SA policyholders pin hopes on UK ruling that lockdown is covered by insurance 'in principle'

Covid-19 forced many businesses to shut their doors, some permanently. Many have filed insurance claims but these are being rejected. 
(Photo by Noam Galai/Getty Images)
Covid-19 forced many businesses to shut their doors, some permanently. Many have filed insurance claims but these are being rejected. (Photo by Noam Galai/Getty Images)
  • The UK High Court made its ruling on the Financial Conduct Authority's (FCA) test case on Tuesday.
  • The Court found in favour of the FCA on most of the key issues.
  • But the FCA says each policy must be considered against the judgment, which may mean that there is still a long road ahead for SA policyholders who are hoping that it will set a precedent.


The UK’s insurance watchdog, the Financial Conduct Authority (FCA), has won its business interruption test case, which will force some insurers to pay for lockdown claims - and South African policyholders are now hoping that it will set a precedent for local courts as well.

The FCA took eight insurers to the UK High Court of Justice as a test case in June to urgently clarify whether insurers are liable for losses that their business interruption clients suffered because of Covid-19. The test case covered 21 different types of policy wording by the eight insurers and 370 000 policyholders.

On Tuesday, the UK court found in favour of the FCA on most key issues, such as whether Covid-19 triggered business interruption cover. Among other things, the Court found that "in principle" there will be cover where insured premises closed in response to government advice under certain policies. 

The judgment did not, however, say that the insurers who were part of the test case are liable for business interruption claims across all the 21 policy wordings that were tested. In a statement, the FCA said this means that each policy must be considered against the detailed judgment to work out what it means for that policy. 

Public loss adjustment firm, Insurance Claims Africa (ICA), said the key development that it hopes will influence SA is the fact that the UK Court has clarified that Covid-19, the lockdown and public response were a single cause of the covered loss.

ICA, which has taken up the fight on behalf of over 700 policyholders in South Africa who had their lockdown claims rejected by insurers, has always argued that insurers who provided cover for notifiable or contagious diseases cannot divorce the lockdown from Covid-19.

"South African insurers have consistently said they require legal certainty in order to honour their customers’ claims," said ICA CEO, Ryan Woolley.

Enough legal clarity

He said this UK judgment, coupled with the fact that the Financial Services Regulatory Authority also said insurers cannot use the lockdown as an excuse to not pay claims and that the Western Cape High Court ruled against Guardrisk in July, should have provided enough legal clarity now.

Guardrisk has, however, been granted leave to appeal the Western Cape High Court's ruling, which was in favour of its client, Cafe Chameleon. With that case up for appeal, all eyes are now on the Santam case which was heard on 1 September, with a ruling expected by mid-November.

Meanwhile, Santam announced on Tuesday that it has paid the entire R1 billion relief it promised to give its smaller business interruption clients in July. The insurer said the relief fund has now been closed.

A total 2 469 policyholders in the small and medium-sized business sectors received between R25 000 and R1.5 million in relief payments each, bringing the total paid out by the insurer to R1.01 billion.

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