SA could have its own lockdown claims test case

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  • Insurance Claims Africa says the Financial Sector Conduct Authority has asked insurers and other interested parties to put forward proposals about SA's business interruption test case by the September 14.
  • Other countries that have taken test cases to court include Ireland and the UK.
  • The FSCA is yet to confirm if it will proceed that route.

South Africa's insurance industry regulator might follow the lead of its international counterparts and take a test case to the Supreme Court of Appeal to deal with the issue of business interruption claims once and for all.

According to the public loss adjustment firm, Insurance Claims Africa (ICA), several insurers who have contagious disease benefits on their policies have approached the Financial Sector Conduct Authority to follow in the footsteps of the UK 's Financial Conduct Authority, which took a joint case of eight insurers to court to provide a watershed ruling on whether insurers are liable for business losses caused by a lockdown.

Insurers around the globe are rejecting business interruption claims for losses caused by the lockdown. Even those who have an "extension" to cover notifiable diseases are arguing that Covid-19 was never contemplated under their policies and that lockdown losses are economic losses and not insured losses.

Fin24 approached the FSCA to confirm whether it will indeed have a test case in SA. The article will be updated once a response is received. 

The ICA, which represents about 700 businesses whose lockdown claims have been rejected by insurers, said it is of the view that the Santam case which is scheduled to begin in the Western Cape High Court on Tuesday is the watershed case SA needs. The case will be heard by a full bench of judges.

ICA CEO, Ryan Woolley, said on Wednesday since the firm was told to seek a different path by the FSCA in June when it proposed the test case route. It believes that time has run out for SA to start that process now, as most businesses in the tourism and hospitality industry are already on their knees and need funding urgently, if they haven't yet closed their doors already.

"If they do go the test case route, I think it would be difficult," said Woolley adding that it will take months before any ruling is made, and the Santam case is, in his view, enough as a test case.

Woolley said the FSCA has asked insurers and other interested parties to put forward their proposals on this matter by 14  September. If the test case goes ahead, he hopes that all 12-odd insurers who have contagious or infectious disease extensions on their products will participate.

The Western Cape High Court has already ruled in one case against Guardrisk that the insurer should cover Cape restaurant Café Chameleon's lockdown losses. But Guardrisk has applied to appeal that ruling and the industry already concluded that it does not set a precedent.

Relief isn't working

While the waiting game for a watershed case that will set a precedent for the entire industry continues, most big short-term insurers who had the infectious disease benefit announced after the FSCA's intervention that they will be providing varying relief measures to their clients.

But the ICA said on Wednesday that because of the restrictions on which businesses would qualify for such relief, most of its clients are still left out in the cold.

"The Prudential Authority and the FSCA said they should focus on SMMEs not micro businesses and to focus on hospitality and tourism which I don't think has been done," said Woolley.

He said some smaller players with international ties have chosen not to offer any relief but wait for the court processes to finalise instead.

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