‘Resounding victory’ for hospitality industry versus insurers

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The restaurant Stellenbosch Kitchen, which was one of the businesses that the court ruled must be paid its claim for loss of business during the Covid-19 lockdown.
The restaurant Stellenbosch Kitchen, which was one of the businesses that the court ruled must be paid its claim for loss of business during the Covid-19 lockdown.
Stellenbosch Kitchen website

A resounding victory for all tourism and hospitality businesses.

That’s how Insurance Claims Africa (ICA) described Tuesday’s decision by the Western Cape High Court to rule in favour of Ma-Afrika Hotels and Stellenbosch Kitchen in their legal battle against Santam.

The insurance firm has been ordered to pay the full business interruption losses incurred by the companies, including the impact of the government’s lockdown response to Covid-19 over the entire policy period of 18 months, without limitations.

The court also ordered that Santam pay Ma-Afrika’s legal costs.

Ryan Woolley, chief executive officer of ICA, the public loss adjustment company that is representing over 750 businesses in the tourism and hospitality sector in their battles to be paid, said the ruling had given everyone hope.

Describing the judgment as “precedent setting”, he believes the courts have sent a clear message to the big corporates that they cannot simply change the wording on a policy when someone presents them with a claim.

“They don’t want to see the insurers bullying the insured,” Woolley said.

“The real question is, are the insurers — which include Old Mutual, Guardrisk, Santam, Bryte, Hollard, F&I, Chubb, TRA, Lombard, AIG and Monitor — truly looking for certainty or simply a way out of their obligations towards their customers?”
CEO of Insurance Claims Africa Ryan Woolly

He also believes the Financial Services Regulatory Authority (FSCA) will be closely watching both the Santam case and Monday’s Supreme Court of Appeal hearing on a claim made by Chameleon Cafe to its insurers, Guardrisk.

In July, the Western Cape High Court rejected the insurers’ argument that the losses suffered by the claimant were due to the lockdown, rather than Covid-19 itself.

“It may be that the FSCA will feel that there is no need for a test case and that these two court cases will give the insurers and the reinsurers the legal certainty that they have been asking for,” Woolley said.

“The real question is, are the insurers — which include Old Mutual, Guardrisk, Santam, Bryte, Hollard, F&I, Chubb, TRA, Lombard, AIG and Monitor — truly looking for certainty or simply a way out of their obligations towards their customers?”

Woolley said he hoped the insurance companies would step up and do the right thing, adding: “By settling valid claims expeditiously, they have the opportunity to contribute to the survival of businesses in this critical sector, and to the preservation of thousands of jobs.”

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In a statement Santam said it had taken note of the judgement, adding that its detailed and complex nature and broader implications needed to be carefully considered.

“It will also be important for Santam to discuss the implications of the judgment with all our stakeholders, including reinsurers, in order to arrive at a comprehensive response,” the company said.

“The response of the global reinsurers, which are in effect insurers to the insurer, is important in helping us to reach finality on this matter.

“We do understand that all parties need finality as a matter of urgency and therefore remain committed to doing our utmost to ensure that we achieve that as quickly as possible.”

Santam has so far paid more than R1 billion in interim relief to nearly 2 500 small and medium-sized businesses affected by the Covid-19 pandemic.

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It has also committed up to R400 million to provide relief through premium reductions, premium refunds and direct support to insurance industry business partners, corporate social responsibility and government initiatives.

Guardrisk, meanwhile, offered its clients settlements for three months of losses.

South Africa’s tourism and hospitality sector sustains over 740 000 direct and 1,5 million indirect jobs, and contributes 8,6% to the economy.

Since March, when the lockdown started, businesses of all sizes have suffered tremendous losses. Many have been forced to close their doors, putting thousands of jobs at risk.

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