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Massive Covid-19 blow for insurers: Guardrisk loses Supreme Court appeal

New precedent in Café Chameleon business interruption insurance case could open the way for billions of rand more in pandemic-related claims
Café Chameleon restaurant in Cape Town. Image: Supplied

Guardrisk Insurance – a subsidiary of JSE-listed financial services giant Momentum Metropolitan – has lost its appeal against a Western Cape High Court judgment on the Covid-19 business interruption insurance case involving Café Chameleon.

The Supreme Court of Appeal (SCA) on Thursday morning, dismissed Guardrisk’s appeal case with costs, in the latest victory for the Cape Town restaurant.

The ruling by SCA Judge Azhar Cachalia was handed down electronically and circulated to the relevant parties.

It represents a new legal precedent in the ongoing Covid-19 business interruption insurance battles in South Africa, with many seeing the Café Chameleon case as a “test case” to reach finality on the matter.

Other cases are before the courts, including against Santam and Old Mutual, which have either been appealed or where lawyers from the insurers were awaiting the Café Chameleon vs Guardrisk appeal ruling before deciding on how to proceed.


Cape café’s ‘precedent setting’ business interruption insurance victory

Santam fails to get Guardrisk’s Café Chameleon appeal postponed

The SCA’s Guardrisk ruling on Thursday could open the way for billions of rand more in pandemic-related claims against the country’s short-term insurers, which have either paid out interim relief on certain Covid-19 business interruption insurance claims or opted not to pay-out until there is legal certainty on the issue.

It is unclear whether Guardrisk or other short-term insurers that may lose such appeals, will take the matter all the way to the Constitutional Court.

However, Café Chameleon’s owner Nico Schoeman has pleaded for the case to be finalised at the SCA, telling Moneyweb previously that the highest court for commercial matters in South Africa is the SCA.

Read: Café Chameleon wants business interruption insurance case concluded at SCA

“The central question in this appeal was whether the government’s imposition of a lockdown in response to multiple outbreaks of a ‘notifiable disease’ i.e. Covid-19, throughout the country, and predominantly in Cape Town, where Café Chameleon’s operates its business, was covered by the infectious diseases clause,” Judge Cachalia noted in his concluding remarks on the Guardrisk ruling.

“The question was answered in favour of Café Chameleon, as was the question whether the outbreak of Covid-19 in Cape Town was the cause of its business interruption,” he added.

Judge Cachalia pointed out that in coming to this conclusion, his decision was “fortified by much of the reasoning” in the Financial Conduct Authority test case in the United Kingdom around similar claims, in addition to the two recent judgments of the Western Cape High Court involving Ma-Afrika Hotels vs Santam; and Interfax vs Old Mutual.


Ma-Afrika wins court battle against insurance giant Santam

Old Mutual Insure the latest loser in Covid-19 claims battle

Ren Dunster, attorney for Café Chameleon, said on Thursday in reaction to the SCA ruling that he and his client (Schoeman) were thrilled with the judgment.

“We applaud the urgency and clarity with which the judges dealt with the matter. We are privileged to have such a strong judiciary in South Africa,” he said.

Describing it as “a David and Goliath” battle, he noted that the SCA had dealt with the insurers’ technical arguments in clear and simple terms.

Meanwhile, though Schoeman was happy with the win, he told Moneyweb that he was still “disheartened” by the fact that insurers have dragged the issue on for so long.

“They are supposed to respond urgently in such circumstances, when clients are facing a make or break situation… The brutal truth is that if Café Chameleon had not won, it would be considering closure. Now, we must worry about how long it will take to get paid out for our claims,” he said.

“How many other businesses and jobs could have been saved if these now validated claims had been paid immediately or in the usual course,” he asked.

“The insurers have had the luxury of exercising their rights to oppose but they must now complete their end of the bargain and start settling claims urgently…

They asked for legal certainty, they now have it and must pay,” added Schoeman.

Dunster said the SCA ruling “should be the end of the line on this matter”.

A franker Schoeman said that the Concourt “is not an appeal court for SCA”. He hopes that the SCA decision brings finality to the case.

Guardrisk is yet to comment on the ruling.

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Wait a minute, the Santam case was decided with reference to the initial Guardrisk case as a precedence. Then the appeal of the Guardrisk case uses arguments from the Santam case to decide the Guardrisk appeal case of the case that was used as a precedence for the Santam case? This seems like a feedback loop.

This is not a massive blow for insurers, reassurers maybe.

good..very very good. now me wonders if the reassurers think the same.

Daar sy! Those insurers were being mean and nasty.

Sanity prevails. This is why these clients took out the insurance in the first place.

Damn right!

I’ve already moved away from Santam because of their underhanded behaviour when their business clients tried to claim due to lockdown.

Bunch of sharks!

Well done to you!

I have also taken my insurance elsewhere

Incidentally, Referring to them as “sharks” is a huge understatement

I can think of a stronger word that describes them all!

The Constitutional Court must be getting tired.

Is there any matter that does NOT go to it? This was an SCA decision on the interpretation/merits of a commercial contract. That contract was entered into willingly by both parties AND furthermore the insurers were the ones that drafted the contract. Now they want to say their constitutional rights were abused by their own contract.

If the clause is found to be unconstitutional (and therefore void), the insurers will pay back with interest all the premiums ever paid for such cover?? Be careful what you wish for!

The double entendre is noted: “ Guardrisk loses its appeal.”

You never know whether your insurer is any good until you lodge a claim.

“Guard Risk” ….. oh the irony.

Technically if a business closes or suffers financial loss due to lock down imposed by government then the insurance company cannot be held liable for the loss.

Insurance is for a business interruption due to something breaking or malfunctioning.

Then there is life insurance for death or injuries.

Respectfully, thats rubbish. Why get insurance then?

Let’s be fair, you get what you pay for.

Think logical.

Insurance and Medical aid – please pay us when you don’t need anything… Oh you need to claim? our legal team will find a way not to pay, or there will be a sneaky T&C that does not “cover that”.

This is tantamount to going to a café, ordering a coffee, paying for it, then when you ask for it they don’t serve that coffee and you don’t get a refund.

Santam, Old Mutual, GuardRisk etc – please get liquidated. Criminals…

I’m furious that they even appealed. If they go to the Con Court it further advertises their true intention and magnifies the stigma they all have.

In my opinion, the Judges do not understand Insurance and what it is meant to achieve. War ( Acts of Governments)and Riot risks have been a standard exclusion for many years. Insurance covers Acts of God ( not a govt) and other risks like accidents, theft, hijacks etc and cannot stand in for acts of Governments ( which the very same Governments should be held liable for). What will happen if Insurers seize to exist or simply do not offer any Business Interruption cover any more?

You asked “What will happen if Insurers seize to exist or simply do not offer any Business Interruption cover any more?”

Businesses will save an extra thousand bucks or so each month. The World will go on and no one will give it a 2nd thought.

It actually might be quite nice. We’ll live in a World where we don’t get bothered by cold calling direct marketing despite being on the DMSA do not contact list.

Shocking – these insurance punts (substituted with “p” instead of “k” or “c” – think they can get away with it.

This whole insurance industry needs to be scrutinized for they under-handed tactics and when these punts advertise on TV and other media they must disclose to the public under all and every circumstance/s when they will not pay out a claim. They very “quiet” on this material piece of information.

Considering they advertise not stop on TV – with they annoying adverts.

End of comments.





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