CAPE TOWN – Santam has rejected a business interruption settlement proposal from more than 400 tourism and hospitality operators relating to the Covid-19 pandemic, forcing claimants to head to court for a declaratory order or as part of a class action.
On Friday, Insurance Claims Africa (ICA) announced that Santam had rejected its proposal.
A court process will benefit only the insurance industry, causing the mass closure of tourism businesses and lead to widespread job losses.
ICA chief executive Ryan Woolley said he was disappointed.
“Santam told us they want certainty through the legal process. They’re not willing to deal with this issue on an urgent basis, which means they will fight a war of attrition. It’s a case of delay, deny and defend. And if your business closes, you have no case. It’s disappointing.”
ICA has made the same offer to other leading insurers.
Specialist business interruption insurance for hospitality and tourism industries includes extensions for claims arising from infectious or contagious notifiable diseases.
Although Covid-19 was a declared notifiable disease, many insurers are either rejecting the claims or frustrating the process. Insurers have blamed government regulations for the losses, saying their policies were never written to cover pandemics.
Santam denies refusing to pay these claims.
A spokesperson said: “We are processing a number of Covid-19 claims and are committed to quickly paying all valid claims that meet the definition of loss described in our policies. In terms of the JSE regulations, Santam is not at liberty to disclose information that has not been made available to shareholders.”
Santam’s interim results, which will be released in September, will provide further details.
The insurer said it was aware of pending legal action but remained confident of its position on the interpretation of what was covered by the insurance policies.
“In the interest of all parties, we welcome a swift court process to obtain legal certainty,” Santam said,
Fighting the claims in court is likely to lead to a drawn-out process that could spell disaster for the industry.
The tourism and hospitality sector sustains more than 740 000 direct and 1.5 million indirect jobs and contributes 8.6 percent to gross domestic product.
Professor Birgit Kuschke from the University of Pretoria said if rejected claims were not dealt with by issuing summonses against the insurer within the prescribed periods as agreed upon in the policies, which might vary between 90 days and six months, the claims would prescribe.
“If you submit an insurance claim and it’s rejected, there are contractual terms limiting your ability to sue the company. The larger problem – and matter of urgency – is to get a moratorium on time lines from the regulators, such as the Financial Sector Conduct Authority, and relevant ministries, due to the Covid-19 lockdown.”
Kuschke said she had been inundated with queries, and has advised claimants and lawyers to consolidate their actions and form a coalition with other law firms and advisory groups such as ICA, to seek a moratorium on these timelines so clients do not lose their ability to claim, as well as a declarator on whether the insurance cover is triggered by the pandemic and subsequent lockdown.
Some global insurance companies had compromised with clients and not all insurers were declining the claims, but they were frustrating the process by sending clients from pillar to post to prove causation, confirmed attorney Nicolene Schoeman-Louw.
“What the insurers should rather do is negotiate a compromise that will ensure both businesses are not imploded.”
Schoeman-Louw warned that if these matters were not expedited, “it could crumble the legal system, with an influx of debt collections, evictions and sequestrations applications”.