ICA unsurprised insurer will only pay three months for business interruption claims

12 January 2021 - 12:58
By ernest mabuza AND Ernest Mabuza
Insurance Claims Africa says it is disappointed that Santam will only pay for three months for Covid-19 business interruption policy claims. Stock photo.
Image: 123RF/convisum Insurance Claims Africa says it is disappointed that Santam will only pay for three months for Covid-19 business interruption policy claims. Stock photo.

Specialist public loss adjuster Insurance Claims Africa (ICA) says it is unsurprised but disappointed by Santam’s decision to settle Covid-19 business interruption claims for a period of three months only.

After seven months of legal wrangling and Santam’s refusal to pay its customers' business interruption claims, the company conceded last week that it was liable.

It also announced that it will commence the process of assessing claims.

It said the claims in question are those affected by the recent judgment in the Western Cape High Court in the case between the insurer and Ma-Afrika Hotels and The Stellenbosch Kitchen.

In its judgment in November, the court said Santam was liable to indemnify the two businesses in terms of the business interruption section of their insurance policies. The court said the period of indemnity was 18 months.

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ICA said Santam had indicated it will offer its hospitality and leisure customers a full and final settlement of only three months of losses, despite many policyholders having indemnity periods of six, 12 and 18 months in their contracts with the insurer.

Despite last week's announcement that it will now reassess business interruption claims it previously rejected, Santam said it will appeal the question of the indemnity period at the Supreme Court of Appeal.

It will argue for leave to appeal on February 16.

Ryan Woolley, CEO of Insurance Claims Africa, said on Tuesday the problem for Santam was that there was a judgment against them in the Ma-Afrika matter, which ordered the insurer to pay for the full indemnity period of 18 months.

“This should not be ignored. The only way for them to treat their customers fairly is to offer an interim payment of three months, and leave the balance to be dealt with after the SCA appeal,” Woolley said.

He said Santam offering three months in full and final settlement, and forcing its customers to sue them for the balance was grossly unfair and unconscionable.

Woolley said these actions suggested that it was no longer legal certainty that Santam was seeking, but that it was in fact trying to take advantage of vulnerable clients who were desperate for funding.

The insurers who had refused to pay business interruption claims had argued that it was the government-imposed lockdown, and not Covid-19, that caused the losses.

However, the courts found that the two events are linked: a lockdown would never have occurred without Covid-19.

“The real tragedy is that if these businesses are forced to shut down as a result of Santam’s non-payment, their claim against the insurer is extinguished.

“Offering a full and final three-month settlement on a valid 18-month contract is unacceptable.”

ICA said the tourism and hospitality sector, which employs 1.5 million people and contributes 8.6% to the SA economy, has all but collapsed as the country continues to buckle under the strain of Covid-19.

It said thousands of jobs have been lost, families destroyed and businesses have been forced to close their doors - a consequence that could have been avoided if insurers had met their legal obligations to their customers from the outset.