Insurers refusing to pay

Folder with close up on the word claims and a note where it is written under investigation. Concept of insurance fraud, 3d Illustration
Folder with close up on the word claims and a note where it is written under investigation. Concept of insurance fraud, 3d Illustration

Insurance companies are refusing to pay between R3,5 and R4 billion in claims from tourism businesses.

Among those affected is William van der Riet, owner of Cathedral Peak Hotel, who has spent more than three months fighting with his insurers, HIC (underwritten by Guardrisk).

Last week they offered to pay for the five days between Covid-19 being confirmed in the area and the lockdown on March 26.

“They offered me R544 000 in full and final settlement. I told them to go to hell,” Van der Riet said, adding that he was working with Insurance Claims Africa, an insurance adjuster, to help him fight for his rights.

The 81-year-old family-run hotel is in danger of closing its doors if it doesn’t get financial assistance soon, Van der Riet­ said. “Our overheads are R800 000 to R1 million a month, but we have no income and no idea when we will be getting any. We can probably last for a month, maybe six weeks, but after that I can’t say,” he added.

If the Van der Riets are forced to shut the hotel, 200 staff will lose their jobs, which will have a huge impact on the local community.

Tshifhiwa Tshivhengwa, chief executive officer of the Tourism Business Council of South Africa, said tourism had “lost more than R68 billion and maybe as much as R72 billion, and each day we don’t operate we lose around R748 million”.

Ryan Woolley, chief executive officer of Insurance Claims Africa, whose company is representing 500 businesses in the same position as Cathedral Peak Hotel, said they were willing to take on Santam, Hollard, Guardrisk and Old Mutual Insure in court.

“Business interruption insurance is specifically bought by a business to cover running costs, salaries and wages, water and lights and anything else they need to pay in order to survive,” Woolley said. “Normally this would be as the result of a fire, flood, storm, hurricane and so on. What the insurers did was to develop a boutique product for the hospitality and tourism industry which would give them wider cover ... for additional risks like murder, suicide, a shark attack, a lion attack or, as in this case, the outbreak of an infectious, contagious, notifiable disease.”

Woolley ridiculed the claim by insurers that the lockdown and Covid-19 had nothing to do with each other, saying: “Policies are very simply worded, but they all say that losses in consequence of, or due to an infectious outbreak or the occurrence of an infectious or contagious disease, are covered.”

Woolley said he had some sympathy for insurance companies as the cost of claims could cripple the sector. It’s why his company has tried to quantify each client’s losses carefully before taking them to the insurance companies. To date, however, none of the companies has wanted to engage with them, so Insurance Claims Africa intends heading to the Western Cape High Court to take on Santam on September 1.

Santam chief marketing officer Mokaedi Dilotsotlhe said the company believed it could not suspend insurance principles that say insurers are only liable for the specific event they insured.

“As much as we wish we could wave a magic wand and make everything pay­able, the principle of proximate cause, which is an enshrined principle in insurance, must hold.”

The insurer is still finalising its answering affidavit for the September case, but its argument is that, while Covid-19 might be the primary or proximate cause of businesses being forced to stop trading, the lockdown is an intervening cause that breaks the direct connection between the proximate cause and the actual closure of many businesses.

Van der Riet said the stress of the past three-and-a-half-months had taken a massive toll on him.

“I took the hotel over from my dad, who built it from scratch, and I wanted to hand it on to my son and his wife, who have come to work at the hotel. It will be a tragedy if that dream comes to an end,” he said.

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