Insurers side-stepping business-interruption claims

Insurance companies claim that Covid-19 is not a notifiable disease, but rather the result of government’s actions and restrictions in the lockdown: Ryan Wooley, Insurance Claims Africa.

DUDUZILE RAMELA: National Treasury has announced temporary changes to living-annuity withdrawal limits and revision rules to ease the pressure on annuitants in the wake of Covid-19. Businesses all over the world have been hit hard by the Covid-19 pandemic. And, here at home, legal battles are brewing as the tourism and hospitality industries cry foul over Covid-19 claims. They allege they have not been paid out business-interruption insurance claims. The Ombudsman for Short Term Insurance and the Financial Sector Conduct Authority, among others, are facing an increasing number of complaints. We explore this now with Ryan Woolley, CEO of Insurance Claims Africa. Ryan, thank you very much for joining us and a good evening to you.

RYAN WOOLLEY: Hello, Dudu, nice to be on the show.

DUDUZILE RAMELA: So you’re representing more than 400 claimants against several insurance groups. What is at the heart of the matter?

RYAN WOOLLEY: At the heart of the matter is most of the major insurers in South Africa have tailored their business-interruption product for the hospitality and tourism industry. They’ve tailored this to provide contingent business-interruption cover as an extension to the policy for a notifiable disease. And the insurers are now turning around and saying: “Covid-19 – yes, it’s a notifiable disease, but your loss is not being caused by Covid-19.” It’s being caused by the government’s actions and their restrictions, and their quarantine measures and the lockdown. And that’s at the heart of the issue. The insurers are trying to renege on these policies and rip away the clients’ funding to pay for their salaries, their wages, their rent and, if they’re lucky enough, net profit. That’s the heart of the issue.

DUDUZILE RAMELA: Are insurance companies then being mischievous here? Is Covid-19 not a notifiable disease?

RYAN WOOLLEY: It’s absolutely a notifiable disease. Notifiable diseases are those that have to be notified to the government because they are highly infectious or contagious. Covid-19 is a coronavirus, which is a notifiable disease, per hearsay law. And if you are insuring a notifiable disease, you’d think that there would be some restrictions placed by the government of access to various [areas] – there would be some quarantine measures put in place. The fact that these insurers did not anticipate the pandemic – they had every ability to exclude it – but they gave the cover to these insureds meant that they were willing to cover this. And they are now trying to walk back on that agreement.

DUDUZILE RAMELA: In your discussions with the insurers, what would you say the temperature is? Could you possibly see yourselves going to the courts with the 400 claimants that you are representing?

RYAN WOOLLEY: Ultimately, if we have to, we will definitely be willing to go to court and pursue it in applications and declaratory orders. But we are hopeful that a sensible compromise can be achieved. We know that the insurers probably can’t afford to pay all these claims and, if a ruling goes against them, that could very well see the end of their businesses.

However, at the same time, the insureds can’t be held accountable for their poor drafting of contracts. So their poor underwriting can’t prejudice the insureds. We would rather see a compromise of sorts. We hope that that would have the support of the Financial Services Conduct Authority in South Africa, and we hope that the insurers will take a sensible approach to these claims and to compromise in a situation where, yes, it’s not to lose, but [rather] allow everybody to survive.

DUDUZILE RAMELA: Let’s talk about the repercussions of all of this, especially on your claimants. What have some of them told you in terms of what it is that they’re going through, of course extending to people that even work in some of these places?

RYAN WOOLLEY: The tourism-sector employs –  I think the stats are about 1.5 million in direct and indirect jobs. When you look at that, and you look at all of our clients who have had to cut back, the hardest hit are definitely the employees. If you can’t afford to run your businesses, these businesses potentially will cease to exist. And this is a product that they’ve paid premiums for, but they now don’t get to access – which would help them to survive. It’s just unconscionable.

DUDUZILE RAMELA: I’d like us to go into perhaps just looking at some of the sectors that have been impacted. We talk about tourism and hospitality as if it’s just one thing, but please just talk us through the various sectors.

RYAN WOOLLEY: Sectors within hospitality and tourism – you’ve got your restaurants, your BnBs, your lodgings, your hotel groups – are all privately run or part of groups. But the hardest hit are definitely those who own the restaurants and BnBs, with their employees and all involved.

The other thing to remember is that it’s a massive employer of the youth. So, when you think about solidarity, you think about all the things that at this time President Ramaphosa has put forward that we need to be thinking about. You see the insurers turn their backs on the tourism sector – not even to consider a compromise would, hopefully, not be the case.

DUDUZILE RAMELA: What does this mean for the future with these negotiations, and the insurers are saying, “Well, we don’t think we can actually cover this”? What does this mean for the future legally, specifically? What is it that we need to perhaps look into in terms of our laws and our policies?

RYAN WOOLLEY: Well, the Financial Services Conduct Authority has changed – they are the regulator of the industry, they verify the drafting of these policies and the conduct of the insurers. So I would think that they would step up and, once having done the investigation. They are taking a very proactive approach in this, which we think is positive going forward. The problem is that it doesn’t solve the problem for our claimants in their current state. What happens if these businesses don’t survive?

The one issue that we’ve got is that the insurers have got ultimate funds available to them to defend this and to litigate for many, many years. Our insurers can’t afford that. They will go out of business, they won’t be able to afford litigation. And, with that, it means that the claims will fall away. We hope that that’s not a tactic that the insurers are pursuing, but it is a reality that there will be this attrition of their claimants. And they have to stand up together against the insurers and get them to at least consider a compromise,

DUDUZILE RAMELA: “At least consider a compromise.” That’s where we leave it. Thank you very much, Ryan.

And to our viewers, just for your benefit, my colleague, Suren Naidoo, has done an amazing job in writing up an article on this. It might pique your interest. You can read it up here.

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