Judgment reserved in Santam vs Ma-Afrika Hotels matter over Covid-19 insurance

Insurance giant Santam argued in the high court in Cape Town on Tuesday why it should not have to pay its client Ma-Afrika Hotels for losses incurred during the coronavirus lockdown.

Ma-Afrika Hotels sought a declaratory order to compel its insurance broker to pay for the interruption of its business during the lockdown.

Santam argued before a full bench that the case revolved around the wording of its policy, which it claimed did not provide cover for a global or national pandemic, but instead was “limited to causative events that are local to the insured’s premises”.

The company also argued their policy did not insure Ma-Afrika Hotels for causative events such as a national lockdown imposed by a government in response to a notifiable disease.

Ma-Afrika Hotel’s senior counsel, Mike van der Nest, said their interpretation of the policy was that an insurance claim would kick in precisely when the government responded to a notifiable disease.

“A notifiable disease is one that relies on a government response. The whole point of a notifiable disease is so that the government can do something about it,” said Van der Nest.

He argued that Santam had taken a “bad bet” in the wording of their policy and were attempting to get out of the liability to their client.

Ma-Afrika Hotels argued that they suffered a loss of revenue after the first two Covid-19 cases were officially registered in the Western Cape on March 11 and 16 near their hotels in Cape Town and Stellenbosch.

They argued that as a result of these two occurrences, the government decided to impose a lockdown and these events happened on a linear scale.

Santam said their client did not attribute any monetary value to their claim and they were thus unsure how much damage was being claimed.

Van Der Nest argued: “It is a spectre to say that these losses are uncertain”.

In their heads of argument, Santam argued that Ma-Afrika Hotels had misidentified the cause of their loss.

“In the applicants’ initial case, they relied on the two local occurrences of illness within a 40km radius of the premises. The insuperable difficulty they face is that the proximate cause of the loss was not this local occurrence,” said Santam’s senior counsel, Dennis Fine.

“It was the global and nationwide spread of the disease; the reaction of governments across the world and their response to the pandemic; the national lockdown and other measures taken by the South African government aimed at slowing the spread of the disease; and the public fear created by Covid-19. These are not insured perils under the policy and the matter ends there,” said Fine.

He said Ma-Afrika Hotels sought their relief in terms of the business interruption section of “similar insurance policies”.

“The extension to the business interruption section provides cover in respect of various events, including infectious diseases. This cover is limited to causative events that are local to the insured’s premises,” he argued.

“The extension specifically [and the policy more broadly] does not provide cover for the consequences of a global pandemic nor a nationwide disease such as Covid-19 and the consequences thereof, including government responses to such global pandemic or national outbreak by way of a lockdown,” said Fine.

Judge Judy Cloete put the theoretical example to him on whether the insurance policy would have had to pay out had there been only a local outbreak in Stellenbosch and a consequent response by local authorities.

Fine said it would, and when Cloete asked what was different between the local scenario and a national scenario, Fine responded: “The facts”.

He argued that the lockdown was the result of an insurable event but that it wasn’t itself an insurable event.

The case was postponed and judgment reserved.

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