Hospitality group Ma-Afrika Hotels together with Stellenbosch Kitchen and Insurance Claims Africa (ICA) are likely to wait at least a month for a ruling in the high-profile business interruption cover battle against JSE-listed insurance giant Santam, following the Western Cape High Court reserving judgment on the matter on Tuesday.
ICA joined forces with the Stellenbosch-based hospitality group in its litigation against Santam, which is refusing to pay out Ma-Afrika Hotels’ business interruption claims linked to the Covid-19 pandemic.
Santam claims the government’s lockdown is the reason for the loss and that the lockdown itself is not “an insured peril” under its Contingent Business Interruption (CBI) policies.
Restaurant company Stellenbosch Kitchen is a joint applicant in the case, which was heard before a full bench of the Western Cape High Court, led by Deputy Judge President Patricia Goliath.
Ryan Woolley, CEO of ICA, confirmed to Moneyweb that judgment was reserved in the case.
“But Ma-Afrika’s legal team did request that the judgment be handed down before the Café Chameleon appeal case, which is to be heard by the Supreme Court of Appeal [SCA] on 16 November,” he added.
Cape Town-based Café Chameleon won its separate business interruption cover claims case in late June against another short-term insurer, Guardrisk, which is a subsidiary of JSE-listed Momentum Metropolitan. However, Guardrisk is taking the ruling on appeal at the SCA.
Decision will ‘reverberate’ for years to come
On Ma-Afrika’s case, Woolley believes that the decision will be “precedent-setting and will reverberate through the insurance industry for years to come”.
He said he was “pleased that all issues were aired” in court on Tuesday and keenly awaited the judgment.
“Santam has rejected Ma-Afrika’s business interruption claim, even though it included cover for infectious and contagious diseases, like Covid-19. Santam is arguing that the business interruption is caused by the lockdown and not by Covid-19,” Woolley reiterated.
“Of course, there would be no lockdown if there wasn’t a pandemic …
“While Ma-Afrika is in court today, the truth is that this is a watershed case for the entire tourism and hospitality industry,” he said.
Cases pile up
ICA, which is a public loss adjustment firm, currently represents over 700 clients that have been affected by the non-payment of Covid-19-related business interruption insurance claims. There are hundreds more such claims countrywide, with several cases in the courts being handled by other firms.
These claims are not just against Santam and Guardrisk, but also Old Mutual Insure, Hollard, Bryte, Thatch, F&I, TRA, Lombard, AIG, Chubb, and Monitor.
“The truth is that Santam and other large insurers in South Africa have lost their moral compass, their credibility and their decency,” Elna du Toit, chief operating officer of Ma-Afrika Hotels, said in a statement on Monday ahead of the Tuesday hearing.
“It’s a travesty that we are having to go to court to fight for what is due to us. If there’s one thing that Covid-19 has shown the tourism and hospitality sector, it’s that when it comes to insurers, they will promise you the earth to get your premiums, but will let you down when you need them most,” she added.
“Over many years we have worked hard, and invested significantly, to build an exceptional hospitality group that is made up of four hotels and two restaurants, including the popular Stellenbosch Kitchen.
“But most importantly, we have built a business that employs 210 loyal staff and sustains over 1 000 of their direct dependents. Their lives and livelihoods remain our concern.”
Following the Café Chameleon judgment, several insurers – including Santam, Guardrisk, Hollard and Old Mutual Insure – have agreed to make concessionary payouts as an interim relief measure until there is legal certainty on the matter. The agreement was reached through financial watchdogs, the Financial Sector Conduct Authority (FSCA) and the Prudential Authority.
Santam, which announced in July that it had allocated R1 billion for these interim settlements, last week said it had paid out R870 million thus far.