Santam has again been ordered to pay 18 months' lockdown claims. Here's why

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The SCA has dismissed Santam's appeal to challenge the 18-month indemnity period for lockdown claims.
The SCA has dismissed Santam's appeal to challenge the 18-month indemnity period for lockdown claims.
Supplied/Estate Living
  • The Supreme Court of Appeal has dismissed Santam's appeal of a Western Cape High Court judgment on lockdown claims.
  • The insurer went to the Bloemfontein court to challenge the 18-month indemnity period, saying its policy only covered clients' losses for three months.
  • Now, Santam has to pay Ma-Afrika R105.5 million and The Stellenbosch Kitchen R16.9 million for revenue loss.

The Supreme Court of Appeal (SCA) has dismissed Santam's appeal on the applicable business interruption indemnity period for Ma-Afrika Hotels and The Stellenbosch Kitchen.

This means the insurer will have to pay the establishments business interruption benefits for 18 months - unless it decides to take the matter to the Constitutional Court.

The insurer and its clients have been engaged in the business interruption claims battle since early 2020. Initially, Santam would not pay for lockdown-related claims, saying that its business-interruption insurance was not meant to cover pandemics - even in the hospitality sector version of that policy, which offered cover for "notifiable infectious diseases".

Santam argued that its clients suffered revenue losses not because of the Covid-19 outbreak, but because of government-mandated lockdown.

But as the series of court judgments in 2020 came in favour of clients, insurers began paying up. Santam also started assessing the lockdown claims in January this year

But the insurer still took the Ma-Afrika Hotels and The Stellenbosch Kitchen ruling to Bloemfontein to challenge the 18-month indemnity period. 

The confusion between indemnity periods

Santam has been arguing that its indemnity period policy "extensions" - like the one covering notifiable infectious diseases - were only for three months. For a client to get an 18-month indemnity period, there needed to be physical damage to their business premises.

It told the SCA that because there was no physical damage at The Stellenbosch Kitchen's and Ma-Afrika's premises, they could not claim under the "main" business-interruption section of its policies. They could only claim under the infectious disease extension, which provides cover for up to three months.

But in the judgment handed down on Thursday morning, the SCA said the "convoluted" reading of the policy and its schedules proposed by Santam was nothing more than an unsuccessful attempt to explain an "irreconcilable contradiction" between the indemnity period of 18 months and three months in one policy schedule. 

"In our view, the indemnity period in relation to claims for loss of revenue due to business interruption ineluctably is 18 months," wrote the SCA in its judgment.

'Tucked away in the fine print'

The court also pointed out that, as indicated by the Western Cape High Court before, the first part of Santam's policy schedule stated that the indemnity period was 18 months. Being at the beginning of the policy schedule, that was the most visible print to clients.

The Western Cape High Court had also pointed out that the limited "extensions" indemnity of three months was "tucked away at the end of the schedule" in fine print. But Santam disagreed, saying it even capitalised that part of information to draw clients' attention to it.

Still, the SCA was not convinced.

"It is, in our view, hardly possible to imagine a more tortured, convoluted and intricate an approach to the reading of the policy," wrote the SCA.

It said there appears to be a desperate re-running of the same argument on Santam's part that lockdown-related business interruption claims are invalid because of the lack of proof of physical damage. It added that while that argument might sway "courts in some foreign jurisdictions", it won't work in SA.

"That issue was put to rest in [the] Guardrisk [case], which held the insurer in that case liable for the business interruption losses due to the outbreak of the pandemic, extending to and including government's response," read the judgment.

The SCA also pointed out that this was not an easy policy to navigate and that Santam's lawyer had conceded as much. 

The SCA also concurred with Santam's clients and the Western Cape High Court that Santam cannot separate the lockdown from Covid-19 - which is a notifiable contagious disease. 

It pointed out that in the Guardrisk vs Café Chameleon case, the court held that a notifiable disease usually required a government response.

"In the main, the [lockdown] regulations contain measures designed to contain the spread of Covid-19 by curtailing movement and social interaction," read the judgment.

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