it asked the insurer’s board about its refusal to pay out policyholders from the tourism and hospitality industry for Covid-related losses.
Just Share said Santam’s board reassured shareholders that, if required to pay out on Covid-related claims, its balance sheet would be fine.
Emma Schuster of Just Share said if there was legal ambiguity in the clauses of the policies held by these small businesses, Santam should take an approach that was in line with its public claims to care about the impact of Covid-19 on the economy and on its clients’ businesses.
“Instead, the company seems determined to take a short-sighted approach which is eroding its reputation,” Schuster said, “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.”
In a Stock Exchange News Service announcement on Tuesday, Santam said 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”.
Santam yesterday declined to comment further on the matter.