Consumer Watch: Santam denies policy wording ambiguity

The Manderson Hotel and Conference Centre’s owner, Ingrid Newbold-Schoen says she switched to Santam because it had a good reputation and is the country’s largest insurer. Picture: Afristay

The Manderson Hotel and Conference Centre’s owner, Ingrid Newbold-Schoen says she switched to Santam because it had a good reputation and is the country’s largest insurer. Picture: Afristay

Published Jul 6, 2020


Santam maintains there is no uncertainty around its policy wording for contingent business interruption (CBI) cover, although it admits the nature of the policy is where the “bulk of the confusion and disconnect” stems from.

On Friday, the insurer’s chief risk officer Asher Grevler, head of intermediate distribution Andrew Coutts and head of marketing Mokaedi Dilotsotlhe sought to clarify Santam’s position on why it was not settling Covid-19-related business interruption claims.

They denied sloppy policy wording was forcing the company to argue semantics, both in court and in public, and said they were confident its policies were not ambiguous: it did not provide cover for pandemics.

Public face

Tourism and hospitality sector clients are outraged by most insurers’ refusal to honour claims stemming from Covid-19 losses.

These clients had been sold commercial policies with extensions to cover perils such as contagious or infectious disease, murder, suicide and even shark attacks. The policies differ from standard business interruption insurance, which only covers direct physical damage to a property such as fire, flood or theft.

Santam has become the public face of the CBI saga because many of the complaints emanate from its business clients and it is taking the fight to court in September, but most of the major insurers – barring OUTsurance, which has announced it had reserved R220 million for such claims, with R37m already reimbursed – are affected. OUTsurance’s pandemic extensions cost an additional R10 a month, which it later admitted was underpriced, and yet it actively reached out to clients who had the cover in place to encourage them to claim.

Affected insurers argue they never intended to provide coverage against communicable disease perils such as Covid-19, and as such, their premiums were not priced to do so.


But the insured, brokers, public loss adjusters and a growing number of legal experts say the insurers chose to insure perils such as notifiable diseases, which contemplates, by their policy wording, quarantine or restrictions of access including government measures such as lockdown. And if pandemics are not specifically excluded, as some insurers have done, the policies allow for losses stemming from such catastrophic risks.

Insurers have now endorsed their policies to exclude Covid-19. Santam said this was done to clear up any confusion and provide certainty to the market.

Earlier in the week, the Tourism Business Council of SA criticised insurers, saying the hospitality and tourism sectors were facing imminent collapse and insurers had let clients down.

The council said by refusing to pay claims stemming from Covid-19, insurers were spitting in their clients’ faces and destroying the livelihoods of millions of people who depend on the sectors.

The council’s chief executive Tshifhiwa Tshivhengwa was joined by Ryan Woolley, the chief executive of Insurance Claims Africa, a specialist public loss adjustment firm representing over 500 tourism and hospitality claimants against large insurers, as well as Meg Fargher, owner of Budmarsh in Magaliesburg, and William van der Riet, owner of the Cathedral Peak Hotel in the Drakensberg.

Tourism and hospitality sustain more than 1.5 million jobs and contribute around 8.6% to the GDP.

Tarred and feathered

Santam says it has been denigrated unfairly: it has settled some claims – without revealing how many, nor their value – where the claimants proved direct business interruption caused by a localised outbreak of the disease.

Grevler said Santam did not believe claims stemming from the lockdown were valid. “The policy says your business must be interrupted if your business is interrupted due to or as a result of contagious or infectious disease. It’s not sufficient for Covid to be in your area. There must have been a specific case (causing interruption). It’s down to the issue of causation: as a result of or due to.”

Santam argued businesses must be able to prove direct, localised causation due to the outbreak and said it cannot insure against economic losses suffered due to Covid-19.

Coutts said, typically, Santam viewed March 28 (the day after lockdown was instituted) as the decider: if clients suffer losses before or after that date, they are likely to have a claim. Insisting that Santam has adopted the “right view”, he said it was certain about its policy wording.

“We’re certain about what we’ve communicated to the market. But we do feel for these businesses, we’re empathetic to what they are going through. We’re not heartless. We always look for reasons to pay claims,” Dilotsotlhe said.

Open to interpretation

Grevler, though, conceded there was ambiguity. “It’s not unfair to say the wording is not, absolutely, 100% clear because the wordings were never written with the national lockdown scenario in mind. It wasn’t considered at the time as even remotely possible. They were written with the concept of a very localised outbreak of an infection causing interruption. Had we known this was the type of events we would cover it would certainly be in everyone’s interests to be absolutely specific.”

Coutts said one of the extensions, covering shark attacks, was sold as part of a “bucket” of other contingencies and kicks in when coastal businesses are shut due to beach closures.

The policy wording makes no mention of direct causality though, nor of localised outbreaks of disease (or wildlife attacks, for that matter), but the losses would never have occurred without the lockdown: they were incurred because of, or due, to the virus. By extension, hospitality and tourism collapsed because a virus had caused widespread panic and fear, necessitating a government lockdown, resulting in economic loss.

Asked why policies stipulated losses suffered within a radius, Grevler said radius was not relevant. “It speaks to the local nature of the claim. We’re only asking the policyholder to show their business was interrupted by a specific case of Covid.”

He said, in the interest of all parties, it was important to obtain legal certainty as expeditiously as possible. And while Santam had no interest or intention in delaying court proceedings, if it lost, they would take the matter on appeal.

Professor Birgit Kuschke, from the Department of Mercantile Law at the University of Pretoria, advises that clients whose claims have been rejected institute action in court as soon as possible to stop prescription. “If all claimants go to the same attorneys, it will be faster and cheaper. Either get in touch with Ryan Woolley and Insurance Claims Africa, Weavind and Weavind, or Stemela Lubbe.”

* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected], tweet her @georginacrouth and follow her on Facebook.

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