Why is Santam only offering to pay for three months of lockdown losses?

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Santam has joined a growing list of insurers who have decided to start assessing business interruption claims. But not all claims.
Photo: Gallo Images/Jacques Stander.
Santam has joined a growing list of insurers who have decided to start assessing business interruption claims. But not all claims. Photo: Gallo Images/Jacques Stander.
  • After almost seven months of legal wrangling, Santam's business interruption cover clients were relieved when the insurer announced on 4 January that it will start assessing their rejected claims.
  • Now, the insurer is offering them a final settlement to cover only three months of their lockdown losses and they are not happy.
  • The ICA, which is championing the fight for clients, says they were covered for much longer but Santam is disputing this.

The business interruption cover battle refuses to draw to an end even after insurers have agreed to cover losses caused by the lockdown.

Santam, the country's biggest short-term insurer has raised the ire of specialist public loss adjuster, Insurance Claims Africa (ICA) by offering to pay only for three-months' worth of losses that its clients were covered for.

The ICA said Santam's three months full and final settlement offer was a smack in the face to policyholders who had paid premiums for a much longer indemnity period and had waited almost seven months as the insurer initially rejected their claims.

The indemnity period refers to the maximum period in months for which a policyholder can claim for losses in a business interruption policy.

Santam changed its stance only last Monday, announcing then that it would start assessing the claims it initially rejected, thanks to the Supreme Court of Appeal's judgment against Guardrisk, which upheld the Western Cape High Court's decision that insurers who offered policies with a contagious disease extension should cover losses caused by the lockdown trading restrictions.

ICA CEO, Ryan Woolley said the short indemnity period Santam is offering as a settlement was disingenuous when one considers that the Western Cape High Court had already ordered the insurer to cover 18 months' worth of losses in the Ma-Afrika hotels case against them. 

"By offering 3 months in full and final settlement and forcing their customers to sue them for the balance is grossly unfair and unconscionable," said Woolley in a statement.

Santam has however applied to appeal that indemnity period. In a written response on Tuesday, the insurer said that the Supreme Court of Appeal judgment in the Café Chameleon case against Guardrisk did not deal with the 18-month indemnity period.

It added that the 18-month indemnity period applied only to the Ma-Afrika and while it is challenging that, its view is that it set no legal precedent for other clients.

 "The hospitality & leisure division policies that are impacted by the recent court rulings and are currently being processed by Santam specifically carry three-month indemnity periods. It is for this reason that Santam is offering full and final settlements in respect of these claims," said Santam. 

Court ruling vs Santam's interpretation on indemnity period

The insurer, which is owned by Sanlam, went further to address the Ma-Afrika indemnity period that it is appealing. It said while the Western Cape High Court ruled that it should cover 18 months of losses, Ma-Afrika's policy stated a three months indemnity period for notifiable infectious diseases.

"The indemnity period in respect of this extended [infectious diseases] cover is clearly stated as three months in the relevant Santam policies," wrote the insurer.

The company admitted that Ma-Afrika's indemnity period was 18 months in one instance; where the business was not able to operate because of physical damage to its premises.

"This is a standard business interruption policy for physical damage.

"It is Santam’s view that the Western Cape High Court erred in its judgment in applying an 18-month indemnity period across the entire policy," said Santam adding that while this was 18 months for Ma-Afrika, other clients generally had shorter indemnity period.


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