Covid-19 rejected claims groups to take more insurers to court

  • Many insurers who offer business interruption cover have rejected lockdown-related claims.
  • Clients with rejected claims are joining groups that are taking these insurers to court. Even a class action is being considered.
  • Insurance Claims Africa will be serving court papers to HIC Underwriting Managers and possibly other insurers this month.
  • The first case to be heard is against Santam on 1 September.

Hundreds of companies in the tourism and hospitality sector, who have had their business interruption claims rejected by insurers, are planning to take most of the major industry players to court and are even contemplating a class action suit.

"We are definitely instituting action against Santam and HIC [Underwriting Managers] and considering the same against several other insurers," said Ryan Woolley, CEO of Insurance Claims Africa (ICA).

ICA, which is a specialist public loss adjustment firm, represents almost 500 businesses in the tourism and hospitality sector whose claims have been rejected by insurers. Woolley said the firm hopes by the end of this week it will be part of the Santam matter, set to be heard in the Western Cape High Court on 1 September. It is preparing to start instituting legal proceedings against HIC, which is underwritten by Momentum Metropolitan Holdings' Guardrisk, late next week.

"We had a meeting as recently as this morning with our senior council, and joining the [Santam] matter does require similar facts and that the plaintiff won't be raising any objection to us joining. We understand they won't. But obviously Santam can still object but we hope they won't," said Woolley.

The growing litigation cases between companies in the tourism and hospitality industries comes as most short-term insurers who provide business interruption, save for Outsurance, are rejecting claims related to business interruptions caused by the lockdown.

Even though some, like Santam and HIC, do cover notifiable contagious diseases under their policies, they argue that the lockdown is a government-mandated trade restriction. For this reason, loss of income during this period is not covered unless a company can prove that someone within their premises or covered radius tested positive for the virus.

But the industry may prefer settlement to litigation

Because the litigation route will take months and even years in some instances, Tshifhiwa Tshivhengwa, CEO of the Tourism Business Council of South Africa (TBCSA), said most of the players in the tourism and hospitality sector are approaching 100 days since they last operated, adding that even those who have started operating, are seeing a fraction of the business they used to.

He said because the industry has been "decimated", having lost about R72 billion since the lockdown began, the companies whose claims have been rejected need a quicker resolution to avoid permanent closure.

He added that the rejection of claims, especially by players like Santam and HIC who sold "boutique" cover specifically for the tourism and hospitality industry, was "spitting on the faces" of their clients, before accusing the insurance companies of acting like pyramid schemes who collect money with no intention of paying out.

"Stop beating around the bush and go on and on about going to court. That just delays time. By the time we get to court business would have fallen, people will be on the streets without jobs. We are adding to unemployment unnecessarily, " said Tshivhengwa.

The ICA said its members have offered to take only 50% of what they are claiming from insurers upfront and the rest over the years once insurers have fought their battle with the global reinsurrers. The firm said it believes reinsurers are the ones holding the local insurers to ransom and wants government to intervene.

Possibility of a class action is being investigated

ICA is also talking to other claims groups to see if they think there is merit in instituting some form class action. He said the firm is still uncertain about the feasibility of this route but one of its professors is investigating whether this is indeed necessary.  

"The view is that potentially it could be because the FSCA has created a class of policyholders that have got this contingent business interruption cover. That will be the basis for the class as it's currently been put to us. That is not the basis in which we are moving forward but we are willing to explore all avenues," said Woolley.

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